- Friday, May 3, 2024
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The outlook for the manufacturing
sector in 2024 may not be a positive one, at least in the first half of the
year, the Manufacturers Association of Nigeria (MAN) has projected.
MAN Director General Segun
Ajayi-Kadir, in a statement on Thursday, said the period will be challenging,
with a subtle possibility of recovery from the third quarter.
He, however, said the envisaged
recovery is highly dependent on the deployment of policy stimulus supported
with a synthesis of domestic growth driven, export focused and offensive trade
strategies.
According to him, this will
promote resilience, steady growth and ensure that the sector gains meaningful
traction in the later part of the year.
MAN, in the statement which was
made available to The Nation, said an examination of the trajectory of
manufacturing globally portrays a struggling sector that is now more than ever
challenged by key macroeconomic variables and externalities, leading to
dwindling growth.
“This is evidenced by the
manufacturing growth rates in China, USA, and South Africa,” MAN said, noting,
for instance, that “The World Bank reported that the manufacturing sector in
China declined from 8.7 per cent in 2021 to 4.8 per cent in Q3 2023.
“In USA, the sector performance
dwindled to -0.9 per cent in Q3 2023 from the 6.8 per cent recorded in 2021,
while South Africa also recorded a decline to -0.17 in Q3 2023 from 6.7 per
cent of 2021.”
Ajayi-Kadir, while noting that
the trend is similar to what is obtainable all over Africa, said of course,
Nigeria is not exempted, as the manufacturing growth rate nosedived to 0.48 per
cent in Q3 2023 as against 2.4 in 2021.
“Judging from the observed trend,
it is obvious that the outlook for the manufacturing sector in 2024 may not be
a positive one, at least in the first half of the year,” he said.
The MAN DG stated that drawing
from likely economic dynamics and in the light of the aforementioned, the
Association projects that in 2024, there will be clarity on the actual and
specific policy direction and priority areas of the current administration,
especially around deepening industrialisation.
He said while MAN looks forward
to engaging government in this regard, the government, hopefully, will see the
manufacturing sector as the key driver of sustained economic growth and will
give the sector the priority that it deserves.
MAN also projected that in 2024,
sectoral real growth is expected to hit about 3.2 per cent, while the sector’s
contribution to the economy will most likely exceed 10 per cent and the
Manufacturers’ CEOs Confidence Index is predicted to rise above 55 points
thresholds.
Also, average capacity
utilization will still hover around the 50 per cent threshold as the
forex-related challenges and high inflation rate limiting manufacturing
performance may linger until mid-year.
MAN also said the sector may
experience a meagre improvement in manufacturing output as forex and interest
rates-related challenges are expected to subside from the third quarter.
The Association further said
higher manufacturing output is envisaged from the beginning of the third
quarter of the year as the government disburses capital provisions of the
budget to abandoned, ongoing and new capital projects with expected special preference
for locally made products.
MAN also projected that the
ongoing concessions of seaports, airports and roads may also provide
opportunities for the cement sub-sector and contributes to infrastructure
upgrade needed to enhance manufacturing productivity.
MAN also sees a reasonable
stability in the monetary policy ambience as the apex bank reverts to playing
its conventional roles and deliberately improves forex supply to the productive
sector for import of inputs not available locally.
Ajayi-Kadir also said the results
of the emerging upward surge in global oil prices, domestic oil and gas
production, local refining of petroleum products and projected gains of
exchange rate unification will promote stability in the forex market and impact
manufacturing positively from the second half of the year.
“This will lead to reduction in
the pressure on demand for forex and improve the inflow of export proceeds from
oil and gas,” he stated.
He also said the ongoing tax
reforms and the envisaged bank recapitalization will frontally address the
challenges of multiple taxation and poor access to credit that have continued
to limit manufacturing sector performance, if successfully implemented.
The MAN boss further said he
expects a dynamic implementation of the Electricity Act 2023, which will
increase private investment in renewable energy, enhance energy efficiency and
improve electricity supply to the manufacturing sector.
“The improved electricity supply
will ameliorate the issue of inadequacy, reduce the disruptions occasioned by
frequent outages and in turn improve energy security.
“In broad terms, the year 2024
may start on a tough note for manufacturing but may end with some measured
improvements because the envisaged policy reforms, improved commitment to
domestic production and general positive outlook seams favourable for the
sector,” he said.
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