Manufacturers Adopt Survival Strategies, As CEOs’ Confidence Soar in Q2,’22

The Manufacturers Association of Nigeria (MAN) has reacted to the predominant challenges in the Nigerian economic environment by adopting survival strategies and adjustments, even as the confidence of Chief Executive Officers (CEOs) in the sector rises from 0.7 points to 54.6 points in the second quarter of 2022 (Q2’22) from 53.9 points in the previous quarter.

The Manufacturers Association of Nigeria (MAN) disclosed this in its Manufacturers CEO’s Confidence Index (MCCI) Q2 ’22 report made available to Gentechnews.

MCCI is a quarterly research and advocacy publication of MAN, which measures changes in pulse of operators and trends in the manufacturing sector quarterly, in response to movements in the macroeconomy and government policies, using primary data extracted through direct survey on over 400 CEOs of MAN member-companies.

The report stated: “In the Second quarter of 2022, the Index of MCCI marginally increased to 54.6 points up from 53.9 points recorded in the first quarter of the year, despite the plethora of challenges including poor access to Forex for importation of raw materials not available locally, effect of rising global inflation, aggressive drive for revenue by Government, frequent collapse of the Grid, increase in price of diesel, scarcity of wheat and other manufacturing inputs due to the ongoing war in Europe and widespread insecurity that combined to limit productive activities in the economy during the quarter.

“The afore-mentioned meagre improvement in the index score in the second quarter of 2022 implies that manufacturers’ confidence in the economy slightly improved above what obtained in the preceding quarter. Signifying that the manufacturers responded to the economic challenges that prevailed in the quarter with appropriate survival strategies and adjustments including remodeling of production operations, after the marginal slowdown experienced in the first quarter.”

With the Aggregate MCCI score increased to 54.6 points in the Second Quarter of 2022 from 53.9 points of the first quarter of  this year, the report showed that manufacturers still have minimal confidence in the economy, with the expectation of improvement in the operating environment.

The report signifies that the manufacturers responded to the economic challenges that prevailed in the quarter with appropriate survival strategies and adjustments including remodelling of production operations, after the marginal slowdown experienced in the first quarter.

The report further noted: “In addition to the survival strategies adopted by manufacturers that improved production, the increase in the Aggregate Index score was attributed to the feedback on the anticipated improvement in business condition, employment condition and production level in the third quarter of the year.

“Noteworthy, is the fact that business condition in the quarter under review was more challenging than what obtained in the first quarter of the year just as employment the condition worsened.

“Nevertheless, the operating environment in the quarter under review was fairly better than the condition in the preceding quarter due to compelling adjustments made by Government, manufacturers and households in response to general increase in price, forex shortage, increasing cost of energy, scarcity of raw materials and many more, thrown up by the war in Europe.”

Findings from the sectoral analysis shows that Index score activities in the Wood & Wood Products and Electrical & Electronics sectoral group signaled an improvement over the results of the first quarter despite the fact that the operations of the groups were most impeded by unfriendly operating environment. However, the Motor Vehicle & Miscellaneous Assembly group appeared to be gradually finding its footing back after operational difficulty in the first quarter of the year.

In the quarter under review, observations from analysis on industrial zones activities showed a differential in the operating environment in the zones.

According to the report, River/Bayelsa scored 45.0 points, which fell short of the 46.0 points recorded in the first quarter, while the index score of Bauchi/Benue/Plateau fell below the 50 points baselines at 46.3 points from 48.3 points recorded in the first quarter of the year.

Likewise, Index score of the Abuja zone also declined to 43.5 points from the 44.8 points in the first half of the year. The Middlebelt and Rivers/Bayelsa zone was the toughest during the quarter under review. However, the Middlebelt that houses Bauchi/Benue/Plateau industrial zones is the most unsettled region due to insecurity challenges in the country.

“As a result of the situation, a number of companies in the zone operated at sub-optimal level, while others have either shut down operations or relocated to a safer environment. The companies experienced severe stockout of primary raw materials, particularly agro-allied as most of the farmers had taken to their heels due to insurgency. Manufacturing and other business activities in the Rivers/Bayelsa zone appears to be struggling with the impact of aggressive drive for internally generated revenue by the Government to bridge revenue gaps occasioned by the divesting activities of International Oil Companies from hydrocarbons to renewable energy sources. The huge autonomous investment in crude oil business in the zones, accounts for the number of induced investments in the area,” the report stated.

The report highlighted that the effect of the Russian-Ukrainian war clearly underscored the popular maxim that the world has become a global village, stressing that the occurrence of an incident in a part of the world, notwithstanding how specific we may think, can actually become a global issue.

“Therefore, apart from the need for ardent management of global peace, the series of global occurrences and the lessons learnt demand that national Governments should begin to take drastic measures to manage these phenomena proactively going forward. Undoubtedly, phenomena such as the China-America trade war, the Asian and Global Financial crises, the challenges thrown up by COVID-19 pandemic and now, the Russian-Ukraine war call for the development of sustainable national anticipatory policy measures,” the report added.

The business ambiance in the second quarter, according to the report was no doubt beset by numerous macroeconomic, regulatory and externally induced challenges, compounded by the lingering backlashes of COVID-19 pandemic; the ongoing Russian-Ukrainian war; shortfall in the global supply chain followed by the rise in energy cost, fertilizer and fertilizer inputs, wheat grain, etc.

Cumulatively, it stated that these challenges interplayed to shape the direction of performance of the manufacturing sector in the second quarter of 2022.

It is therefore urged the Government to intentionally create an anticipatory policy framework that will facilitate automatic stabilization of the economy in the event of domestic or global shocks, while addressing the afore-mentioned familiar operating challenges limiting the performance of the sector.