Manufacturers’ confidence drops further amid worsening economic conditions

Manufacturers’ confidence in the economy has dropped further by 1.6 points to 51.9 points in Q2 2024 from 53.5 points recorded in Q1 2024. This is a relapse following the improvement recorded in the previous quarter, suggesting that the sector is experiencing tougher times.

This was revealed in the Manufacturers Association of Nigeria (MAN) CEOs Confidence Index (MCCI) for the second quarter of the year released yesterday. Reading above 50 points indicates the expectation for economic expansion, while an index score of less than 50 suggests deterioration in the operating environment.

The quarterly report attributed the decrease to the performance of diffusion factors. The indicators for the current business and the current employment conditions declined below the 50-point mark, dropping from 46.8 points and 47.5 points in Q1 of 2024 to 43.9 points and 47.2 points in Q2 of 2024, respectively.

The index of the current production level also fell from 52.8 points to 49.7 points, which is also below the 50-point threshold, underscoring a significant decline in manufacturers’ confidence regarding production levels, during the review period.

The report also noted that all manufacturing indicators recorded unfavourable changes in addition to the FX scarcity, high exchange rate and heightened inflation and unfavourable macroeconomic environment worsened by the skyrocketed increase in electricity tariff, consistent increase in interest rates, perennial fuel scarcity and the nationwide industrial action during the reviewed quarter.

These, the report said, grossly escalated the cost of manufacturing operations, distorted the manufacturing value chain, discouraged investments, increased job losses and reduced sales volume.

In terms of increase in production costs, the worst hit sectors are the wood and wood products sector, closely followed by the flood/beverages/tobacco sector and the electrical and electronics sector.

Others are the basic metal, iron and steel sector, chemical and pharmaceutical sectors and the industrial plastic and rubber sectors. The top ten on the list of manufacturers’ challenges include multiple taxation, high energy cost/hike in electricity tariff/inadequate power supply, high exchange rate/ forex scarcity, high inflation, limited sourcing and high cost of raw materials, declining sales, high interest rate and low access to credit, insecurity, over-regulation by Government agencies and high transport costs.