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Challenges Confronting Business in 2024

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By Okunloye Abiodun

Many international companies are leaving due to unfavorable conditions.

According to Segun Ajayi-Kadir, the director-general of the Manufacturers Association of Nigeria (MAN), manufacturers are set to face a difficult year in 2024, as the sector’s prospects might not be optimistic, particularly in the first six months. This assessment is based on an examination of troublesome macroeconomic trends and the repercussions of global dynamics on the domestic economy. The diminishing expansion of manufacturing is a subject of concern for MAN, as it reflects a substantial drop from 2.4% in 2021 to a mere 0.48% in Q3 of 2023. Such a downward trend mirrors the challenges faced by prominent manufacturing giants such as China and the US, hinting that Nigeria is not impervious to the global factors that hinder the industry’s progress.

Local circumstances are influenced by various factors, such as instability in foreign exchange rates, exorbitant interest rates, and consistently low average capacity utilisation at approximately 50%. Moreover, there has been a significant departure of six multinational corporations from the nation in the past half-year – among them, the renowned consumer goods company Procter & Gamble, Unilever, Sanofi, Bolt Food, GlaxoSmithKline Consumer Nigeria Plc and Jubilee Syringe Manufacturing. According to their perspective, the policies implemented by the Central Bank in recent years have been ineffective in generating the necessary economic growth and enabling entrepreneurs to thrive.

Foreign currency and interest rates hinder numerous companies.

The true worth of Nigeria’s currency, the Naira, is still hidden behind manipulated exchange rates, leaving exporters in a state of bewilderment due to their limited access to foreign currency. Moreover, exorbitant benchmark interest rates have made it almost impossible for numerous companies to secure loans, hindering their growth prospects. Regrettably, inflation management policies have adversely impacted the productivity of both small and large businesses, further eroding their confidence in the future. This scepticism is clearly evident in the consistently below-par manufacturers’ CEO confidence index maintained by MAN.

Also, the association anticipates a persistent and difficult situation during the initial six months, followed by faint hopes of recovery. Their estimates reveal that the sector’s growth will face obstacles in achieving a mere 3.2% this year, with the manufacturing sector failing to surpass a contribution of 10% to the GDP. To alter this storyline, the fiscal and monetary authorities must embrace a complete overhaul centred on enhancing the productivity of businesses. The CBN is being urged to relinquish control over the Nairas exchange rate and let market forces influence its value. Instead of allotting forex resources arbitrarily, policies should be altered to prioritise manufacturers and exporters, granting them consistent access to ensure their operations run smoothly.

Necessary assistance should be provided for local industries.

Reducing benchmark rates is crucial in facilitating equitable credit accessibility for businesses, ensuring that interest rates do not hamper their capital investments. Additionally, it is imperative to address the limitations on electricity supply in the power sector through comprehensive reforms. The resolution of these challenges is paramount for Nigerian enterprises to flourish and fully harness their significant potential in fostering widespread economic growth. In its 2024 budget plans, the Tinubu administration should place utmost importance on providing assistance to domestic industries. When distributing capital funds for ongoing and upcoming infrastructure ventures, priority must be given to utilising locally produced materials.

Encouraging the widespread adoption of Nigerian-made products for public procurement is highly recommended. In parallel, the private sector must continue actively collaborating with policymakers, offering valuable insights to foster a more favourable economic landscape. With a strong commitment to its enforcement, the recently enacted Electricity Act has the potential to revolutionise energy investment and enhance access to power. Transparent and effective execution of ongoing measures to unify exchange rates and increase domestic refining capacity offers potential for economic progress. As global oil prices rebound, boosting foreign reserves through increased exports will offer much-needed support. Nigeria can only overcome its foreign exchange challenges by transforming into a manufacturing powerhouse akin to China.

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Nigeria has the potential to replicate China’s industrialisation if it adopts a cautious approach in the next ten years. By focusing on manufacturing, Nigeria can generate massive export earnings, address foreign exchange shortages, and establish sustainable employment opportunities. Moreover, Nigeria can enhance its manufacturing capabilities by shifting from basic processing to advanced production processes. Whether it concludes the year on an optimistic note hinges on the government’s dedication to promoting domestic production and effectively implementing suggested reforms. Active participation from all stakeholders is crucial. Businesses need to persist in identifying obstacles and recommending policy remedies, remaining resilient even when faced with challenging circumstances.

Related Link

MAN: Website

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1 month ago

Challenges Confronting Business in 2024.Many international companies are leaving due to unfavorable conditions. – Express your point of view.

1 month ago

The challenges outlined in the article are concerning for the country’s economic prospects. The departure of multinational corporations, currency manipulation, high interest rates, and a sluggish manufacturing sector pose significant obstacles. It’s crucial for the government to address these issues through policy reforms, prioritizing local industries, and collaborating with the private sector to foster economic growth and create sustainable employment opportunities. The potential for progress lies in a strategic and dedicated approach to overcome these challenges and build a resilient and thriving economy for Nigeria.

1 month ago

The prosperity and economic contribution of enterprises is crucial. To solve these issues and improve the business climate, the government and pertinent parties should take appropriate action.

1 month ago

Issues Facing the Business in 2024. Unfavorable conditions are causing a large number of international enterprises to leave. These days, our enterprises face a plethora of difficulties. It appears as though the government is not making any effort at all to remove the obstacles.

Adeoye Adegoke
1 month ago

The business landscape in 2024 is indeed presenting some tough challenges. With many international companies leaving due to unfavorable conditions, it’s crucial for businesses to navigate these obstacles wisely. Factors like economic instability, political uncertainties, changing regulations, and technological disruptions can all contribute to these unfavorable conditions. As a result, businesses may face difficulties in terms of market access, supply chain disruptions, talent acquisition, and maintaining profitability. However, it’s not all doom and gloom! Many businesses are finding innovative solutions, such as diversifying their markets, embracing digital transformation, and fostering strong partnerships. Adapting to change, staying agile, and continuously seeking opportunities can help businesses thrive even in challenging times. It’s all about finding the silver lining and turning these challenges into opportunities for growth and success!