Business
Manufacturers Face Dire Situation As Unsold Goods Soar To N470 Billion
The Nigerian manufacturing sector is facing difficulties as the amount of unsold goods continues to increase.
The inventory stockpile has risen by 22 percent, reaching N469.66 billion in 2022 compared to N384.58 billion in the previous year. Moreover, industry operators express concerns that the situation is deteriorating further.
According to the bi-annual economic review conducted by the Manufacturers Association of Nigeria (MAN), the umbrella body of manufacturers in the country, the increase in inventory can be attributed to the drop in the purchasing power of Nigerians, resulting from sustained inflationary pressures.
Additionally, the cash crunch that affected the economy in the first quarter of 2023, following the implementation of the Naira Redesign policy, has further worsened the situation.
Despite these challenges, the report reveals that the manufacturing sector has experienced a decline in factory output. In 2022, the sector’s factory output decreased by 9.7 percent, amounting to N6.67 trillion, compared to N7.39 trillion in 2021.
Commenting on the development, Director General, MAN, Segun Ajayi-Kadir, stated: “Inventory of unsold goods in the sector totalled N469.66 billion in 2022 as against N384.58 billion recorded in 2021.
The high inventory recorded in the period is attributed to low purchasing power in the economy 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. The withdrawal of a large amount of the ‘old Naira’ without commensurate replacement with the ‘new notes’ resulted in a cash crunch in the economy with very limited means of purchasing items by households across the country.
“Inventory of unsold finished products in the manufacturing sector increased to N282.56 billion in the second half of 2022 up from N169.75 billion recorded in the corresponding half of 2021; thus, indicating N112.81 billion or 66 percent increase over the period. It also increased by N85.46 billion or 51 percent when compared with N187.1 billion recorded in the first half of the year.
“In the second half of 2022 as the cost of wheat and other food inputs increased; prices of fuels, particularly diesel rose by over 50 percent; cost of transportation logistics including shipping escalated even as the effect of COVID-19 pandemic is yet to fully die down. In addition to these challenges was the CBN policy on Redesigning the Naira.
“The CBN policy created a cash crunch that debilitated economic activities in the last quarter of 2022. This particularly affected the manufacturing sector adversely as it was extremely difficult to sell most of the Fast-Moving consumer Goods (FMCG) and other commodities by the sector in the period.” He called on the government to formulate and implement a national policy that would address the current high inflation in the country.
Also speaking on the situation, MAN President, Francis Meshioye said: “The manufacturing sector has been struggling with crashing sales, mainly attributable to the sustained naira scarcity. A continuing decline in sale volumes will necessitate production cuts and a reevaluation of investments in the sector.
“Specifically, if sales proceeds can no longer sustain business overheads and operating expenses, businesses will be forced to scale down their operations which would result in factory closures, job losses, a decline in exports and much more.”
Operators within the Fast Moving Consumer Goods (FMCG) industry are calling upon national and sub-national governments in Nigeria to reconsider their approach to revenue mobilization. They argue that targeting the FMCG sub-sector has resulted in a sluggish pace of growth within the industry.
Director, Corporate Affairs & Sustainability, Coca Cola Hellenic Bottling Company, Mr. Ekuma Eze, who made the plea at a recent event, said the FMCG sector has borne the brunt of such revenue mobilisation drives.
According to him, the FMCGs, which form the largest chunk of the manufacturing sector in Nigeria, and the fourth largest sector of the nation’s economy sector, are overburdened with taxes and levies, compared with their counterparts in other countries.
Eze said the introduction of, and increase in taxes, in recent times, bore eloquent testimony that companies in the nation’s FMCG remain the target of the government’s revenue drive.
Company income tax rate in Nigeria is 30 percent for companies with gross turnover greater than N100 million, compared to an Africa average of 23.5% and a worldwide average of 23.4 percent.
He stated further: “Tertiary Education Tax is now 3 percent going by the Finance Bill 2022.
“There’s been a consistent increase in excise tax for beer and tobacco companies while N10/1 excise tax was introduced in June 2022.
“The introduction of this new tax regime, due to price elasticity of demand, which is high among lower income consumers, who are major consumers of the products, has led to reduction in sales and a revenue decline of 16 percent between June 1 and December 2022.”
He also lamented the negative impact of the recent Naira Redesign Policy on the sector, noting that the policy had succeeded in significantly reducing sales between February and March, this year, by between 20 percent and 60 percent.
According to him, the fallout of this is the re-organisation option being contemplated by some companies; a development, he noted, may further compound the nation’s unemployment issue.
“Many FMCGs reported significant sales decreases in February and March by between 20 to 60%. Many of these businesses are planning to restructure, which will worsen the unemployment problem,” Eze added.
Recall that MAN had issued a statement on May 2, 2023 condemning the recently released 2023 Fiscal Policy Measures, FPM, by the Federal Ministry of Finance, Budget and National Planning, saying that it would lead to industry recession, capacity under-utilisation, and layoffs of workers.
Also commenting, Dr Chinyere Almona, Director General, Lagos Chamber of Commerce and Industry (LCCI), lamented that the rising inflationary pressure has significant and worrisome impacts on both the household and business sectors.
Her words: “Since February 2016 to date, the country has recorded a double-digit monthly inflation rate, with an adverse effect on the size of its middle class.
“Apart from eroding purchasing power, it has led to inventory stockpiles. If left unchecked, the high inflation may further constrain production, lead to a steeper rise in poverty figures, frustrate economic growth, and lead to higher unemployment and non-competitive exports, especially in the sub-region. LCCI is concerned that despite consistent monetary policy rate hikes, taming the inflation trend has remained futile.
We, however, appeal to the government to implement fiscal measures, such as reducing/ removing taxes on staple food items to protect the most vulnerable as well as spur demand-side growth.”
President of the Pan-African Conglomerate, Dangote Industries Limited (DIL), Aliko Dangote has called for increased investments in the African continent to foster its rapid growth and development.
He made the call at the largest gathering of private sector leaders in Africa, the Africa CEO Forum in Kigali, Rwanda.
According to Dangote, recent trends underscore Africa’s pivotal role as the future epicenter of global progress.
The business mogul cautioned against the continent’s overreliance on raw material exports, but advocating instead for strategic investments that will propel indigenous industries. He urged African nations to resist the urge to export raw materials but to nurture domestic manufacturing capabilities so as to reduce dependency on imported consumer goods.
He said, “Looking ahead, Africa holds the key to its greatness. I’m not merely investing money but dedicating my entire being to this cause. In Africa, possibilities are boundless. It is like a scratch card; you won’t know what is inside unless you scratch it.
“For some of us, despite the boom of the capital market in the US, we didn’t really participate, rather we invested in Africa.”
Over the past seven years, Dangote pointed out that he had channelled over $25 billion into bolstering Africa’s self-sufficiency in vital sectors such as fertilizers, petrochemicals, and refined products.
Notably, he said the monumental Dangote Refinery, boasting a capacity of 650,000 barrels per day, stands poised to meet the burgeoning demand across West Africa, Central Africa, and South Africa.
“We have finished our refinery; it is quite big. We believe it is what Africa needs. If you look at the entire continent, there are only two countries that don’t import petroleum products, only Algeria and Libya but the rest import.
“We need to change that, so we don’t just produce raw materials but finished products and create jobs. One of the things we need to know as Africans is that when we produce raw material and export them while others dump finished products on our continent, what we are doing is that we are importing poverty while exporting jobs. We must change the narrative.
“We just commissioned in February. We are producing jet fuel and diesel. By next month, we will be producing gasoline but what that will do is that it will be able to take most of the African crudes that are being produced and be able to supply refined products not only in Nigeria because our capacity is too big for Nigeria.
“It will be able to supply in West Africa, Central Africa and South Africa. This is the first phase, we are going to the next phase by next year,” he said.
Expressing concern over Africa’s paradoxical export of raw materials juxtaposed with an influx of imported finished goods, Dangote underscored the urgent need to reverse this trend.
He lamented that exporting raw materials while importing finished goods perpetuated a vicious cycle of job loss and poverty.
Founded in 2012, the Africa CEO Forum, is a platform through which African decision-makers connect with each other continuously, as well as with international investors and institutions operating on the continent.
It has evolved into an organisation dedicated to facilitating business in Africa through the exchange of ideas and experiences.
. . . As Dangote Cement, Airtel, Seplat Top Awards
The Institute of Chartered Accountants of Nigeria (ICAN) and the NGX Regulation Limited (NGX RegCo) on Friday, 17th May held the maiden corporate reporting award.
Biztellers reports that the award recognizes the top 30 most capitalized companies listed on the Nigerian Exchange (NGX) for the 2022 financial reporting year.
It was gathered that the awards underscored both organization’s shared commitment to fostering transparency, accountability, and international best practices within the private sector. Evaluation criteria included financial reporting, corporate governance, and sustainability reporting.
Dangote Cement secured the top position across all three categories, earning the Platinum award alongside the best-in-class award of excellence in corporate governance. Airtel clinched the gold award, securing the second position and the best-in-class award of excellence in financial reporting for the period under review.
Seplat Energy was honored with the Silver award while also receiving the best-in-class award for excellence in sustainability reporting.
President, ICAN, Dr. Innocent Okwuosa, commended NGX RegCo for ensuring better disclosures and reporting among listed companies.
He noted that corporate reporting had evolved over the years from the time that most of its content focuses on financial reporting to when there emerged the clamour for incorporation of social and environmental disclosures.
He emphasized the evolution of corporate reporting over time, highlighting the shift from a primary focus on financial reporting to the increasing request to incorporate social and environmental disclosures, noting that “the latter has evolved and have been differently propagated including but not limited to Environmental Social and Governance (ESG) disclosure and of late sustainability disclosures”.
Dr Okwuosa added that good corporate reporting must reflect the best elements in corporate governance, financial, and sustainability reporting, highlighting that the maiden edition is limited to NGX-30 companies for ease of administration and will be extended to all the listed companies in the future.
On his part, CEO, NGX RegCo, Olufemi Shobanjo, highlighted that “without a doubt, transparency is one of the key drivers of any economy. It ensures full disclosure of information by entities and that such information is easily accessible to members of the public to make informed decisions.
“Over the years, there has been an evolution in the type and quality of information demanded, driven by heightened expectations from investors, decision-makers, and society as a whole.”
He added that “while financial reports remain at the forefront of information required by stakeholders, the concept of Environmental, Social and Governance (ESG) considerations has become an area of increasing interest to both public and private sector stakeholders”.
Shobanjo attributed this to the interplay between ESG and key issues such as sustainable development, corporate governance, climate change, stakeholder engagement, and community relations amongst a myriad of other issues.
“Stakeholders are beginning to demand more accountability, and companies are required to think beyond just profitability by expanding their scope to include the ethical impacts that their operations have on society or communities within which they operate,” he added.
He concluded that “as a self-regulatory organization, NGX Regulation remains committed to ensuring that the expectations of investors and other stakeholders regarding access to quality information are met.”
. . . Tinubu Lauds NNPC Ltd, Partners Over Three Commissioned Gas Projects
In line with its renewed hope agenda, the Federal Government has reiterated determination to utilize Nigeria’s abundant gas resources towards revamping her industrial growth and kick-starting economic prosperity.
Biztellers reports that President Bola Ahmed Tinubu made the assertion while commissioning three critical gas infrastructure projects executed by the NNPC Limited and its partners in Ohaji-Egbema, in Imo State and Kwale, in Delta States, on Wednesday.
The three projects commissioned include the expansion of the AHL Gas Processing Plant, the ANOH Gas Processing Plant and the 23.3km ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline Projects.
He said, “It is pleasing that approximately, 500MMscf of gas in aggregate would be supplied to the domestic market from these two Gas Processing Plants, which represents over 25% incremental growth in gas supply.
“In practical terms, this translates into more gas to the Power Sector, Gas-Based Industries, and other critical segments of the economy.”
The President pointed out that from the onset, his administration was clear of its intention to leverage on the virtually unlimited capacity of gas to deepen domestic gas utilization, increase national power generation capacity, revitalize industries, and create multiple job opportunities for economic growth.
He said aside the Presidential Compressed Natural Gas (CNG) Initiative which is aimed at moving Nigerians away from petrol and diesel as vehicular combustion fuel, significant progress has also been recorded in incentivizing gas development through Presidential Executive Orders.
While congratulating the projects partners (NNPC Limited, Sterling Oil Exploration & Energy Production Company Limited (SEEPCO) and Seplat Energy for the successful implementation of the three projects, Tinubu particularly charged the NNPC Limited to, as the national energy company of choice, sustain its relentless efforts and record more successes in the energy sector for the benefit of all Nigerians.
President Tinubu described the commissioning as a highly significant milestone for Nigeria as it demonstrates his administration’s efforts to accelerate the development of critical gas infrastructure geared at enhancing the supply of energy to boost industrial growth and create employment opportunities.
He said the projects were fully in line with the Federal Government’s Decade of Gas initiative, and his administration’s quest to grow value from the Nation’s abundant gas assets while concurrently eliminating gas flaring and accelerating industrialization.
“I wish to assure the citizenry that these are just the beginning, as the federal government is stepping up its coordination of other landmark projects and initiatives that will ensure the earliest realization of gas fueled prosperity in our country.
“Consequently, I wish to assure investors in the energy space that this is an investment enabling government and we will not relent in facilitating the ease of doing business,” the President noted.
Earlier in his address, the Minister of State for Petroleum Resources (Gas) Rt. Hon. Ekperikpe Ekpo highlighted the efforts of his ministry to continue to champion the utilisation of gas as a transition fuel as Nigeria moves towards achieving clean energy efficiency and security by 2060.
Ekpo commended the President for his leadership and support towards the success of the three projects.
In his remarks, the GCEO NNPC, Mele Kyari described the commissioning as a demonstration of Mr. President’s commitment and support to grow the domestic utilization of natural gas for power generation, as feedstock for gas-based industries and overall rapid industrialization of Nigeria on the back of the enormous gas resources in the country.
Kyari assured that as part of its mandate, NNPC Ltd remains committed to maintaining energy security by executing more strategic gas projects for the benefit of Nigeria.
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