MAN: Capacity utilization, capital importation, manufacturing production declined in 2022

Manufacturing capacity utilization, capital importation and manufacturing production recorded declines in 2022, according to the Manufacturing Association of Nigeria (MAN).

This is contained in the Report of the Director General of MAN for 2022 which was delivered at the Association’s 51th Annual General Meeting which held Lagos on October.

Capacity utilization refers to the manufacturing and production capabilities that are being utilized by a nation or enterprise at any given time. It is the relationship between the output produced with the given resources and the potential output that can be produced if capacity was fully used.

Capacity utilization in the manufacturing sector declined to 54.9 % in the second half of 2022 from 59 % recorded in the corresponding half of 2021, an indication of 4.1 % decline over the period.

It also declined by 3 % when compared with 57.9 % recorded in the first half of the year. Manufacturing capacity utilization averaged 56.4 % in 2022 as against 55.9 % average of 2021.

MAN attributed the decline manufacturing capacity utilization in the second   half to the adverse effect of high cost of energy and Russian-Ukrainian war, the uncertainty on the possible implication of the naira redesign policy and other perennial challenges such as acute shortage of forex for importation of raw materials and machines, high cost of borrowing among others.

 Also, according to MAN, the period under review witnessed a decline on the inflow of foreign investment into the country compared to what was obtained in 2021.

Foreign investment net inflows are the value of inward direct investment made by non-resident investors in the reporting economy

MAN said that the report of Foreign Direct Investment (FDI) for the fourth quarter of 2022 stood at US$84.23 million, indicating a decline of US$274 million or 76.49 % when compared with US$358.23 million generated in the corresponding period quarter of 2021.

MAN said that though, the figure indicated a slight increase of US$2.51 million or 3.07 % when compared with US$81.72 million recorded in the preceding quarter of 2022.

The portfolio investment statistics recorded US$285.26 million in the first quarter of 2022 from US$642.87 million in the fourth quarter of 2021, indicating US$ 357.81 million or 55.63 % decrease over the period, the figure  also reduced by US$156.82 million or 35.47% when compared with US$442.08 million recorded  in the third quarter of 2022.

The report of foreign investment to the manufacturing sector for the fourth quarter of 2022 stood at US$392.54 million indicating, US$ 32.48 million or 9.02% increase when compared with US$360.06 million recorded in the fourth quarter of 2021.

According to MAN report, the figure also, increased by US$294.32 million or 299.65 % when compared with US$98.22 million recorded in the preceding quarter of 2022.

However, on annual basis, capital importation stood at US$5,328.88 million in 2022, indicating a decrease of US$1,371.63 million or 20.47 % when compared with US$6,700.51 million recorded in 2021.

The manufacturing sector’s factory output declined to N2.68 trillion in the second half of 2022 from N3.73 trillion recorded in the corresponding half of 2021, indicating a decline of N1.05 trillion or 28 % over the period It also declined by N1.31 trillion or 32 % when compared with N3.99 trillion recorded in the preceding half.

MAN report added that the value of manufacturing was N6.6.67 trillion in 2022 as against N7.39 trillion recorded in 2021.

 According to UNIDO, the value added of manufacturing industries is a survey concept that refers to the given industries’ net output derived from the difference of gross output and intermediate consumption. Value added is calculated without deducing consumption of fixed assets represented by depreciation in economic accounting concepts.

 MAN’s report says “manufacturing production was severally affected in the second half of 2022 by the absence of implementation of new capital project by the government as the focus was on the election.

“Production in the sector was also negatively affected by the purchases by households due cash withdrawal limit that accompanied naira redesign policy, the high inflationary pressure in the country, high cost of energy, particularly diesel and gas, acute shortage of forex for importation of raw materials and machinery needs of the sector that are not locally available and many more.”