The Manufacturers Association of Nigeria (MAN) and other key stakeholders in the real sector have expressed deep concerns over the rising costs of borrowing and electricity tariffs, which they believe are stifling Nigeria's path to sustained economic growth. These concerns have been heightened by the recent downturn in the Manufacturing CEOs’ Confidence Index (MCCI), which dropped from 53.5 points in the first quarter of 2024 to 51.9 points in the second quarter, indicating growing challenges within the manufacturing sector.
One of the major concerns raised by the Organised Private Sector (OPS) is the aggressive hike in the monetary policy rate (MPR) by the Central Bank of Nigeria (CBN). This policy decision, aimed at curbing inflation, has had the unintended consequence of stifling output in key sectors such as manufacturing, trade, ICT, and real estate. The contraction in these sectors has likely contributed to the decline in Nigeria's Gross Domestic Product (GDP) during the second quarter of 2024, further threatening the country’s economic stability.
Additionally, the steep increase in electricity tariffs has added another layer of burden on manufacturers. The high cost of electricity, coupled with unreliable power supply, has made it increasingly difficult for businesses to operate efficiently. Despite paying exorbitant bills, manufacturers, particularly those classified under Band ‘A’, report that they do not receive the promised minimum of 20 hours of electricity supply per day. This situation has not only escalated production costs but also undermined the competitiveness of Nigerian products in both local and international markets.
In light of these challenges, MAN and other stakeholders are urging the Federal Government to take immediate action to mitigate the impact of high interest rates and electricity tariffs. Among their key recommendations is the prioritization of foreign exchange (forex) sales to the productive sectors of the economy, particularly manufacturing. By stabilizing the naira and managing the floating exchange rate within a business-friendly range, the government can help tame inflation and improve access to forex for manufacturers who rely on imported raw materials and machinery.
MAN is also advocating for a review of the foreign exchange rate used for import duty assessments on production inputs that are not locally available. They suggest pegging this rate at N800 until the exchange rate stabilizes. This measure, they believe, would ease the financial burden on manufacturers and help stabilize the prices of goods.
The energy crisis remains a significant hurdle for the manufacturing sector, and MAN has called on the government to take decisive action to address this issue. They are urging the Nigerian Electricity Regulatory Commission (NERC) to review the high electricity tariffs, particularly for Band ‘A’ customers, and ensure that manufacturers receive the electricity supply they are paying for.
Moreover, MAN is pushing for the government to prioritize the domestic supply of gas and ensure that its pricing is in naira. They believe that by refocusing the Gas Master Plan to guarantee sufficient gas supply for power generation, the government can alleviate some of the energy challenges faced by manufacturers.
The association also emphasizes the importance of the effective implementation of the Electricity Act 2023. They suggest that the government should make full use of the N115 billion FG-USAID deal to support the private sector and address long-standing energy challenges. By doing so, the government can help the manufacturing sector overcome these hurdles and contribute more significantly to Nigeria’s economic growth.
The cry for help from the Manufacturers Association of Nigeria and other stakeholders in the real sector underscores the urgent need for government intervention in addressing the high costs of borrowing and electricity. With the right policies and support, the manufacturing sector can overcome these challenges and play a pivotal role in driving Nigeria’s economic growth. However, without prompt action, the nation risks further economic contraction and the collapse of more businesses, which would exacerbate unemployment and poverty levels across the country.