Rising inflation, declining disposable income of consumers, neglect of governance for politics and growing insecurity have contributed to diminishing manufacturers’ confidence in the Nigerian economy.
Inflation in Nigeria quickened to 15.92 per cent in March on the back of an increase in the price of goods and services at a time the purchasing power of consumers has been eroded by the devastating Covid pandemic and the 2019 plunge in oil price.
The fragile confidence is underlined by the drop in the Manufacturers CEO’s Confidence Index (MCCI) for Q1 2022 from 55.4 points to 53.9 points, representing a 1.5 points dip.
The MCCI is a quarterly research and advocacy study of the Manufacturers Association of Nigeria(MAN) which measures the state of the economy through the manufacturing sector.
The MCCI pools its data from a direct survey of over 400 Chief Executive Officers of MAN member-Companies across the country who are on daily basis, affected by the macroeconomy and the various government policies.
The MCCI has a baseline index of 50 points that indicates a stationary point in the economy and affirms the level of confidence and performance in a particular quarter.
Above 50 points indicates that manufacturers have confidence in the economy and improvement in manufacturing performance, while any index point below 50 points indicates otherwise.
The MCCI at the end of the fourth quarter of 2021, was 55.4 points and has now dropped to 53.9 points at the end of the first quarter of 2022.
Other drivers of the drop in the MCCI for Q1 are the high-interest rate, excessive drive for revenue by the government, and the persistent forex and energy crises.
Of importance also is the impact of the Russian Invasion of Ukraine which has caused a hike in the price of diesel, wheat and other imported manufacturing inputs.
In summary, the country’s manufacturing sector witnessed a fairly stable macroeconomic performance in the first quarter of 2022, as the country’s economy is still stagnant as seen in current business conditions across the country.
MAN in the MCCI Q1 2022 report says the slight decline still confirms sustained confidence of the sector on the economy despite the slight reduction in its performance in the quarter.
The MCCI has since the second quarter of 2021 remained above the 50 neutral points, reaching 55.4 points in the fourth quarter of the year. The score according to MAN indicates sustained confidence of manufacturers, though fragile in the economy and improved manufacturing performance over the period.
While appraising the MCCI Q1 2022, MAN states that “On the overall, the score suggests fairly stable confidence in the economy driven primarily by improvement in the current business condition.
The body notes that the sector’s performance was pulled down by the declining employment and production conditions arising from familiar supply-side constraints.
“The general decline in the index point and the dimmed outlook for the second quarter evidenced by expectations of lower production, employment and unfriendly business condition, is a cause for concern.
This, MAN notes has now compelled, especially from the government, a National Response and Sustainability Strategic Plan to avert the looming economic crisis and shortages that would arise from the impact of the Russian invasion of Ukraine.
Speaking further, MAN stated in the report that the trend observed in the first quarter of 2022 MCCI resonates with priority expectations, the oscillatory trajectory of the macroeconomy and fluctuating manufacturing performances observed in the last two years.
“The performance recorded is largely similar but with slight differing magnitude when compared with what was obtained in the last quarter of 2021.
“The prevalence of familiar binding constraints to the steady growth of the manufacturing sector, the reverse effects of COVID-19 pandemic and the food shortages, rising inflation, foreign exchange parity, economic uncertainty, gene the real increase in the price of petroleum products, supply chain disruptions and the growing concern of future increase the prices of wheat and fertilizer manufacturing inputs occasioned by the Russian invasion of Ukraine are contributory factors that impacted the aggregate MCCI,” MAN added in the report.