A report by the Manufacturers Association of Nigeria (MAN) says access to foreign exchange and long-term loans from banks, among others is discouraging investments in the manufacturing sector.
The report titled ‘MAN CEO’s Confidence Index (MCCI) Q4’ stated that the ability for the sector to grow and improve is being mitigated by the macroeconomics environment in the country.
“The implication of movements in macroeconomic variables such as forex, lending rate, commercial bank loans and Federal Government Capital Expenditure based on the perceptions of CEOs of manufacturing companies for the fourth quarter of 2022 shows that manufacturing activities continue to suffer due to persisting scarcity of forex and unfavourable naira exchange rate parity,” it said.
For accessibility to forex, it said only 26.7 per cent of manufacturers claimed that the rate at which forex was sourced improved in the fourth quarter of 2022; 46.6 per cent disagreed while 26.7 per cent were not sure if forex sourcing had improved in the quarter under review.
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It noted that the implication of the situation is limiting the ability of manufacturers to import foreign raw materials inputs needed to complement the local raw materials.
It however said interest rates charged to manufacturers by commercial banks have marginally improved in the quarter under review but a large per cent of the CEOs believe that the rate at which banks lend to manufacturers does not encourage productivity in the fourth quarter of 2022.
Also, high cost of borrowing and lack of long-term funds are major challenges of the sector and do not encourage productivity in.
“About 53% of manufacturers enumerated disagreed that commercial bank loans to the manufacturing sector encourages productivity. Unfortunately, the dearth of limited credit has been a core challenge of manufacturing. Incidentally, when it is available, it is usually on short-term tenure which does not adequately support the medium to long term gestation required in the manufacturing sector,” the report added.
