The Manufacturers CEO’s Confidence Index, MCCI, of the Manufacturers Association of Nigeria, MAN, quarterly research shows that in the fourth quarter of 2022, the Aggregate Index Score (AIDS of MCCI declined to 55.0 points down from 55.4 points recorded in the third quarter of the year.
The decline in the Aggregate Index Score underscored the persisting challenges and the waning confidence of manufacturers in the economy in the fourth quarter of 2022 over the recorded points in the preceding quarter.
The AIS declined in the quarter under review due to the persisting increase in the Consumer Price Index (CPI), erosion in Naira value, difficulty in sourcing forex for productive use, high cost of energy, the issue of insecurity and the lingering Russian-Ukrainian war including the associated adversities.
“The fourth quarter of 2022 was adversely affected by escalation in the Consumer Price Index, CPI, continuous erosion in Naira value and difficulty in accessing forex, high cost of energy, persisting insecurity and the consequences of lingering Russian-Ukrainian war”, according to the quarterly report.
These issues among others according to the report are principally responsible for the difficult operating environment and its declining implication on manufacturing activities in the country during the quarter under review. The Aggregate Index Score, AIS, of MCCI declined to 55.0 points in the fourth quarter of 2022 from 55.4 points obtained in third quarter of the year.
The index score of the current quarter though below that of the previous quarter, indicates that manufacturers generally still have confidence in the economy.
Across Sectoral groups however, activities in the Pulp, Paper, Printing & Publishing with index score of 49.6 points and Motor Vehicle & Miscellaneous Assembly (48.4 points) are negatively affected by the harsh operating environment in the quarter under review as their index scores fell below the 50 base points.
Similarly, among industrial zones, activities in Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) zones were depressed by high-cost of operating environment in the fourth quarter of 2022 as underlined by their index scores which fell below the benchmark points.
Consequent upon the above trends, it is crucially important for the Government to have a shift towards a better exchange rate management; and moderate the rising energy cost via better management of refined petroleum products imported into the country.
These among other measures would no doubt help to reduce the current high inflation, which is fast eating-up the working capitals of businesses including manufacturing in the economy.
Industrial Zone MCCI
An observation of analysis of the 14 industrial zones shows that Index scores of Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) fell below the 50 base points. The scores indicates that manufacturers operating in the zones have lost confidence in the economy due to persisting harsh operating environment in the zones. Imo/Abia, Kaduna, Ogun, Apapa and Kwara/Kogi though have index scores above 50 benchmark points but declined in the quarter under review. Edo/Delta, Oyo/Ondo/Ekiti/Osun, Kano, Ikeja, Anambra/Enugu and Bauchi/Benue/Plateau have index scores above the 50 base points with increase in the quarter under review.
The scores indicates continuous improvement of the confidence of manufacturers operating in the zones in the economy. Index scores of Abuja zone increased to 50.7 points in the fourth quarter of 2022 from 43.5 points obtained in the preceding quarter.
The score indicates a significant improvement in the confidence of the manufacturers operating in the zone. Apart from the general macroeconomic challenges that affect all the zones, it is important to examine and address State-specific challenges as they concerns the zones.
MCCI Analysis of examination of the ten sectoral groups shows that Index Score of Pulp, Paper, Printing & Publishing (49.6 points) and Motor Vehicle & Miscellaneous Assembly (48.4 points) fell below the 50 benchmark points.
The score indicates a gross loss of confidence in the economy by manufacturers operating in the two sectoral groups. Particularly, the motorcycle sub-group of the Motor Vehicle & Miscellaneous Assembly has been facing difficulty following the banning of motorcycles by various States Government in some metropolis. Food, Beverage & Tobacco; Textile Apparel & Footwear; Wood & Wood Products; Chemical & Pharmaceutical; NonMetallic Products; Domestic/Industrial Plastic & Rubber; Electrical & Electronic; and Basic Metal, Iron & Steel groups all scored above 50 based point.
The score suggests that manufactures operating in the groups have confident in the macroeconomy. Source: MAN Surveys Figure ii: Sectoral Breakdown Aggregate MCCI Motor Vehicle & Misc.
Assembly Basic Metal, Iron & Steel Electrical & Electronics Domestic/Industrial Plastic &Rubber Non-Metallic Products Chemical & Pharmaceutical Pulp, Paper, Printing & Publishing Wood & Wood Products Textile Apparel & Footwear Food, Beverage and Tobacco.
In the fourth quarter of 2022, Aggregate Index Score, AIS, of MCCI declined to 55.0 points down from 55.4 points recorded in the third quarter of the year. Among the standard Diffusion Factors, Current Business Condition and Business Condition for the next three months, scored above 50 benchmark while increasing in the quarter; Current Employment Condition (Rate of Employment) and Production level in the next three months scored above the 50 benchmark points though with a decline in the period respectively; Employment Condition for the next three months dipped below the benchmark points to 48.8 points which is also below 49.2 points obtained in the preceding quarter.
Employment decision by manufacturers is so difficult due to the unpredictability and difficulty in macroeconomic movement.
“In summation, the fourth quarter of 2022 appeared to be more difficult to manufacturers than the level of hardship in the preceding quarter due to persisting rise in CPI, high cost of energy, unabated erosion in Naira value and difficulty in sourcing forex including the harsh effect of Russian-Ukrainian war”, stated the report.