Manufacturers say unsold inventory at record high of N402.4bn

Nigerian manufacturers say their inventory of unsold goods jumped to a record high with a value of N402.4 billion ($1 billion) as consumer spending fell in a difficult business environment.
It’s a confirmation of “the reality that the disposable income of the consumers has been grossly eroded,” Mansur Ahmed, president of the Manufacturers Association of Nigeria, told reporters in Lagos.
Nigeria’s economy contracted 6.1 per cent in the second quarter as the combined impact of the prolonged lockdown to curb the spread of the coronavirus and the plunge in the price of oil, the country’s main export, took its toll.
Ahmed said many manufacturing companies are having difficulty in getting foreign currency to import raw materials and spares that aren’t available in Nigeria. Over 40% of dollar needs are unmet, constraining producers from operating at full capacity. Unreliable electricity supply is also forcing members to spend more than 38% of their production costs on alternative power, adding to their woes, he said.
The manufacturers’ association said President Muhammadu Buhari’s government decision to shut the country’s borders, ostensibly to curb the flow of illegal goods, was stifling exports by members to the West African regional market.
“It is important that we open it immediately so that important Nigerian manufacturers who are trading in the West Africa region legitimately can resume,” said Ahmed. “Otherwise some of them will lose their significant market.”
It will be recalled that the Manufacturing PMI in the month of July stood at 44.9 index points, indicating a contraction in the manufacturing sector for the third consecutive month.
Of the 14 surveyed subsectors, the transportation equipment subsector reported growth (above 50 per cent threshold) in the reviewed month, while nonmetallics in the mineral products sector reported no change. The improvement in transportation must have been driven by the gradual easing of lockdown across the country.
However, the remaining 12 subsectors shrank in the following order: printing & related support activities; primary metals; fabricated metal products; paper products; food, beverage & tobacco products; chemical & pharmaceutical products; furniture & related products; electrical equipment; plastics & rubber products; petroleum & coal products; textile, apparel, leather & footwear, and cement.
Also, the non-manufacturing PMI stood at 43.3 index points, indicating a contraction for the fourth consecutive month, though showing signs of recovery compared to 35.7 and 25.3 index points recorded in June and May respectively.
Of the 17 surveyed subsectors, only arts, entertainment & recreation, and transportation & warehousing recorded growth (above 50 per cent threshold), while the remaining 15 subsectors recorded declines in July 2020.
The CBN report usually has five PMI components, which include Production level, New orders, Supplier Delivery time, Employment level, and Raw material inventory. In the month of July, four of the five components shrank in the following order: Production level (44.7), New orders (43.1), Employment level (40), and Raw material inventory (43.2).
PMI is a survey conducted by the Central Bank of Nigeria, showing changes in the level of business activities in the current month compared with the preceding month.
The latest PMI figures show that Nigeria’s manufacturing and the non-manufacturing sectors are yet to recover from the effects of COVID-19 lockdown, which caused disruption in all economic activities across the country.
Also, the continued contraction in the manufacturing sector implies that unemployment may rise further in the economy. According to the Economic Sustainability plan recently released by the Nigerian government, unemployment may hit c.40 per cent by the end of 2020, a trend that may leave the Nigerian economy in a sustained deep recession.

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