By Merit Ibe, [email protected]
Nigerian manufacturers have lamented the state of insecurity in the country, warning it was raising their operating costs and lowering production output in several industrial zones.
According to them, the continuous increase in general prices of goods in Nigeria and its multiplier effects on the standard of living of the citizens is threatening national growth and recovery post COVID-19.
Industry players who spoke to Daily Sun argued that the current double-digit inflation rate will frustrate efforts at economic recovery, erode purchasing power and increase poverty rate.
Apart from insecurity and conflicts in food producing areas that led to reduction in the production and supply of food, the disruption of supply chain activities due to the pandemic, Ukraine -Russia war, instability in the exchange rate and management among others have also compounded the inflationary pressure.
Therefore, even if domestic food production increases and supply and distribution constraints are eased, a combination of exchange-rate management problems, shortage of hard currency, expansionary monetary policy and funding of fiscal deficit will continue to generate inflationary pressures.
They also argued that the slow recovery rate coupled with high unemployment rate would continue to erode the investor confidence in the capacity of the authorities to sustain adequate macroeconomic activity that will support post-pandemic recovery.
For their part, some economists have warned that the state of insecurity has reached a frightening crescendo, as the trajectory portends adverse implications for economic growth prospects and investment outcomes.
Industry operators believe that Nigeria’s worsening security situation, the escalating energy cost, exchange rate depreciation, liquidity crisis in the foreign exchange market and the spike in inflationary pressures form major headwinds undermining economic growth.
The Chief Executive Officers of Manufacturers Association of Nigeria (MAN) member-companies in Nigeria 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 stem 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, five 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 low performance recorded in some zones is attributable to the disruption of manufacturing activities by high-level insecurity, rising operating costs and harsh manufacturing 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.
Chairman, National Association of Small Scale Industrialists (NASSI), Lagos Gertrude Akhimien, decried Nigeria’s security situation, saying it has forced many SMEs out of business.
“Insecurity is a major reason for the shutdown of many SMEs. Many SMEs that are in production need raw materials, which they have not been able to access due to the security situation especially in the Northern part of the country. “Small business owners are afraid to risk their lives due to the senseless killings and kidnappings. So, the little raw materials that come in are expensive and at the end of the day there is no profit. As I talk to you now, five bakeries just shut down. The bakery section just raised alarm of the continuous rise in price of raw materials as such many have closed shop waiting till price stabilises . If price keeps increasing consumers cannot buy they rather make alternatives.