The Manufacturers Association of Nigeria (MAN) Economic Review ascribed the good showing of manufacturing sector in 2021 to palliative measures by government to salvage the sector from the effect of COVID-19 pandemic, writes Dike Onwuamaeze
How did the Nigerian manufacturing sector fare in 2021? This is the question the Manufacturers Association of Nigeria’s (MAN) Economic Review for the second half of 2021 provided answers to.
According to MAN’s economic review, year 2021 provided the opportunity to redress the staggering negative impact of COVID-19 Pandemic on the industrial sector, which strongly rebounded in 2021 following the continuous containment of the pandemic and the opening of global economies.
It said that the Nigerian manufacturing sector growth increased from -2.85 percent in 2020 to 3.37 percent in 2021.
The positive performance recorded in the manufacturing sector in year 2021 was attributed “to the palliative measures imposed by government to salvage the sector from the effect of COVID-19 pandemic. Nevertheless, to improve and reposition the manufacturing sector and restore it back as the engine of growth, there is need to maintain those policies and formulate others that will encourage investments especially on the stability of exchange rate, development of local raw materials, protection of lives and properties among others.”
The highlights of the MAN’s economic review showed that capacity utilisation in the manufacturing sector increased to 58.9 per cent in 2021 higher than the 49.5 per cent average it recorded in 2020. Also, the value of manufacturing sector production output increased to N7.03 trillion in 2021 from N4.42 trillion that was attained in 2020.
The review also showed that unsold inventory of finished products in the sector declined to N439.46 billion in 2021 when compared to the N577.61 billion recorded in 2020. The decline in inventory in the period under review was attributed to the recovering aggregate consumption following the gradual rebounding of economic activities as COVID-19 pandemic receded.
Manufacturing Capacity Utilisation
MAN said that “capacity utilisation in the manufacturing sector increased to 59.0 percent in the second half of 2021 from 53.7 percent recorded in the corresponding half of 2020; thus, indicating 5.3 percentage points increase over the period. It increased by 6.6 percentage point when compared with 52.4 percent recorded in the preceding half. Capacity utilization in the sector averaged 58.9 percent in 2021 from 49.5 percent average of 2020.”
The review attributed the increase in manufacturing capacity utilisation to the lifting of economic and social restrictions meant to contain COVID-19 pandemic and the full rebounding of economic activities globally and in Nigeria within the period.
Another factor that contributed to the increase in capacity utilisation was the entrance of five new paper mills that are recycling waste papers to produce cartons. Moreover, the capacity utiisation in the manufacturing sector was buoyed by the BUA Group that established a cement factory in Sokoko and the commencement of a new African Glass Limited factory that produced glass products.
Yet, not all segments of the manufacturing sector witnessed improved capacity utilization in 2022. One of them is the non-metalic mineral segment. According to the report, “manufacturing activities in the non-metallic minerals sub-sector have been persistently low following the exclusion of some of the veritable raw materials for glass production that are imported from the official foreign exchange window.
“The situation was worsened by the limited availability and high cost of prospecting for local raw materials in the country. Therefore, capacity utilisation in the sub-sector averaged 49.5 per cent in 2021 as against 49.9 per cent of the 2020.”
Manufacturing Production Value
The MAN’s economic review also showed that the output of the manufacturing sector increased to N3.73 trillion in second half of 2021 from N2.36 trillion recorded in the corresponding second half of 2020, which represented an increase by 58.1 per cent. Production value in the sector totaled N7.03 trillion in 2021 as against N4.42 trillion recorded in 2020.
Total production in the non-Metallic sector increased to N624.36 billion from N139.68 billion of 2020. Also, production value in paper segment increased to N67.28 billion in the second half of 2021 from N64.56 billion recorded in the same half in 2020 and N75.44 billion in the preceding half. Production value in the sector stood at N142.72 billion in 2021 as against N125.11 billion of 2020.
But the production value in the Food, Beverages and Tobacco sub-sector declined marginally to N1.201 trillion in the second half of 2021 from N1.204 trillion recorded in the same half of 2020; thus, indicating N0.003 trillion or 0.25 percent decline over the period. It also declined by N0.19 trillion or13.7 percent when compared with N1.39 trillion achieved in the preceding half.
However, production value in in the Chemical and Pharmaceutical sub-sector totaled N631.52 billion in 2021 as against N610.47 billion in 2020.
Manufacturing Investments
The report stated that manufacturing investment was N217.22 billion in 2021 as against N118.52 billion in 2020. It said that investment in the manufacturing sector increased in the second half of 2021 to N73.18 billion from N56.44 billion recorded in the corresponding half of 2020, which indicated N16.74 billion or 29.7 percent increase over the period. It however, increased by N70.96 billion or 49.3 percent when compared with N144.14 billion recorded in the first half of 2021.
MAN economic review noted that investment in the manufacturing has been recovering gradually following the return of economic activities as the issues of COVID-19 pandemic are continuously resolved.
It said: “In the last one year significant investment has been recorded in the pulp, paper, printing and publishing sub-sector with the establishment of five new paper mills that are into recycling of waste papers to produce cartons. There is also the new BUA Group cement factory in Sokoko and the new African Glass Limited factory that produced glass products.”
Manufacturing Employment
The review showed that manufacturing job also rebounded following the gradual return of economic activities in the sector after a year onslaught brought by COVID-19 pandemic lockdown. For instance, the total net employment in the sector in 2021 after adjusting for job losses was 11,659 while net job losses in 2020 was 3257.
“The total historical cumulative jobs in the manufacturing sector were estimated at 1,671,441 by the end of 2021 based on surveys conducted since 2013. A total of 8508 jobs were created in the sector in the second half of 2021 as against 3,451 jobs recorded in the corresponding half of 2020 and 7,602 job created in the preceding half,” the review said.
Electric Supply to Industries
The report said that in the second half of 2021 daily electricity supply to the manufacturing sector averaged 11 against 12 hours in the corresponding period of 2020. However, daily power outage for the second half of 2021 averaged 3 times as against 4 times of the same half in 2020 and 3 times recorded in the preceding half.
The MAN said that it is important that the Nigerian Electricity Regulatory Commission (NERC) would continue to drive the electricity sector by ensuring the effective and beneficial implementation of On-grid/Off-grid, Mini-grid, and eligible customer initiatives.
MAN said that data collected in the survey of this report showed that electricity supply from the national grid improved in the second half of 2021. It highlighted that average daily supply of electricity has been stable at 11 hours and power outage, three times per day respectively.
The relative stable supply of electricity consequently caused expenditure on alternative energy to decline to N71.22 billion in 2021 from N81.91 billion of the 2020.
According to the report “expenditure on alternative energy source reduced to N45.0 4 billion in the second half of 2021, from N57.75 billion recorded in the corresponding half of 2020.
“This indicated N12.71 billion, or 22.0 per cent, decline over the period. However, it increased by N12.86 billion or 40.0 percent when compared with N32.18 billion of the first half of 2021.”
Local Sourcing of Raw Materials
However, local sourcing of raw materials dropped to 52.4 per cent in 2021 lower than the 57.5 per cent it achieved in 2020. However, a sectorial group analysis showed significant adjustment in the utilisation of local raw materials across the groups. For instance, in the Food, Beverage and Tobacco group utilisation of local raw materials averaged 68.5 percent in 20201 as against 68.3 percent of 2020.
But local raw materials utilisation in the wood and wood product sectoral group decreased in average to 54.5 percent in 2021 as against 60.9 percent in 2020.
Similarly, local raw materials utilisation in the Chemical and Pharmaceutical sector fell to an average of 46.5 per cent in 2021 against 52.8 percent average for 2020. It also declined in the Non-Metallic Minerals products group to 50 percent in 2021 against 63.2 percent recorded in 2020.
In similar manner, local sourcing of raw materials in the Basic Metal, Iron & Steel group declined to 50.5 percent in 2021 from 65.5 percent recorded in 2020.
Recommendation
However, notwithstanding the improve performance of the manufacturing sector during the year, it is still far beyond its potential growth and contribution to national output due to an almost innumerable challenges confronting the sector.
It said: “Following direct feedback from manufacturers, we recommend first and foremost that government should create plausible incentives for investment in the development of raw materials locally through the backward integration and resource based industrialisation initiates. We recognise an urgent need for investment and production of Active Pharmaceutical Ingredients (API) in the country; this should be adequately incentivised to encourage significant private investments.”
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