The Manufacturers Association of Nigeria (MAN) has projected that this year, sectoral real growth is expected to hit about 3.2 per cent, while the sector’s contribution to the economy will most likely exceed 10 per cent and the Manufacturers’ CEOs Confidence Index is predicted to rise above 55 points thresholds.
Also, average capacity utilization will still hover around the 50 per cent threshold as the forex-related challenges and high inflation rate limiting manufacturing performance may linger until mid-year.
MAN also said the sector may experience a meagre improvement in manufacturing output as forex and interest rates-related challenges are expected to subside from the third quarter.
The Association further said higher manufacturing output is envisaged from the beginning of the third quarter of the year as the government disburses capital provisions of the budget to abandoned, ongoing and new capital projects with expected special preference for locally made products.
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MAN also projected that the ongoing concessions of seaports, airports and roads may also provide opportunities for the cement sub-sector and contributes to infrastructure upgrade needed to enhance manufacturing productivity.
However, the outlook for the sector may not be positive, at least in the first half of the year.
MAN Director General Segun Ajayi-Kadir, in a statement yesterday, said the period will be challenging, with a subtle possibility of recovery from the third quarter.
He, however, said the envisaged recovery is highly dependent on the deployment of policy stimulus supported with a synthesis of domestic growth driven, export focused and offensive trade strategies.
According to him, this will promote resilience, steady growth and ensure that the sector gains meaningful traction in the later part of the year.
MAN, in the statement said an examination of the trajectory of manufacturing globally portrays a struggling sector that is now more than ever challenged by key macroeconomic variables and externalities, leading to dwindling growth.
“This is evidenced by the manufacturing growth rates in China, USA, and South Africa,” MAN said, noting, for instance, that “The World Bank reported that the manufacturing sector in China declined from 8.7 per cent in 2021 to 4.8 per cent in Q3 2023.
“In USA, the sector performance dwindled to -0.9 per cent in Q3 2023 from the 6.8 per cent recorded in 2021, while South Africa also recorded a decline to -0.17 in Q3 2023 from 6.7 per cent of 2021.”
Ajayi-Kadir, while noting that the trend is similar to what is obtainable all over Africa, said of course Nigeria is not exempted, as the manufacturing growth rate nosedived to 0.48 per cent in Q3 2023 as against 2.4 in 2021.
“Judging from the observed trend, it is obvious that the outlook for the manufacturing sector in 2024 may not be a positive one, at least in the first half of the year,” he said.
The MAN DG stated that drawing from likely economic dynamics and in the light of the aforementioned, the Association projects that in 2024, there will be clarity on the actual and specific policy direction and priority areas of the current administration, especially around deepening industrialisation.
He said while MAN looks forward to engaging government in this regard, the government, hopefully, will see the manufacturing sector as the key driver of sustained economic growth and will give the sector the priority that it deserves.
MAN also sees a reasonable stability in the monetary policy ambience as the apex bank reverts to playing its conventional roles and deliberately improves forex supply to the productive sector for import of inputs not available locally.
Ajayi-Kadir also said the results of the emerging upward surge in global oil prices, domestic oil and gas production, local refining of petroleum products and projected gains of exchange rate unification will promote stability in the forex market and impact manufacturing positively from the second half of the year.
“This will lead to reduction in the pressure on demand for forex and improve the inflow of export proceeds from oil and gas,” he stated.
He also said the ongoing tax reforms and the envisaged bank recapitalization will frontally address the challenges of multiple taxation and poor access to credit that have continued to limit manufacturing sector performance, if successfully implemented.
The MAN boss further said he expects a dynamic implementation of the Electricity Act 2023, which will increase private investment in renewable energy, enhance energy efficiency and improve electricity supply to the manufacturing sector.
“The improved electricity supply will ameliorate the issue of inadequacy, reduce the disruptions occasioned by frequent outages and in turn improve energy security.
“In broad terms, the year 2024 may start on a tough note for manufacturing but may end with some measured improvements because the envisaged policy reforms, improved commitment to domestic production and general positive outlook seams favourable for the sector,” he said.
