MAN CEO’s Confidence Index: Weaker manufacturing performance recorded in 2nd quarter of 2019

The aggregate Manufacturers CEO’s Confidence Index for the second quarter of 2019 stood at 50.9 points; thus, indicating a contraction of 0.4 points from 51.3 points recorded in the first quarter of the year.

The Second quarter of 2019 MCCI with a composite index of 50.9 points presented a weaker manufacturers’ confidence on the economy when compared with the first quarter performance of 51.3 points; thus, indicating a shrinking manufacturing activity.

The current MCCI revealed that more sub-sectors and industrial zones performed below the 50-point threshold as against what obtained in the first quarter. This therefore demands that Government should, as a matter of urgency, address the challenges responsible for the observed downward trend.

The weak performance is attributable to the persistence of numerous operating challenges limiting manufacturing activities.

The indexes of Current Business Condition in the second quarter dropped to 43 points from the 45.5 points recorded in the first quarter; Current Employment Condition which stood at 38 points in the first quarter of the year also weakened to 35 points in the second quarter, while production expectation in the next 3 months decelerated marginally from 65.5 points recorded in the first quarter to 64.5 points in the second quarter of the year.

The index Shows that port related challenges at the Lagos ports still persist.  Majority of the CEOs (94%) interviewed agreed that congestion at the ports significantly affects productivity negatively.

This unpalatable issue manifest daily in form of delay in clearance of manufacturing inputs and machinery as well as high demurrage which increases cost of production in the sector and often times slows down manufacturing operations.

Even though a large percentage of respondents claimed that the level of local raw-materials sourcing has increased in the country, greater proportion of those interviewed are still of the view that effort should be intensified to improve the development, sourcing and utilization of local raw materials.

The MCCI  stated Government needs to promote private sector driven policies that would further enhance the capacity of relevant institutions to deliver on set mandates and improve the level of local sourcing of raw materials.

“Therefore, Government needs to properly fund the relevant institutions, initiate policies that will give priority attention to the development of local raw-materials in commercial quantities, create friendlier environment for investment on the value-chains of these materials and ensure that adequate forex is made available for importation of vital raw materials that are at the moment, not available locally”.

The manufacturers also stressed the need to urgently step up the campaign on Buy-Made-In-Nigeria, interrogate the implementation of the EO003 to ascertain the degree of compliance of MDAs and establish support-structures that would ensure that Government patronage of goods manufactured in Nigeria improved as expected.

MANUFACTURERS’ RECOMMENDATIONS

To stimulate improved performance, generate better contribution to the Gross Domestic Product (GDP) and consciously promote sustained manufacturing growth, Government, as a matter of priority must deliberately put in place enduring measures that will address the challenges identified by CEOs of manufacturing companies in Nigeria. In addition to recommendations made in the course of analyzing the different segments of this report, Government should consider the following:

i.              Improve basic infrastructures within strategic economic hubs nationwide, classify manufacturers as strategic users of gas, expand the roads leading to Lagos Ports and make other ports outside Lagos functional to reduce cargo traffic and stimulate economic activities in those locations;

ii.             Streamline existing forex windows, make more forex available for importation of manufacturing inputs that are not locally available and provide appropriate incentives for the struggling sub-sectors;

iii.            Expedite the process of issuing manufacturers End Users Certificate through liaison with MAN as it is being currently worked out;

iv.           Return to the January to December Budgetary calendar, improve the implementation of the Capital Expenditure component of the National budget and ensure that the oversight function of NASS is not extended to the private sector.

v.            Ensure proper implementation, monitoring and evaluation of government laws, regulations and Executive Orders;

vi.           Ensure that only approved taxes/fees & levies are collected by agencies of Government and improve surveillance of the National borders to reduce the menace of smuggling, importation and sale of goods that are on the prohibition list in the open market;

vii.          Entrench better monetary policy management to reduce the current high inflation in the economy; make available long term and low interest loan facilities to the real sector.

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