Nigerian manufacturers have slashed their investments by 56 per cent in seven years, reflecting a sector buffeted on all sides by a cacophony of poor policies and economic headwinds.
Between 2016 and 2021, manufacturers’ investments tumbled from N489.44 billion to N217.22 billion, according to data collected by the Manufacturers Association of Nigeria but analysed by The PUNCH.
“How many companies in our sector are still in operation? Wempco has shut down; WAHUM is struggling, and the rest are just there. When we come for meetings, we will not be more than 11,” Chairman of Qualitek Industries, Engineer Oluyinka Kufile, who is a major player in aluminium and steel sector, told The PUNCH.
Kufile attributed the situation to a combination of poor policies, arguing that Nigeria had yet to understand its true direction in economic diversification.
The Nigerian economy has witnessed two recessions within the period- one fuelled by a foreign exchange crisis and the other by COVID-19.
But the responses of Nigeria’s federal and state governments to issues of economy have been poor, according to analysts. Insecurity has worsened over the period and foreign exchange crisis has reached its crescendo, with naira-to-dollar exchange rate rising from N197/$ to N425 in the official market over the period – signaling 54 per cent naira depreciation. States, the Customs, the Federal Inland Revenue Service and several government ministries and parastatals have been more concerned about revenue drive than easing business for 41.5 million small businesses and a string of large enterprises.
According to the Deputy President of the Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, investments were often driven by policy certainties.
He said the major factor scaring investors was the unpredictability of Nigeria’s foreign exchange market/devaluation of the naira.
He explained that foreign investors were skeptical about investing in Nigeria because the value of their returns would have declined in the future due to naira devaluation.
Market analyst, Ike Ibeabuchi, noted that central bank was getting the whole blame because the fiscal side was doing little.
“The investment drop is not only caused by foreign exchange, but also by weak policies. The CBN has got it wrong in some areas, but what are the finance minister, the investment minister, security operatives, state governors and other stakeholders doing to make Nigerian an attractive investment hub?” he asked.
The global headwinds such as COVID-19 and Russia’s invasion of Ukraine have not helped matters, having infused raw materials scarcity from wheat to oil, and pushing the central bank into raising the benchmark interest rate from 11.5 to 14 per cent in three months.
MAN said the rising borrowing cost would “lead to rising cost of manufacturing inputs, which will naturally translate to higher prices of goods,low sales and enormous volume of inventory of unsold products.”
“It will exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses,” MAN further said, noting that it would hurt capacity utilisation and upscale the rate of unemployment.
“Manufacturers are hopeful that the stringent conditionalities for accessing available development funding windows with the CBN will be relaxed to improve the flow of long-term loans to the manufacturing sector at single digit interest rate,” the group said in an emailed message.
More than 50 Nigerian manufacturing companies have shut down in the last five years, according to investigations by The PUNCH.
Some of the manufacturing companies that have exited the industry in the last five years include: Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries, and Stone Industries
