Seeks declaration of state of emergency
By Dike Onwuamaeze
The Manufacturers Association of Nigeria (MAN) has lamented the high volume of inventory of unsold products worth N420 billion during the first quarter of 2020, canvassing a special bailout fund for the sector with tangible deliverables on the number of jobs to be created, the volume of exports to be generated, projected revenue and quantum of local raw materials to be used by manufacturers.
It also called on the federal government to declare a state of emergency in the manufacturing sector.
The declaration of emergency, according to MAN, would enable the government to study the current state of the manufacturing sector and craft sustainable stimulus packages to herald the recovery of the industrial sector.
The call was contained in the MAN CEOs Confidence Index (MCCI) for the first quarter of 2020, which was created to quarterly measure changes in macroeconomic trends, operating environment and selected diffusion factors relevant to the manufacturing sector.
The Head of Research Department of MAN, Dr. Oluwasegun Osidipe, who headed the research team that produced the report, stated that the respondents to the MCCI’s survey were chief executive officers (CEOs) of manufacturing companies in Nigeria.
Osidipe explained that the MCCI survey sought to measure the thoughts of the CEOs on the economy “with a view to ascertaining their level of confidence in the prevailing economic policies, regulatory guidelines and manufacturing operating environment in Nigeria.” The association also called on the government to reduce the financial pressure on companies occasioned by the lockdown, necessitated by the government’s measure to contain COVID-19, by providing 60 per cent of employees’ salaries for at least three months to prevent the retrenchment of workers.
It also demanded a downward review of interest rates on bank facilities to manufacturers to five per cent with two years’ moratorium.
“Manufacturers that are investing in order to scale up production should be granted loans at five per cent interest rate for a period of five to seven years to improve liquidity and ramp up productivity.
“Government should prevail on the Central Bank of Nigeria (CBN) to extend its COVID-19 stimulus packages to manufacturers not covered by existing CBN’s initiatives. The CBN should also grant manufacturers increased access to foreign exchange at the pre-COVID-19 rate to support the importation of raw materials, machines and spares that are not available locally,” the MCCI said.
The survey noted that manufacturing performance was dismal in the first quarter of 2020 as it fell below 50 points benchmarks for the first time since its first edition was published in 2019 and emphasised that the monetary authority should prioritise improved access to foreign exchange by operators in the real sector of the economy for the purchase of machines, raw materials and other manufacturing inputs that are currently not available in the country as the survey showed deterioration in the manufacturers’ access to foreign exchange
The survey also indicated that the majority of CEOs affirmed that the persisting high lending rate would not encourage any meaningful manufacturing, noting that the situation is worsened by the CBN’s policy contradictions that expected deposit banks to lend more to the private sector on one hand and on the other increased the Cash Reserve Ratio that tactically reduced the quantity of money that would be available for lending.
It added: “Fifty per cent of respondents submitted that the size of commercial bank loan available to the sector has shrunken greatly and consistently discouraged manufacturing productivity as government borrowing continues to crowd out the real sector.”
The MCCI also demanded that the government should sustain the implementation of the backward integration policy by “properly funding relevant institutions, giving utmost priority attention to the development of local raw-materials in commercial quantity and creating a friendlier environment for investment on the value-chains of these materials that are not locally available.”
“Furthermore, the government shall involve the private sector operators in the crafting and implementation of adjustment frameworks that would deepen the backward integration efforts and ensure that the little gains made so far in the country’s industrialisation drive are sustained,” it added.
The survey showed that the positive side of the COVID-19 was that Nigerians were constrained to buy locally produced goods although information emanating from local manufacturers showed that government agencies still maintain their penchant for foreign products even when local substitute of similar quality are readily available.
It advised the government to initiate policies that would strengthen the purchasing power of consumers to stimulate aggregate demand and deliberately reduce the cost of manufacturing in the country.