Manufacturers groan as lots of challenges affect output

The Manufacturers  have continued to groan in the midst of several challenges hampering the growth of the real sector.

The Manufacturers Association of Nigeria, MAN,  stated this in its executive summary for economic review of the second half of 2020.

“At the end of the 2^nd half of 2020, an estimated 1,655,331 historical cumulative jobs were created in the manufacturing sector following data generated from various surveys conducted in the last 8 years.

“A total of  3451 new manufacturing jobs were created in the  2^nd   half of 2020 compared to 10,735   jobs created in the corresponding half of 2019 and 5241 jobs  in the 1^st half of the year.   However,  a total of 3903  jobs were lost in the sector in the period.    This is marked two successive negative net job  in the  sector as job loss out-numbered  new jobs created by  the  time the sector  is recording  a negative net jobs  beginning from the 1^st half of the year”, stated the report.

“Interest rate charged to manufacturers increased to 22.0% in the 2^nd half of 2020 from 20% recorded in the corresponding half of 2019; thus, indicating 2 percentage point increase over the period it also increased by 2.5 percentage point when compared with 19.5% recorded in the 1^st half of the year.  Interest rate charged to manufacturers averaged 20.75% in 2020 as against 21.25% recorded in 2019.  The increase in the interest rate in the 2^nd half of the year was adduced to the opening up of the economy for business after months of lockdown due to COVID-19   and the attendant increase in demand for investible fund by manufacturers in the period”, the report added.

According to UNIDO, in the third quarter of 2020, global manufacturing output declined by 1.1%  in a year-over-year comparison due to COVID-19 containment measures, following a significant drop of 11.1%  in the second quarter of 2020. COVID-19, a pandemic that  began in Wuhan China spread  across the world, decapitating  global economies as evident  in the record death toll of man power; the crashing of crude oil price, the slowed  global supply and demand; and  the total halting of economic activities  at the highpoint of the  period.

“Manufacturing capacity utilization edged up to 53.7% in the 2^nd half of 2020 from 43.2% recorded in the 1^st half of the year; thus, indicating 8.5 percentage point increase over the period.  However,  it declined by 5.74% when compared with 59.44% recorded in the corresponding half of 2019.  Capacity utilization in the sector averaged  49.5% in 2020 as against 56.8% recorded in 2019. The uptick in capacity utilization in the period is attributed to the relaxing of the  COVID-19 containment measures, particularly the opening of  the economy for business activities in the 2^nd half 2020. The increase is also seasonally influenced as a result of   Christmas celebration boosted economic activities in the last quarter of the year”, stated the report.

“Manufacturing production value declined to N2.36 trillion in the 2^nd half of 2020 from N7.38 trillion recorded in the corresponding half of 2019; thus, indicating N5.02 trillion decline over the period.   However,  it increased by N0.32 trillion or 15.5% when compared  with N2.04 trillion  recorded in the  1^st half of the year. Production value in the  sector totaled N4.4 trillion in 2020  as against N11.99 trillion  achieved in 2019.   The uptick in manufacturing production in the 2^nd half over the performance in 1^st half of the year was due to the opening up of the economy for businesses  after  over 5 months of lockdown to contain the spread of COVID-19”.

“Utilization of Local Raw-materials by manufacturers in the 2^nd half of 2020 declined to 56.5%  as against 64% recorded in the corresponding half of 2019; thus, indicating 7.5 percentage point decline over the period.   It also declined by 1.9 percentage point when compared with 58.4% recorded in the 1^st half of  the year.  Local raw-materials utilization in the sector declined to  57.45% in 2020 from 60.5% recorded in 2019. The decline in  local raw-materials utilization in the sector was attributed to the  opening up of world  economies  for  trade after months of global lockdown.  Manufacturers are therefore, able  to increase   import raw-materials”, stressed the report.

“Inventory of unsold finished manufactured goods increased to N303.22 billion in the 2^nd half of 2020 from N202.16 billion recorded in the corresponding half of 2019; thus, indicating N101.06 billion or 50% increase over the period.    It also increased by N28.83 billion or  10.5% when compared with N275.39 billion recorded in the 1^st half of the year.  Inventory of unsold manufactured goods in the sector  totaled N577.61 billion in  2020  as against N402.42 billion recorded in the 2019.  The increase in inventory in the period was attributed to   the general low consumption  and renewed imports in the economy as global economies generally opens after months of lockdown.  Electrical  and Electronic sectoral group   accounted for over 33% of total inventory  of unsold manufactured products in period.  The group are having the challenges of low patronage, high smuggling and products counterfeiting which rubbed-off negatively on inventory”.

“Estimated cumulative manufacturing investment from 2013 to the 2^nd half of 2020 was N5.73 trillion based on data generated from surveys conducted by MAN over the period. Manufacturing investment declined to N56.44 billion in the 2^nd half of 2020 from N257.66 billion recorded in the corresponding half of 2019; thus, indicating N201.22 billion decline over the period.   It also declined by N5.64 billion or 9.1% when compared with N62.08 billion achieved in the 1nst half of the year.  Manufacturing investment totaled N118.52 billion in 2020 as against N496.11 billion achieved in 2019.  Manufacturing investment declined in the period following the depressing fallouts from COVID-19 that gave no impetus for new investments in the sector”, the report stated.

“Energy information generated from the sector  has shown consent improvement in electricity supply to the  manufacturing sector.  In the 2^nd half of 2020  electricity supply from the distribution companies to the sector increased to 12  hours on daily average from  10 hours per  day on the average recorded since the  1^st half of 2019.   Average daily power  outage  had constantly averaged 4 time per day.  However, expenditure on alternative energy in the 2^nd half  of 2020 increased to N57.75 billion  in the 2^nd half of 2020 from N34.70 billion recorded in the corresponding half of 2019; thus, indicating N23.05 billion or 66.4% increase over the period.  It also increased  by N33.59 billion  or over 100% when compared with  N24.16 billion recorded in the 1^st half of  the year.  Expenditure on alternative energy source in the  sector stood at N81.91 billion in 2020 as against N61.38 billion recorded in 2019. The increase in alternative energy expenditures in the sector was attributed to the general high inflationary pressures in the economy.  However, specifically, the increase in the petrol pump price exerted significant influence on prices of some of the fuel used by the sector to generate electricity”, the report added.