MAN: Unsold inventory of finished products declines N224.63 bn in 2nd half yr. 2021
The Nigerian manufacturing industry subsector recorded declines in some major areas in the second half year of 2021, according to the Half Yearly Economy Review released on Thursday by the Manufacturers Association of Nigeria (MAN).
The review which was signed by the President of MAN Mansur Ahmed showed declines in the manufacturing inventory of unsold finished products, and Local raw materials utilization in the manufacturing sector.
According to the report, manufacturing inventory of unsold finished products dipped to N224.63 billion in the second half of 2021 from N303.22 billion recorded in the corresponding half of 2020; thus, indicting N78.59 billion or 25.9 percent decline over the period.
However, it increased by N9.8 billion or 4.6 percent when compared with N214.83 when compared with N214.83 billion recorded in the preceding half. Inventory in the sector totaled. N439.46 billion in 2021 as against N577.61 billion recorded in 2020.
Unsold inventory is the product that an organisation intends to sell but, for whatever reason, has been unable to; the decline in inventory in the period under review was attributed to the recovering aggregate consumption following the gradual rebounding of economic activities as COVID-19 pandemic receded.
In similar vein, local raw materials utilization in the manufacturing sector dipped to 51.7 percent in the period under review from 56.5 percent recorded in the corresponding period of 2020; thus indicating 4.8 percentage points decline over the period.
It however, declined by 1.3 percentage points when compared with 53 percent recorded in the preceding half. Local sourcing of raw materials averaged 52.4 percent in 2021 as against 57.5 percent in 2020.
Since the full opening of the economy following the lockdown associated with COVID-19 pandemic, local raw materials and other manufacturing inputs have been relatively scarce and costly. This has also affected the output of the sector negatively.
Investment in the manufacturing sector increased in the second half of 2021 to N73.18 billion from N56.44 billion recorded in the corresponding half of 2020; thus, indicating N16.74 billion or 29.7 percent increase over the period.
It however, increased by N70.96 billion or 49.3 percent when compared with N144.14 billion recorded in the preceding half. Manufacturing investment totaled N217.22 billion in 2021 as against N118.52 billion in 2020.
Manufacturing investment has been gradually recovering following the return of economic activities as the issues of COVID-19 pandemic are continuously resolved. In the last one year significant investment has been recorded in the Pulp, Paper, Printing & Publishing (6Ps) sector with the establishment of 5 new paper mills that are into recycling of waste papers to produce cartons; there is also the new BUA Group cement factory in Sokoko; and the new African Glass Limited factory that produced glass products.
In the second half of 2021, the average cost of borrowing in the sector from the commercial banks was 24.0 percent as against 22 percent of the corresponding half in 2020 and 19 percent of the preceding half. Cost of capital in the sector averaged 21.5 percent in 2021 as against 20.8 percent of 2020.
Consequently, cost of loanable funds maintained a key challenges to the manufacturing in the half under review notwithstanding the monetary easing stance of the Central Bank of Nigeria as underscored by the retention of Monetary Policy Rate MPR at 11.5% with the asymmetric corridor at +100/-700 around MPR; Credit Reserve Ratio (CRR) at 27.5% and Liquidity Ratio at 30% since November 2020
