COVID-19: Production, distribution costs increased to 31%, say manufacturers

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Manufacturers across the country say the coronavirus pandemic and its second wave have increased both the production and distribution costs of their products to 31 per cent in the last quarter of 2020 from 27% recorded in the third quarter.

This and other challenges confronting them were contained in the just-released Manufacturers Confidence Index by the Manufacturers Association of Nigeria.

It stated, “Production and distribution costs increased to 31% in the fourth quarter of 2020 from 27% recorded in the third quarter of the year.

 “In the fourth quarter of 2020, manufacturing investment declined by 19% from 18% recorded in the third quarter of the year.”

In the current survey (Q4 2020 MCCI), most manufacturers also reported not being able to adequately source foreign exchange for importation of productive raw-materials and machinery that are not available locally.

The Manufacturers Confidence Index (MCCI) is an index created by the Manufacturers Association of Nigeria to gauge the changes in manufacturing activities quarterly as a result of changes in the macroeconomic ambience and Government policies.

The survey indicated that 400 chief executive officers of member-companies were interviewed across the six geo-political zones of the country, and their views used for the statistics.

On the effects of the pandemic on the macroeconomic, as far as production and distribution of goods were concerned, the survey indicated that 96 per cent of the manufacturing CEOs that responded reported an increase in production and distribution costs in the sector due to the prevailing macroeconomic environment and on account of the pandemic.

It added, “This is supported by the rising aggregate prices, the continuous erosion of the value of Naira, increase in electricity tariff, increase in price of PMS, high cost of gas and the distortion caused by the End-SARS demonstration in the period.”

The survey further showed that Only 3 per cent of respondents reported no effect while the remaining 1 per cent claimed that the macroeconomic environment had decreasing effect on manufacturing production and distribution costs in the period under review.

 “There is no doubt that the macroeconomic ambience that prevailed in the last quarter was still influenced by the onslaught of COVID-19 as business activities sluggishly resumed in the period,” it stated.

The manufacturers, however noted that in this post-lockdown easing and emergence of second-wave of COVID-19 periods, “it is important that Government begins to critically consider ensuring that forex is allocated to manufacturers at the official rate, particularly for importation of machines and raw-materials that are not at the moment produced in the country.”

The manufacturers said “It is important that Government ensures modalities and access to COVID-19 stimulus are friendly to manufacturing companies.”

The manufacturers had issues with the lending rate which they complained had remained at two digits, and 71 per cent of the CEOs agreed that this did not encourage productivity in the manufacturing sector in the period under review.

“The cost of borrowing in the country remains at double digits even amidst the reforms that are meant to culminate in lower rates to engender the country’s economic recovery process.

 “Special single digit loans offered by development banks are still hard to leverage on as conditionalities to access the loans through commercial Banks are often overwhelming and laden with additional charges that will eventually make the interest rate double digit.”

 They finally submitted that the general deterioration in the manufacturing indicators in the quarter under review was occasioned by the abrasive macroeconomic ambience, and the ripple effects of the first lockdown that witnessed the closure of about eight sectoral groups for months.

They added that the persisting effect of COVID-19 and lingering backlashes of the End-SARS demonstration equally contributed to it.

“It is therefore expedient that the government give significant attention to the experiential challenges identified by manufacturers and recommendations made in the report to fully restore manufacturing activities back to the path of sustained growth,” they said.

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