Adedapo Adesanya
By Adedapo Adesanya
The costs of production and distribution of products increased by 31 per cent in the last quarter of 2020 in contrast to the 27 per cent rise recorded in the third quarter.
This information was revealed by the Manufacturers Association of Nigeria (MAN), which attributed the jump to the coronavirus pandemic.
In the MAN CEOs Confidence Index (MCCI), the organisation said “in the fourth quarter of 2020, manufacturing investment declined by 19 per cent from 18 per cent recorded in the third quarter of the year.”
In the current survey (Q4’20 MCCI), most manufacturers also reported not being able to adequately source foreign exchange for importation of productive raw-materials and machinery that are not available locally.
The MCCI is an index created by the group to gauge the changes in manufacturing activities quarterly as a result of changes in the macroeconomic ambience and government policies.
The survey indicated that 400 chief executive officers of member-companies were interviewed across the six geopolitical zones of the country, and their views used for the statistics.
On the effects of the pandemic on the macroeconomic, as far as production and distribution of goods were concerned, the survey indicated that 96 per cent of the manufacturing CEOs that responded reported an increase in production and distribution costs in the sector due to the prevailing macroeconomic environment and on account of the scourge.
It added: “This is supported by the rising aggregate prices, the continuous erosion of the value of the Naira, increase in electricity tariff, increase in the price of premium motor spirit (PMS), high cost of gas and the distortion caused by the EndSARS demonstration in the period.
“The survey further showed that only three per cent of respondents reported no effect while the remaining one per cent claimed that the macroeconomic environment had a decreasing effect on manufacturing production and distribution costs in the period under review.
“There is no doubt that the macroeconomic ambience that prevailed in the last quarter was still influenced by the onslaught of COVID-19 as business activities sluggishly resumed in the period.”
The manufacturers noted that, “it is important that government begins to critically consider ensuring that forex is allocated to manufacturers at the official rate, particularly for the importation of machines and raw materials that are not at the moment produced in the country.
“It is important that the government ensures modalities and access to COVID-19 stimulus are friendly to manufacturing companies.”
The manufacturers had issues with the lending rate, which they complained had remained at two digits, and 71 per cent of the CEOs agreed that this did not encourage productivity in the manufacturing sector in the period under review.
“The cost of borrowing in the country remains at double digits even amidst the reforms that are meant to culminate in lower rates to engender the country’s economic recovery process.
“Special single-digit loans offered by development banks are still hard to leverage on as conditionalities to access the loans through commercial banks are often overwhelming and laden with additional charges that will eventually make the interest rate double-digit,” it added.
