MAN: Excessive Regulation Marred Productivity In Q2’24

The Manufacturers Association of Nigeria (MAN) has said that activities of government’s regulatory agencies impacted negatively on productivity in the second quarter of 2024.

The Association said the implication of the operating environment on manufacturing activities in the quarter was measured focusing on multiple regulation, multiple taxes, access to the national ports, local sourcing of raw materials, inventory of unsold goods, and patronage of locally manufactured goods by government’s agencies.

According to MAN’s findings showed that 90 per cent of the respondents confirmed that excessive regulation by the government depressed productivity. The report said 90.3 per cent respondents attested to the fact that multiple taxation depressed productivity in the sector and 67.4 per cent affirmed that port gridlocks negatively affected productivity.

It further disclosed that the production system was marred by over 190 multiple taxes while the Oronsaye Report and the National Single Window are yet to be implemented to address over-regulation and port gridlocks.

Furthermore, it affirmed that 55.6 per cent confirmed that local sourcing of raw materials had improved in the sector and only 45.9 per cent agreed that the implementation of the Executive Order 003 has been beneficial to the sector.

“While the scarcity of forex continues to prompt the local sourcing of raw materials, investment in local sourcing is being frustrated by exorbitant cost of borrowing and high rate of insecurity in farming areas.

“Hence, only a minimal improvement of 3.8 percentage points was recorded for local sourcing of raw materials during the period of review. “Compared to 56.4 per cent in the preceding quarter, only 43.7 per cent of the CEOs surveyed agreed that the inventory of unsold manufactured goods had reduced in the last three months.

“The further erosion of consumers’ purchasing power accounted for the drop in sales of manufactured finished goods,” MAN stated in the report.

It also pointed out that while the headline inflation rate intensified from 33.20 per cent in Q1’24 to 34.19 per cent in Q2’24, food inflation escalated from 40.01 per cent to 40.87 per cent within the same periods.

According to MAN, “the rising inflation has contributed to increased production costs, forcing manufacturers to raise their prices. This, in turn, has led to a shift in demand from some manufactured goods to basic household foodstuffs.”

While evaluating the effects of macroeconomic environment on manufacturing indicators, MAN noted that data on the effects of macroeconomic environment on manufacturing activities were also generated and analysed taking into consideration production and distribution costs; capacity utilisation;

volume of production; investment; employment; sales volume; and cost of shipment. MAN in its findings showed that 79.9 per cent, 81 per cent and 77.8 per cent of the respondents respectively affirmed that the macroeconomic environment had a decreasing effect on manufacturing capacity utilisation, volume of production and sales volume in the second quarter of 2024.

Also, it added that only 12.5 per cent and 9.3 per cent of the respondents respectively affirmed that the macroeconomic environment had an increasing effect on manufacturing investment and employment during the period of review.

About 91.8 per cent of the respondents confirmed the increasing cost of production and distribution and 79.2 per cent reported increasing cost of shipment. MAN said: “The analysis confirms the effect of the harsh macroeconomic environment on manufacturing indicators.

The state of insecurity, rising energy costs and lending interest rates continue to reinforce the inflationary pressure, thereby making the operating environment highly unfavourable and sales less profitable for manufacturers.”

On the impact of macroeconomic environment on the manufacturing sector, MAN stressed that the findings showed estimates of the impact of macroeconomic environment on key manufacturing indicators, which include production and distribution costs, capacity utilisation, volume of production, investment, employment, sales volume and cost of shipment.