Experts in the Manufacturing sector have pointed out that consistently implementing government policies leveraging Technology and other industries can stabilize the sector. This information was revealed during the online pre-summit session of the Nigerian Economic Society Group (NESG), which was facilitated by Muda Yusuf, the manufacturing thematic lead with the theme “Reversing the Decline: Strategies for stabilizing Nigeria’s manufacturing sector.” According to the experts, the industry can be enhanced by investing in technological advancements and research that supports the technical part of production or by educating and hiring high qualified personnel.
They went on to say that manufacturers can also become more efficient by putting import substitution tactics into practice, which include cutting energy costs, lowering the risk of foreign exchange exposure through local procurement of raw materials, and enhancing management practices like price evaluations and stock and inventory management. On his part, Afolabi Olorode, acting MD of FBN Quest Merchant Bank stated that the banking industry can assist the industrial sector by direct financing for working capital, term facilities and project science, value chain Finance by raising equity, and alternative sources of funding.
Subsidies removal and naira depreciation affect the sector.
Olorode added that FBN Quest Merchant Bank processes Export transactions for manufacturers, underwrites the intervention of funds from the Bank of Industry (BOI) and outsources foreign exchange through CBN intervention. Chijioke Uwaegbute, partner and Tax leader at PwC Nigeria asserted that considering the majority of its inputs are imported, the manufacturing sector has been impacted by the combined effects of the removal of Subsidies and the depreciation of the naira. According to him, last year’s gross profit for the producers of non-alcoholic drinks decreased by roughly 57% on an annual basis, while cost of materials increased by 30% and sales increased by roughly 78%.
Uwaegbute further noted that some other measures that can help this industry include local production for import substitution and new government initiatives like low Value Added Tax (VAT) and withholding tax exemptions for manufacturers. The new Withholding Tax (WHT) regime was just released by the Federal Ministry of Finance is an advanced and indirect form of Taxation that is withheld at the source from the taxpayer’s bills, with exemptions for Nigerian farmers, manufacturers, small company owners, and other individuals.
CBN urged to lift restrictions on FX policies.
The Central Bank of Nigeria (CBN) has been urged to lower interest rates on loans for its members by Bioku Rahman, the departing chairman of the Manufacturers Association of Nigeria (MAN) for Kwara and Kogi. Rahman described the existing rates as “business-killing.” He also called on the CBN to lift restrictions on foreign currency (FX) policies for local manufacturers, saying, “CBN can widen the window of foreign exchange to local industries,” during his speech at the association’s 10th annual general meeting (AGM).
This event comes as the CBN recently raised the Monetary Policy Rate (MPR) to 26.75 percent and commercial banks charged an average maximum lending rate of 35 percent on loans to MAN members. Additionally, the 30th Nigerian Economic Summit was preceded by a pre-summit webinar with the theme “Reversing the Decline: Strategies for Stabilising Nigeria’s Manufacturing Sector,” in which the Nigerian Economic Summit Group (NESG) advocated for the revival of the country’s manufacturing sector.
Related Article: Declining trend in the manufacturing sector
It is noteworthy that the Manufacturing industry faces challenges due to the strenuous macroeconomic conditions in which it operates. According to the GDP data for Q4 2023 released by the National Bureau of Statistics (NBS) the manufacturing sector’s share of Nigeria’s GDP decreased to 8.23% from 8.40% during the same period in the previous year. The sector’s contribution to GDP decreased from 8.42% to the present amount on a quarterly basis. Real GDP growth in the manufacturing sector during the fourth quarter of 2023 increased by 1.38% year over year, which was an improvement over the previous quarter but a minor decrease from 2022.