How inflation surge, Naira depreciation impact Manufacturers’ confidence
By Joy Obakeye
The Manufacturers Chief Executive Officers (CEO’s) Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN) has revealed that the aggregate Index Score (AIS) of MCCI declined to 55.0 points in the fourth quarter of 2022 from 55.4 points recorded in the third quarter of the year.
The report noted that the fourth quarter of 2022 was adversely affected by an escalation in the Consumer Price Index (CPI), continuous erosion in the Naira value and difficulty in accessing forex, high cost of energy, persisting insecurity and the consequences of lingering Russian-Ukrainian war.
The report measures changes in the pulse of operators and trends in the manufacturing sector quarterly, in response to movements in the macroeconomy and Government policies using primary data generated from a direct survey of over 400 Chief Executive Officers of MAN member-Companies.
According to the report, among the standard Diffusion Factors, Current Business Condition and Business Condition for the next three months, scored above 50 benchmarks while increasing in the quarter; Current Employment Condition (Rate of Employment) and Production level in the next three months scored above the 50 benchmark points though with a decline in the period respectively; Employment Condition for the next three months dipped below the benchmark points to 48.8 points which are also below 49.2 points obtained in the preceding quarter.
“Employment decision by manufacturers is so difficult due to the unpredictability and difficulty in macroeconomic movement.
In summation, the fourth quarter of 2022 appeared to be more difficult for manufacturers than the level of hardship in the preceding quarter due to persisting rise in CPI, high cost of energy, unabated erosion in Naira value and difficulty in sourcing forex including the harsh effect of Russian-Ukrainian war.”
Across sectorial groups, the report explained that activities in the Pulp, Paper, Printing & Publishing with an index score of 49.6 points and Motor Vehicle & Miscellaneous Assembly (48.4 points) are negatively affected by the harsh operating environment in the quarter under review as their index scores fell below the 50 base points.
Food, Beverage & Tobacco; Textile Apparel & Footwear; Wood & Wood Products; Chemical & Pharmaceutical; Non-Metallic Products; Domestic/Industrial Plastic & Rubber; Electrical & Electronic; and Basic Metal, Iron & Steel groups all scored above 50 based points. The score suggests that manufacturers operating in the groups have confidence in the macroeconomy.
Similarly, among industrial zones, activities in Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) zones were depressed by high-cost of the operating environment in the fourth quarter of 2022 as underlined by their index scores which fell below he the benchmark points.
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Imo/Abia, Kaduna, Ogueating upa nd K ra/Kogi though have index scores above 50 benchmark points but declined in the quarter under review.
Edo/Delta, Oyo/Ondo/Ekiti/Osun, Kano, Ikeja, Anambra/Enugu and Bauchi/Benue/Plateau have index scores above the 50 base points with an increase in the quarter under review. The scores indicate continuous improvement n the confidence of manufacturers operating in the zones in the economy.
Index scores of the Abuja zone increased to 50.7 points in the fourth quarter of 2022 from 43.5 points obtained in the preceding quarter. The score indicates a significant improvement in the confidence of the manufacturers operating in the zone.
Apart from the general macroeconomic challenges that affect all the zones, it is important to examine and address State-specific challenges as they concern the zones.
