The Manufacturers Association of Nigeria (MAN) has expressed optimism that that continued lowering of inflationary pressure and effective implementation of the newly enacted minimum wage would lower production cost and improve sales of manufactured goods in the country.
The MAN expressed this optimism in its report: Manufacturers' CEO Confidence Index (MCCI) for the Q2'24, which stated that the MCCI's Aggregate Index Score (AIS) dropped by 1.6 points to 51.9 points in Q2 2024 from 53.5 points it recorded in Q1 2024.
It said: "The sentiments of the manufacturers on the business condition and production level in the next quarter remained above the threshold (50) point primarily due to the expectations that inflationary pressure in the country may subside to slightly ease production costs and improve demand for manufactured products."
"In spite of the general notion that the approved higher minimum wage would lead to tighter employment conditions, manufacturers expect its implementation to improve sales."
The report further stated, "the expectations of a prolonged stability in the exchange rate and the adoption of the recommendations by the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC) also contributed to the optimism of the manufacturers during the reviewed period.
"The adoption and effective implementation of the recommendations of the PFPTRC can ease tax burdens faced by the manufacturers by streamlining the several taxes currently paid into just eight taxes."
Commenting on the1.6 points drop in the AIS from53.5 points in Q1'24 to 51.9 points in Q2'24, MAN said that it represented, "a relapse following the improvement recorded in the previous quarter."
It attributed the decrease in the AIS to the current performance of diffusion factors, which showed that the indicators for "the current business and the current employment conditions declined below the 50-point benchmark, dropping from 46.8 points and 47.5 points in the first quarter of 2024 to 43.9 points and 47.2 points in Q2 2024, respectively."
The index of the current production level fell from 52.8 points to 49.7 points which is also below 50-point threshold, and underscored a significant decline in manufacturers' confidence regarding production levels during the review period.
The deterioration of the three indices was occasioned by the exorbitant increase in the electricity tariff, the aggressive hike of the interest rates, the high exchange rate, the persistent inflationary pressure, the reoccurrence of fuel scarcity as well as the disruptive effect of the Industrial Action observed by the National Labour Congress.
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It said: "Based on the prevailing harsh economic environment, the manufacturers also reduced their expectations for the Employment Condition and Production Level in the Next Quarter. A closer observation reveals that more manufacturers are projecting tighter employment conditions for the next quarter, which is responsible for the decline in the Employment Condition Index in the Next Quarter.
"The index dropped below the 50-point threshold, sliding from 51.2 points in Q1 2024 to 49.8 points in Q2 2024. Similarly, manufacturers' expectations for production levels remained pessimistic, as reflected in the Production Level Index for the Next Quarter, which recorded a drop of 3.3 points, falling from 63.5 points in Q1 2024 to 60.2 points in Q2 2024.
"However, the sentiments of the manufacturers on the Business Condition and Production Level in the Next Quarter remained above the threshold point primarily due to the expectations that inflationary pressure in the country may subside to slightly ease production costs and improve demand for manufactured products."
Similarly, manufacturers' expectations for production levels remained pessimistic, as reflected in the production level index for the Next Quarter, which recorded a drop of 3.3 points, falling from 63.5 points in Q1 2024 to 60.2 points in Q2 2024.
