Nigerian manufacturers said unemployment in Nigeria may hit a record 50 percent, amid a contracting economy, foreign exchange scarcity and unsold inventory now valued at over N400 billion naira.
Mansur Ahmed, president of the Manufacturers Association of Nigeria, painted the gloomy picture of the economy on Thursday.
He said consumer spending fell in a difficult business environment, especially after the COVID-19 disrupted economic activities since March.
He said that the consequence of this development was that sectoral groups ran short of supplies of raw materials due to disruptions in the global value chain, with many still unable to access forex.
“The manufacturing sector performance that was expected to be strong, having recorded an impressive performance in the 4th quarter of 2019 on account of border closure, suffered a huge setback.
“For Nigeria, the outcomes include lockdown, near shut down of the operations of eight manufacturing sectoral groups, disruption in supply chain, inventory of unsold items and loss of jobs.
“Arising from the scenario, the expectation is that inflation, interest and exchange rates, will jointly trend upward from their current states in differing magnitude of between 15 per cent and 18 per cent.
“Also expected is that the rate of unemployment will double, reaching the 50 per cent mark for the first time in our history,” he said.
It’s a confirmation of “the reality that the disposable income of the consumers has been grossly eroded,” Ahmed said.
Nigeria’s economy contracted 6.1% in the second quarter as the combined impact of the prolonged lockdown to curb the spread of the coronavirus and the plunge in the price of oil, the country’s main export, took its toll.
Ahmed said many manufacturing companies are having difficulty in getting foreign currency to import raw materials and spares that aren’t available in Nigeria.
Over 40% of dollar needs are unmet, constraining producers from operating at full capacity. Unreliable electricity supply is also forcing members to spend more than 38% of their production costs on alternative power, adding to their woes, he said.
The manufacturers’ association said President Muhammadu Buhari’s government decision to shut the country’s borders, ostensibly to curb the flow of illegal goods, was stifling exports by members to the West African regional market.
“It is important that we open it immediately so that important Nigerian manufacturers who are trading in the West Africa region legitimately can resume,” said Ahmed.
“Otherwise some of them will lose their significant market.”
Despite the difficulties, Ahmed said members of MAN made donations worth N8 billion in cash and N300million worth of palliative materials to both Federal and States Governments during the outbreak of COVID-19 pandemic.
“To this end, I sincerely appreciate members of MAN for their support to government when it was most needed to provide palliative as a way to cushion hardship experienced by Nigerians and to contain the spread of COVID-19,” he said.
On the current state of the Nigerian economy and the manufacturing sector, Ahmed said that the performance of the economy was fragile and slowly sliding into recession.
He urged the Central Bank of Nigeria (CBN) to ensure a properly managed transition regime to reduce the effect on the manufacturing sector.
“The burden of foreign currency denominated loans and offsetting of existing credit commitments to foreign suppliers of raw materials should be given priority consideration.
“It is our conviction that the foreign exchange unification initiative will engender a regime of a balanced participation for forex users and promote a transparent, as well as efficient allocation of forex required for sustained economic growth,” he said.
“Manufacturers that are investing in order to scale up production, should be granted loans at 5 per cent interest rate for a period of five to seven years.
“These will no doubt improve liquidity and ramp up productivity in the manufacturing sector in a manner that will cover up for obvious losses due to COVID-19,” he said.
Ahmed also urged government to direct all regulatory agencies to reduce their respective administrative charges (Pre-COVID-19 rates) payable by manufacturing concerns by 50 per cent.