Salvaging the Manufacturing Sector


Tuesday, May 11, 2021 / 08:59  AM / by United Capital Research/ Header Image Credit: Modern Distribution Management

At the 50th anniversary of the Manufacturing Association of Nigeria (MAN), the DG of the association, Segun Ajayi-Kadir, stated that FX restriction policies by the CBN as well as the impact of the Covid-19 pandemic has forced 415 companies to stop manufacturing over the past one year. The DG listed several supply-side constraints limiting productivity within the sector, including traffic logjam at the ports slowing down access to imported raw materials, infrastructure (including power & transportation), land acquisition, multiplicity of taxes & levies from different tiers of government and inconsistent government policies.

True to the comments of the DG, the manufacturing sector has been held back by the various challenges plaguing firms within the sector. Over the past five years (2015- 2020), the manufacturing sector has averaged real GDP growth of -0.9%. Interestingly, the sector has contracted thrice. This is a stark contrast to prior five years where the sector averaged a growth of 13.3%. We think the manufacturing sector mirrors the struggles of the general business operating environment and ease of conducting economic activities profitably.

In our opinion, we believe an overhaul of the business environment including physical infrastructure (like ports, transportation, & power) and policy framework (resource control, foreign exchange, taxation, land laws and regulations etc.) would be needed to stimulate a rebound in the fortunes of the manufacturing sector. This has become more imperative as the AfCTA kicks in. This is because Nigeria could lose significant amount of investment to other business-friendly African countries who would then export to the huge Nigerian market in the absence of huge tariffs and other trade limitations.

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Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

Related News