13 September 2017

Nigeria: Report - Policy Inconsistency, Infrastructure Deficit, Bane of Manufacturing Sector

Abuja — Unfavourable foreign exchange rates, infrastructure deficit, policy inconsistency, and weak demand, among others, are the bane of the nation's manufacturing sector, a new survey has revealed.

The Manufacturing Sector Survey 2017 which was conducted by NOIPolls, in partnership with the Centre for the Study of the Economies of Africa (CSEA), covered a total of 496 companies across 12 states (two per geo-political zone).

It was conducted between February and May 2017 and identified unfavourable foreign exchange rates (55 per cent), bad roads (55 per cent), unavailability of petrol and diesel (47 per cent), limited access to credit (45 per cent), policy inconsistency (44 per cent), lack of infrastructure ( 39 per cent), unstable power supply (31 per cent) and weak demand (29 per cent) as the major challenges facing the manufacturing sector.

The CEO of NOIPolls, Dr. Bell Ihua, who unveiled the report at a press conference in Abuja yesterday, said the survey proved that 74 per cent of the manufacturing companies found the business environment unsupportive in 2017, adding that the finding represented a 14-point increase over the 2016 result (60 per cent).

He noted that that pointed to a worsening of the business environment.

Similarly, lack of infrastructure, red-tape and corruption were identified as some of the structural bottlenecks stifling the business environment.

According to him, 85 per cent of manufacturing companies surveyed are not operating up to 75 per cent of their installed capacity.

This was attributed to weak demand (69 per cent), poor power supply (58 per cent), petrol/diesel unavailability (38 per cent), limited access to foreign exchange (26 per cent).

Almost half of the companies interviewed (48 percent), he said, considered importation of raw materials critical to their production; particularly medium-to- large manufacturing companies, with up to 62 per cent of input imported.

Also, 75 per cent of manufacturing companies indicated that the disparity in foreign exchange rates has had negative impact on their operations.

In the same vein, 80 per cent of the companies affirmed that inflation has had a negative effect on their businesses.

The survey showed that all the manufacturing companies interviewed disclosed that recession had impacted their business operations and profitability, with 70 per cent stating that it had impacted their businesses negatively.

On the issue of bad roads, the survey found the South-west (59 per cent), South-south (49 per cent), North-central (46 per cent) and South-east (43 per cent) regions as the most affected regions with poor state roads.

In particular, manufacturers lamented the poor state of some roads such as Apapa-Tin Can Access road, Lagos-Ibadan express road, Benin-Ore road, Oyo-Ogbomosho (South-west), East-West road, Benin-Agbor road, and Aba-Port Harcourt road (South-south).

Others are Ajaokuta-Ayangba-Nsukka road, Lokoja-Ajaokuta road, Obajana-Okene road, and Makurdi-Enugu road, among others.

The Director of Research, CSEA, Dr. Adedeji Adeniran, gave the key findings of the report which showed that over the past years, the Nigerian manufacturing sector has experienced dismal performance,due to a number of structural and systematic challenges creating a more challenging environment for manufacturers to operate.

The major finding from the survey of manufacturing firms shows that the key performance metrics and profitability have worsened due to widening forex spread, economic recession and inflation. The overall business environment is also becoming increasingly unsupportive for business growth and development.

Nigeria

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