Local manufacturers in the country have cited high-level insecurity, rising operating costs and the general manufacturing unfriendly environment as responsible for the low production output in some industrial zones in the country.
According to them, the productive sector in some regions continues to shrink, leaving such zones to mainly trade and services.
While the Chief Executive Officers of Manufacturers Association of Nigeria (MAN) member-companies in the economy in the first quarter of 2022 (Q1’22) reported declined confidence in the economy as revealed in the latest Manufacturers CEO’s Confidence Index (MCCI) survey report, some of the pessimism stems from the rising level of insecurity in the country.
The MCCI analysis based on industrial zones showed that out of the 13 industrial zones in Nigeria, Bauchi/Benue/Plateau, Abuja and Rivers struggled in the first quarter of 2022. The performance of the afore-mentioned zones was clearly depicted by the index scores of 48.3, 44.8 and 46.0 points respectively, in the period under review which fell below the 50 neutral points threshold Index score.
MAN stated that the lacklustre performance recorded in Bauchi/Benue/Plateau, Abuja and Rivers industrial zones is attributable to the unbridled disruption of manufacturing activities by high-level insecurity, rising operating costs and the general manufacturing unfriendly environment.
“In specific terms, peculiar contributory factors for Rivers State include the prevailing low interest in the productive sector evidenced by the shrinking industrial landscape, low support for the manufacturing sector and the excessive concentration on trade and services,” the producers added.
“The general decline in the index point and the dimmed outlook for the second quarter evidenced by expectations of lower production, employment and unfriendly business conditions, is a cause for concern. This obviously calls for the crafting of a National Response and Sustainability Strategic Plan to avert the looming economic crisis and shortages that would arise from the impact of the Russia invasion of Ukraine,” MAN stated in the report.
It would be recalled that the Centre for the Promotion of Private Enterprise (CPPE) had warned that the state of insecurity has reached a frightening level deserving of a state of emergency declaration, adding that the trajectory portends serious adverse implications for economic growth prospects and investment outcomes.
In its 2022 first-quarter economic review, the Chief Executive Officer of the CPPE, Dr. Muda Yusuf, noted that the worsening security situation in the country, the escalating energy cost, exchange rate depreciation, liquidity crisis in the foreign exchange market and the spiking inflationary pressures form major headwinds undermining economic growth.
“We cannot retain, scale or attract investment in an environment that is not secure. This is true of domestic and foreign investments. The situation continues to pose a very serious challenge to lives and livelihoods. Investors’ confidence has been greatly undermined with investments across all sectors being adversely affected. When investment is in jeopardy, livelihoods are negatively impacted. Worsening insecurity is adversely impacting lives and undermining livelihoods. This is taking a huge toll on both the social and economic life of the nation,” he added.
He noted that escalating energy costs, alongside poor power supply from the national grid, have consequences for the economy as these are reflected in the high production and operating costs across all sectors, high haulage costs due to diesel prices as well as potential suspension of operations for businesses that are unable to pass the costs to the consumers.