Manufacturers’ trust in economy shaky

Manufacturers in Nigeria have expressed declining confidence in the country’s business environment due to the adverse effects of the Consumer Price Index (CPI), the continuous erosion of the Naira’s value, and difficulties in accessing foreign exchange. In addition, high energy costs, persisting insecurity, and the consequences of the lingering Russian-Ukrainian war have also contributed to the unfavourable operating environment for manufacturers.

According to the Manufacturers CEO’s Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN), the Aggregate Index Score (AIS) of MCCI declined from 55.4 points obtained in the third quarter of 2022 to 55.0 points in the fourth quarter of the same year. The MCCI is used as a benchmark for measuring changes in the pulse of operators and trends in the manufacturing sector quarterly.

The Index is computed using data generated on standard diffusion factors of current business condition, business condition for the next three months, current employment condition (rate of employment), and employment condition for the next three months and production level for the next three months. The baseline score is 50 points, with scores above indicating improvement in manufacturers’ confidence in the economy while scores below indicate a decline.

Among the standard diffusion factors, current business condition and business condition for the next three months scored above the 50 benchmark while increasing in the quarter, while the current employment condition (rate of employment) and production level in the next three months scored above the 50 benchmark points, but with a decline in the period respectively. Employment condition for the next three months dipped below the benchmark points to 48.8 points, which is also below the 49.2 points obtained in the preceding quarter.

The report further noted that manufacturers’ employment decisions have become challenging due to the unpredictability and difficulty in macroeconomic movement. In addition, the harsh operating environment in the fourth quarter of 2022 has negatively affected activities in the Pulp, Paper, Printing & Publishing with an index score of 49.6 points and Motor Vehicle & Miscellaneous Assembly (48.4 points), as their index scores fell below the 50 base points. Among industrial zones, activities in Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) zones were also affected by the high-cost operating environment.

The local producers have called on the government to improve exchange rate management and moderate rising energy costs via better management of refined petroleum products imported into the country. They believe that these measures, among others, will help reduce high inflation, which is eroding the working capital of businesses, including manufacturing, in the economy.