The Nigerian Manufacturing Sector: MAN Warns of Impending Shop Closure

Monday, December 14, 2020  / 11:17 AM / by CSL Research / Header Image Credit: PorscheClassy Media 

A This Day report says the Manufacturers Association of Nigeria (MAN) has warned that many of its members could close shop by January 2021, unless the Federal Government takes urgent steps to address challenges in the sector. The Acting Director General of the association noted that many of its members that have been able to access the CBN's N1trn intervention fund still could not buy machines for their production due to the foreign exchange scarcity. He also noted that most of the sub-sectors are operating at less than 10% capacity utilisation because of the impact of covid-19 and sustained infrastructural challenges. The association appealed to the CBN to prioritise allocation of foreign exchange to the manufacturing sector.

The outbreak of the coronavirus has significantly impacted manufacturing activities within the country. Vast majority of Nigerian manufacturers rely on several raw materials and machines from China and Europe. Apart from the fact that the ability to get supplies was significantly disrupted by the pandemic, the scarcity of FX remains a big problem for many manufacturers. The CBN earlier this year noted that the country's available foreign exchange will be devoted to to strategic imports or to service obligations that are a priority but from media reports, it appears many manufacturers' dollar demands are not met or only partially met.

Foreign currency constraints, devaluation, and shrinking disposable incomes are all factors that significantly strain the performance of the manufacturing sector. A prolonged constraint in the ability of manufacturers to conduct businesses seamlessly  leads to a crisis in the sector and loss of loans extended to manufacturers by the banks. The scarcity of foreign exchange from the official window compels manufacturers to source funds from the black market, which trades at a significant premium to the I&E window, in order to sustain their business operations.

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