Faced with the problems of rising production costs, multiple taxation, reduced profit margins, supply chain disruptions and reduction in consumer spending, Nigerian manufacturers have raised the alarm that the rising inflationary pressures may force many of them out of business.The impact of the current inflationary trends on the manufacturing sector is coming on the heels of the dismal GDP performance of the sector in the second quarter of 2023.
Consequently, the Manufacturers Association of Nigeria (MAN) and the Lagos Lagos Chamber of Commerce and Industry (LCCI), which raised the alarm, have also called on the federal government to step up efforts to tackle the increasing costs of staple foods nationwide.The Director General of MAN, Segun Ajayi-Kadir, who painted the grim picture, listed other challenges to include: Declining profit margins, supply chain disruptions, uncertainty in planning, and reduction of consumer spending.
Last week, the National Bureau of Statistics (NBS) put the consumer price index (CPI), which measures the rate of change in prices of goods and services for July at 24.08 per cent— up from 22.79 per cent in the previous month. The latest figure was the seventh consecutive rise in the country’s inflation rate this year and it’s also the highest in more than 10 years.The sector’s contribution to the real GDP in the second quarter of 2023 accounted for 8.62 per cent, representing a decline from the 8.65 per cent recorded in the second quarter of 2022, as well as a drop
from the 10.13 per cent recorded in the first quarter of 2023.The MAN DG drummed support for a stable exchange rate, which is crucial to controlling inflation.He also called for collaborative fiscal policy measures through budgeting and effective taxation to complement the monetary policy actions of the CBN.Other measures he recommended include: “Reduced reliance on imports; increased targeted support to the agricultural sector to enhance productivity, reduce reliance on imports and stabilise food prices.”
Ajayi-Kadir also wants the government to communicate effectively with the public and stakeholders about its commitment to controlling inflation which can help manage inflation expectations, which can influence price-setting be
haviour and address the challenges of insecurity.On its part, the LCCI is concerned that there may be more inflationary pressures in the coming months due to the volatility of the naira as well as the lagged effects of subsidy removal and its transmission to general prices.The LCCI’s Director General, LCCI Chinyere Almona therefore urged the government to step up efforts to tackle food costs, especially staple food items. The chamber implores the government to hasten the provision of palliatives to lessen the impact of the rising trend in prices on economic agents.The manufacturing sector comprises industries in cement production, beverages, oil refining, food, tobacco, textile, rubber processing, footwear, paper, chemical and pharmaceutical production etc. The drop in the manufacturing sector’s contribution to real GDP does not come as a surprise, considering the harsh macroeconomic environment it operated in during the quarter.
High energy costs, a hike in the exchange rate, higher interest rates and an increase in the cost of importing raw materials meant that many had to reduce production and saw reduced margins. In the second quarter of 2023, the manufacturing sector’s real GDP growth stood at 2.20 per cent on a year-on-year basis.
This was a decrease compared to the same quarter in 2022, but an increase of 0.81 per cent points from the previous quarter and 0.59 per cent points from the quarter before that. On a quarter-on-quarter basis, the sector experienced a contraction with a growth rate of -14.98 per cent. (Thisday)
