The Manufacturers Association of Nigeria (MAN) CEOs Confidence Index (MCI) for the second quarter of 2023 has revealed that rising energy costs remain a major challenge facing manufacturers in the country.
Challenges facing manufacturers according to the survey includes, energy costs; high cost of credit/inadequacy of loanable funds; multiple taxes/charges/levies/same tax policy for local producers and importers; unavailability of raw materials/delay in receiving imported raw materials; high cost of raw materials and scarcity of forex/high exchange rate/poor allocation of forex.
According to the survey, about 63.1 per cent of manufacturers enumerated disagreed that government capital expenditure encourages productivity in the manufacturing sector; 23.9 per cent of those enumerated agreed, while about 13.1 per cent were unsure.
MAN said the aggregate index score of MCCI in the second quarter of 2023 declined by 1.4 points to 52.7 points from 54.1 points obtained in the first quarter of 2023, which is also 2.3 points less than 55.0 points recorded in the fourth quarter of 2022.
According to the survey findings, manufacturers within the country continue to grapple with the reverberations of the Naira Redesign policy, which was implemented during the tenure of Godwin Emefiele, the former Governor of the Central Bank of Nigeria (CBN).
Furthermore, manufacturers lament the hindrance caused by two concurrent factors, among which is the upswing in motor vehicle insurance expenses, which continues to add to the operational burden of manufacturers.
Additionally, the escalation in logistics costs is a concern that stems from the heightened pricing of premium motor spirit (PMS), commonly referred to as petrol. This is of particular significance as manufacturers need to distribute their goods extensively across the various states of the country, entailing substantial transportation expenses.
The survey’s observations underscore that the second quarter of 2023 witnessed a substantial uptick of 17.3 per cent in both production and distribution costs for manufacturers.
This surge in costs further accentuates the challenges faced by the manufacturing sector and calls for a comprehensive examination of strategies to mitigate these adverse effects.
Director General of MAN, Segun Ajayi-Kadir, in the report said government’s capital expenditure should address the issues of economic infrastructure such as roads, electricity, water, etc. that support industrial sector businesses.
“The absence of economic infrastructure contributes significantly to the high cost of operating environment which obstructs the development of manufacturing in Nigeria.
“It is highly expedient that the government strives to ensure the harmonisation of fiscal and monetary policies that will pave the way for a stable macroeconomic environment needed to promote productivity in the manufacturing sector and improve the ease of doing business,” he said.
