Increasing inflationary adversely affecting operation of manufacturing sector-MAN
The current inflationary condition in the country is adversely affecting the operation of the manufacturing sector, just like most other sectors of the economy, according to the Manufacturers Association of Nigeria (MAN) which argues that elevated inflation as exemplified by the current trend ,serves as a significant sign of underlying macroeconomic weaknesses.
MAN, whose submissions are contained a statement on Wednesday issued and signed by its Director General , Segun Ajayi-Kadir, added that the neglect to tackle the underlying causes of the persisting inflationary pressure ,will exacerbate constraints on economic expansion and elevate the unemployment rate within the country.
“It is important to note that addressing inflation is a complex and long-term endeavor that requires a coordinated effort from various stakeholders, including the government, central bank, private sector, and civil society,” said the MAN DG who also articulated some of the impacts of the rise in inflation on manufacturing to include:
Increase in Cost of Production: Rising inflation often leads to higher costs of raw materials, labour, and other production inputs. Manufacturers might find it more expensive to procure resources necessary for their production processes, thereby squeezing profit margins.
Reduced Profit Margin: As costs increase due to inflation, manufacturers might struggle to pass on these cost increases to consumers in the form of higher prices. This will result in reduced profit margins, especially as it is becoming more difficult to pass the burden to the consumers as a result of income squeeze leading to price resistance.
Supply Chain Disruptions: Inflation is disrupting supply chains, making it difficult for manufacturers to obtain necessary materials and components. This will lead to delays in production and potentially halt operations as key supplies become scarce or unavailable.
Uncertainty in Planning: Inflation introduces a level of uncertainty in economic conditions. Manufacturers will continue to find it challenging to make long-term business plans due to unpredictable cost fluctuations, demand shifts, and overall economic instability.
Reduction of Consumer Spending: High inflation often reduces consumers’ purchasing power. As prices rise, consumers are cutting back on discretionary spending, including manufactured goods. This leads to decreased demand for products which adversely affects manufacturers’ sales.
To address the challenge , the nation’s manufacturing umbrella body advocates a combination of recommendations, tailored to Nigeria’s specific economic circumstances, can help mitigate inflationary pressures and promote sustained economic growth.
Some of the ways that will ensure effective and conducive operations of manufacturers in the Nigerian economy includes:
1. Striving towards a stable exchange rate is crucial to controlling inflation. The CBN should implement effective exchange rate policies that prevent sharp depreciation of the currency, which has continued to lead to imported inflation. Addressing the problem of free fall of Naira in both official and parallel markets by improving liquidity in I&E window.
2. Employment of collaborative fiscal policy measure through budgeting and effective taxation to complement the monetary policy actions taken by CBN.
3. Increased targeted support to the agricultural sector to enhance productivity, reduce reliance on imports and stabilize food prices.
4.Formulation of policies that promote a stable and conducive business environment which can attract both local and foreign investments, leading to increased production, job creation, and ultimately, stability in prices.
5. Communicate effectively with the public and stakeholders about the government’s commitment to controlling inflation. This can help manage inflation expectations, which can influence price-setting behaviour.
6. Addressing the challenges of insecurity.
7.Deploying fiscal reforms that prioritize productivity and intensify infrastructural development to stimulate economic activity, create jobs and improve living conditions.
8. Implement structural reforms that enhance transparency, reduce bureaucracy and improve the ease of doing business.
