Nigeria’s manufacturing sector still hobbled by numerous challenges- MAN CEO Confidence Index

Despite the gradual improvement in the macroeconomic and manufacturing operating environment buttressed recovery of some key indicators, in the last quarter of 2021,  the nation’s manufacturing sector is still hobbled by numerous challenges among them excessive tax which stakeholders  said may make the much-noised efforts to restore this vital sector of the economy to sustainable growth may end-up as an idle fancy unless drastic measures are taken to address the issues raised by the association.

This position  is contained in the Manufacturers CEOs Confidence Index of Fourth Quarter of 2021 released recently by the Manufacturers Association of Nigeria (MAN), the umbrella body of manufacturers in Nigeria.

The MCCI is an index constructed by MAN to measure changes in quarterly pulsation of manufacturing activities in relation to movement in the macroeconomy and Government policies and therefore barometer used by MAN to aggregate the views of CEOs of manufacturing companies on changes in the economy.

The standard diffusion factors considered in the MCCI processes include the Current Business Condition, Business Condition for the next three months, Current Employment Condition (Rate of Employment), and Employment Condition for the next three months and Production Level for the next three months.

MCCI also measures changes in key macroeconomic indicators including sector specific factors that represent Government activities and policy measures in the economy. Consequently, the effects of movements in Foreign Exchange, Lending Rate, Credit to the manufacturing sector and Capital Expenditure of the Government were also measured.

In addition, it gauges the outcome of changes in business operating environment factors which include Over-regulation, Multiple taxes/levies, Access to seaports, Local raw-material sourcing, and Government patronage of Nigerian manufactured goods and Inventory of unsold manufactured products.

MCCI survey covered 400 Chief Executive Officers of MAN member-companies. They provided data on the afore-mentioned Diffusion factors, macroeconomic indicators and business operating environment variables which were analyzed descriptively using tables, simple percentage and charts.

“The fourth quarter of 2021 highlighted a gradual improvement in the macroeconomic economic and manufacturing operating environment buttressed by marginal recovery of some key manufacturing indicators. Although, changes in almost all manufacturing indicators as measured in this report are still not as desired, the performance in the fourth quarter is better than what obtained in the preceding quarter.

“The resilience of manufacturers, the seasonal transactions and passive policy support sustained manufacturing in the quarter despite the prevalence of familiar and emerging excessive tax related challenges faced by manufacturers.

“Overall, the sector recorded a mixed grilled performance occasioned by meagre improvement in the operating environment indices and macroeconomic ambience evidenced by the high points, which cumulatively triggered the increase in the aggregate, MCCI score for the quarter to 55.4 points from 54.0 points recording the preceding quarter, “ says the report.

 Consequently, the MAN’s report said , in order to improve the performance of the sector, government needs to intentionally put in place mechanism that will address these challenges permanently by considering and implementing the following recommendation:

Further incentivize investment in the development of raw-materials locally through the Backward Integration and Resource based industrialization initiates. Government should call for more investor to key into these initiatives with appropriate and definite incentives.

For instance, there is need for urgent investment and production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc. to support manufacturing activities.

Government should give specific attention to the security of life and investment in industrial areas; properly delineate and upscale security infrastructure in the various industrial areas in the country, particularly in the northern part of the country for priority attention. Government should also quickly invest in modern security such as drones, camera, etc. for robust monitoring of the areas.

It should ensure effective allocation of available forex to productive sectors, particularly the manufacturing sector for importation of raw materials and vital machine and equipment that are not available locally. Government also needs to expressly direct the Central Bank of Nigeria to consult with the Ministries of Industry Trade & Investment and effectively engage MAN on measures for improving forex supply to manufacturing concerns.

Government should direct the Ministry of Science Technology and Innovation to inaugurate the Secretariat that will implement the strategies for the Executive Order and SON to designate local manufacturers of LPG Gas Cylinders as priority provider of the 10 million Cooking Gas Cylinders to be procured by the Government for 12 States in the Federation.

Government should return Milk and other Dairy Products to the National List in the Fiscal Policy Guidelines to maintain consistency with the Backward Integration Programme, which has spurred heavy investments in the diary production.

It should unify academic curriculum with industrial skill needs and requirements to guarantee sustainable development of skilled manpower for the industries. Government should as a matter of urgency synchronize the curricular of tertiary institutions, particularly the Polytechnics with skills requirements of industries. The various government vocational and training centres should also be re-engineered to offer those skills that are needed by the industries.

It should revisit the resuscitation of the existing national refineries to produce fuels locally, embark on the rehabilitation of major highway corridors, improve trade facilitation infrastructure and deepen the on-going development of rails system to change narrative on operating environment from being high cost to low production cost environment.

Government should ensure that industrial policies in the country are allowed to gestate with proper monitoring and evaluation rather than jettisoning or altering them unduly frequently. The continuous infractions on the original EPZ and tariffs for the Motor Vehicle and Assembly sector should be quickly remedied to the development of the zones and motor vehicle assembly in the country.

Sustain the Eligible Customer initiative to ensure that more electricity is supplied to the manufacturing sector.

Government should:

➢ Strengthen the Bank of Industry (BOI) and Bank of Agriculture (BOA) to adequately provide liberal finance for the manufacturing sector;

➢ Monitor the implementation of Executive Order 003 to ensure compliance by MDAs so as to boost activities in the manufacturing sector;

➢ Publish the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies;

➢ Rationalize Government Ministries, Departments, Agencies, parastatal and Commissions to resolve the issues of over-regulation and duplication;

➢ Improve the time taken to clear machines and raw-materials at the national ports while making the link road accessible;