Manufacturers’ industrial capacity reduced to 30% over rising production cost –

2022: Manufacturers demand better forex market, infrastructure

By Merit Ibe

The crushing scarcity of foreign exchange, depreciating naira exchange rate and high inflationary pressures, now posing severe impediments  to businesses in the countrymay have forced manufacturers to reduce production capacity to less than 30 percent to remain afloat.

The manufacturers who spoke to Daily Sun revealed that they have resorted to  looking inwards to source raw materials and selling at zero or near-zero profits to avoid being stuck with very high inventory of finished products since consumers cannot afford to pay more from their lean resources.

Most manufacturers are also  becoming innovative in their operations, reducing  wastes and inefficiencies to the barest by driving export to source more forex.

Manufacturing sector is still plagued by high cost of local and imported raw materials, insecurity within the industrial areas, shortage of skilled manpower, high cost of transportation, government policy inconsistency among others.

According to the 2021 Manufacturers Confidence Index (MCCI),  developed  by the Manufacturers Association of Nigeria (MAN), the development can only be reversed if government can intentionally put in place mechanisms that will address these challenges permanently by creating an enabling environment for ease of doing business. The further advocated that  investment incentives should be put in place to develop raw-materials locally through the backward integration and resource based industrialisation initiatives.

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In his reaction, Mr Imokhai Ehimigbai, Export Manager at Aarti Steel Ltd, and a member of the MAN Export Group (MANEG), said a favourable exchange rate in the case of an appreciating naira will no doubt improve the manufacturing sector,  but he said a reverse is the case as the economy keeps experiencing a depreciation in naira.

According to him, this has been a very difficult moment for manufacturers. “In mitigating this in our case, we have reduced our production capacity drastically.

Also reacting to what manufacturers were doing to cope with the rising costs,  Chairman,  MAN, Apapa branch,  Frank Onyebu, noted that the current scarcity of foreign exchange is a huge burden on the manufacturing sector already bedeviled by so many other problems, including insecurity, high energy cost and general infrastructure deficiency.

“These have led to unprecedented rise in the cost of production resulting from high cost of inputs and other factors.

“Ordinarily, this rise in cost should be transferred to the customers. However, our depressed economy and the consequent drop in consumer demand will not support any significant rise in the price of manufactured products.

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“Manufacturers are therefore stuck between the devil and the deep blue sea. It is either we sell at zero or near-zero profits or we are stuck with very high inventory of finished products since consumers cannot afford to pay more from their lean resources.”

“Manufacturers are  innovative now in their operations. They source raw materials locally which  cannot be overemphasized. Wastes and inefficiencies have been reduced to the barest minimum while operations are streamlined to take advantage of technology.

“Government should create a more conducive environment for businesses to thrive. There is need for government to make good its pledge to drastically improve the ease of doing business in Nigeria.

“ Infact we operate at less than 30percent capacity utilization now as a result, many jobs have been lost. We are  also driving export to source for greater part of our forex for bringing in raw materials. We are also looking inwards now for local substitute for foreign raw materials to increase the local content of our inputs.”

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