Manufacturers’ expenditure on alternative energy sources declined by 21.1 per cent to N60.47 billion in first half of 2023 from N76.70 billion recorded in the second half of 2022. It also declined by N7.33 billion or 10.8 per cent from the N67.8 billion recorded in the same period of 2022.
Manufacturers Association of Nigeria (MAN) gave these figures in its ‘Half Yearly Review of the Economy (January – June 2023).’
This document presented the summary of finding of the survey of the manufacturing sector by MAN for the first half of 2023.
The survey was designed to monitor changes in manufacturing sector performance indicators viz-a-viz the behaviors of macroeconomic and policy environments during the period of the survey.
The focus manufacturing indicators include capacity utilization, production value, inventory, level of utilization of local raw materials, investment, expenditure on alternative energy sources, etc.
MAN said electricity supply to the industries from the national grid in the first half of 2023 increased marginally to 11.3 hours per day from 10.2 hours recorded in the same period of 2022.
Additionally, it increased by 42 minutes when compared with 10.6 average hours per day of electricity supply in the last half of 2022. In the same vein, the average number of outages per day increased marginally to 4.7 times from 4. 4 times in the first half of 2022.
MAN, however, lamented that at 24 per cent, cost of funds to manufacturers, undoubtedly, was one of the major hurdles confronting the manufacturing sector in the country.
The Director General of MAN, Segun Ajayi-Kadir, said the challenge of high cost of obtaining funds was substantiated by data gathered during the fieldwork for the first half of 2023 report.
“According to this data, the average lending rate to the manufacturing sector from commercial banks remained high at 24 per cent when compared with what was recorded in the corresponding half of 2022,” he said.
Ajayi-Kadir, however, said cost of funds for manufacturers increased by 2.0 percentage points when compared with 22.0 per cent recorded in the second half of 2022.
“The lending rates offered by commercial banks to industries are significantly influenced by the continuous upward adjustments in the Monetary Policy Rate.
“These adjustments aim to maintain a favorable real interest rate environment, with the goal of attracting foreign investment inflow, defending the domestic currency (Naira) and curbing the spiraling inflation, the MAN DG stated.
He noted that 2023 started with uncertainty in the economy as a result of Naira redesign policy of the Central Bank that led to naira crunch and the usual dormant economic activities prior to general election.
Ajayi-Kadir said the re-infusion of the old currency notes which was initially moved out of circulation brought a promising outlook to the economy, and consequently, a short-lived uptick in economic activities, especially in the informal sector, was experienced.
Even at that, the effects of the naira redesign program and slow economic activities, according to him, was reflected in the Gross Domestic Product (GDP) data released by the National Bureau of Statistics (NBS), showing that the economy slowed to 2.31 per cent and 2.51 percent in the first and second quarters respectively.
Furthermore, the subsidy removal and exchange rate unification policy towards the end of the first half left the economy on the brink of uncertainty, causing a ripple effect that further eroded investors’ confidence.
“As a result, businesses and foreign investors are increasingly wary of committing capital, thereby hindering economic growth and prospects for recovery.
“The combined effect of these is the resultant higher inflationary pressure, which fuels cost of production, reducing consumers’ purchasing power and having a greater impact on the manufacturers,” Ajayi-Kadir said.
He, therefore, said it was of utmost importance that the challenges identified by manufacturers in MAN’s survey are promptly and effectively addressed. “The sector urgently requires measures to mitigate the adverse effects of these policies and restore its growth trajectory,” he stated.
Concerning the high cost of funds to manufacturers, Ajayi-Kadir recommended the provision of credit guarantees for industrial loans from commercial banks and creation of development funding opportunities with liberal conditions for Small and Medium Enterprises (SMEs).
He also canvassed strengthening the Bank of Industry (BoI) and Bank of Agriculture (BoA) to provide finance for the manufacturing sector, as well as making the CBN non-oil export stimulation facility accessible to the productive sector with favorable terms and conditions, among othres.
The MAN boss also said in order to address the electricity supply challenge, there was the need to develop a roadmap for improved power supply, including off-grid solutions and private sector-driven independent power projects.
Other recommendations he put forward include promoting renewable energy sources such as solar and wind, resuscitating national refineries for local fuel production, and review the nation’s domestic gas pricing etc.
