A report from Nigerian manufacturers shows that the manufacturing industry saw a 52% increase in unsold finished goods in six months.
This comes despite the 32 percent (N1.31 trillion) decrease in factory output in the manufacturing sector in the second half of 2022 compared to N$3.99 trillion recorded in the year’s first half.
The Manufacturers Association of Nigeria’s Bi-Annual Economic Review report obtained from The PUNCH included these.
The Association summarized the survey results of the manufacturing industry for the second half of 2022 in this document.
According to the report, the government’s failure to implement new capital projects as the general elections approached severely impacted manufacturing production in the second half of 2022.
Limited purchases by households due to the naira redesign policy, high inflationary pressure, high cost of energy (particularly diesel and gas), and acute shortage of forex for importation of raw materials and machinery needs of the sector, among other factors, were said to have negatively impacted production in the sector. The report partly read;
“Inventory of unsold finished products in the manufacturing sector increased to N282.56bn in the second half of 2022 up from N169.75bn recorded in the corresponding half of 2021; thus, indicating N112.81bn or 66 percent increase over the period.
“It also increased by N85.46bn or 51 percent compared to N187.1bn recorded in the year’s first half. Inventory of unsold goods in the sector totalled N469.66bn in 2022 as against N384.58bn recorded in 2021. The high Inventory recorded in the period is attributed to low economic purchasing power due to the declining real income of households following the continuous increase in inflationary pressures in the country. This is worsened by the Naira Redesign policy, which began in the last quarter of 2022”.
According to the report, capacity utilization in the manufacturing sector declined to 54.9 percent from 59 percent recorded in the corresponding half of 2021; thus, it indicated 4.1 percentage points fall over the period.
Quarter-on-quarter declined by three percentage points compared to 57.9 percent recorded in the first half of the year. As a result, manufacturing capacity utilization averaged 56.4 percent in 2022 against the 55.9 percent average of 2021.
The report also noted an increase in local raw materials utilization in the sector due to increased difficulty in sourcing forex, which compelled manufacturers to look more inward for raw materials, notwithstanding the associated colossal cost.
On investments into the sector, the report said manufacturing sector investment dipped to N145.59bn in the second half of 2022, down from N160.88bn recorded in the corresponding half of 2021, thus, indicating N15.29bn or a 10 percent decline over the period.
It declined by N32.8bn or 18 percent compared with N178.39bn recorded in the year’s first half. As a result, manufacturing investment totalled N323.98bn in 2022 against N305.02bn recorded in 2021.
MAN states that the government’s high debt profile, which primarily deters foreign investment, high cost of borrowing, high cost of energy, and low consumption, affected investment during the period.
Also, in the second half of 2022, manufacturing employment dipped to 6741, down from 8508 and 9559 recorded in the corresponding half of 2021 and the first half of 2022, respectively.
cc: Punch Ng