Manufacturers Groan over Deterioration of Key Economic Indicators in 1st Quarter 2023

•Reveal volume of sales plummeted by 13%

Dike Onwuamaeze

The Manufacturers Association of Nigeria (MAN) has stated that operators in the sector groaned in pains during the first quarter of 2023, as sales volume of locally made goods declined by 13 per cent in the period.

The association made this known in its “MAN CEO Confidence Index” (MCCI) report on the first quarter of 2023, which disclosed that Nigeria’s macroeconomic environment had significant negative impact on manufacturing indicators during the review period.

These indicators which included production and distribution cost, capacity utilisation, volume of production, investment, employment, sales volume and cost of shipment, largely deteriorated in Q1 2023.

The MCCI stated emphatically that a critical evaluation of its survey analysis supported an inference that the manufacturing sector’s “performance in the first quarter of 2023 was much lower than what was obtained in the last quarter of 2022.”

It added that manufacturing activities in the first quarter of 2023 were adversely affected by escalation in the Consumer Price Index (CPI), continuous erosion in Naira value and difficulty in accessing foreign exchange, high cost of energy, naira crunch, exorbitant taxes, high lending rates, persisting insecurity and the consequences of lingering Russian-Ukrainian war.

The report added: “Manufacturers are extremely groaning in pains due to these issues that are frustrating their contribution to the economy.

“Major performance indicators of the manufacturing sector all recorded unfavorable changes. Amidst the harsh business-operating environment evidenced by poor macroeconomic indices, the underperformance was largely driven by the nationwide cash crunch in the first quarter of the year. 

“The economic turmoil significantly crushed consumer patronage and costly disrupted the manufacturing value chain in most periods of the quarter.”

A breakdown of the survey’s report revealed that, “production and distribution costs escalated by 24 per cent in the quarter under review much higher than the 19 per cent increase witnessed in the preceding quarter.”

The report further showed that, “capacity utilisation nosedived further by 5.0 per cent in the quarter under review similar to the contraction witnessed in the preceding quarter.”

Furthermore, the, “volume of production contracted by 13 per cent in the quarter under review against the 1.0 per cent growth recorded in the previous quarter; while manufacturing investment dropped by 3.0 per cent in the first quarter of 2023 from 2.0 per cent increase recorded in preceding quarter.”

It added that, “manufacturing employment reduced further by 3.0 per cent in the first quarter of 2023 from 2.0 per cent contraction recorded in preceding quarter.”

Moreover, “sales volume plummeted by 13 per cent in the first quarter of 2023 against the stable record witnessed in the preceding quarter,” the MCCI noted, adding that the, “cost of shipment rose by 20 per cent in the first quarter of 2023 though witnessed a slowdown from the 22 per cent increase recorded in the fourth quarter of 2022.”

The MCCI stated that in the course of the survey, manufacturers had the opportunity to identify and rank the current challenges of the manufacturing sector in order of severity of impact.

“Based on the ranking, multiple taxes/charges/levies was top on the list of major manufacturing challenges. This was accordingly followed by inadequate power supply, low patronage/poor sales/low purchasing power, unavailability of raw materials/delay in receiving imported raw materials/high cost of raw materials and scarcity of forex/high exchange rate/poor allocation of forex.”

The Aggregate Index Score (AIS) of MCCI declined to 54.1 points in the first quarter of 2023 from 55.0 points obtained in fourth quarter of 2022. The index score of the current quarter though below that of the previous quarter, indicates that manufacturers generally show resilience and have confidence in the economy.