Manufacturers’ Energy Spending Dip N17bn In H1 2019.
GILBERT EKUGBE
The real sector recorded a slight improvement in electricity supply in the first half of 2019, spending a total of N32.68 billion, representing a drop of N17.24 billion from the amount spent in the second half of 2018.
The sector had closed the second half of 2018, spending N49,92 billion on power, up from the N43.18 billion spent in the first half of 2018.
Manufacturers rely on power to operate and the epileptic supply of the commodity increased their overheads, eating into their profits by as high as 40 percent which goes on alternative energy to power their operations.
The umbrella body for manufacturers in the country, the Manufacturers Association of Nigeria (MAN) however said supply from power distribution companies to its members improved marginally since second half of 2018.
In addition, the sector got an average of 10 hours of electricity supply per day in the first half of 2019 but with an increased average of five times outage daily from the four times daily recorded in the second half of 2018.
Money saved on power was however spent on loan as cost of funds to manufacturers was still high in the first half of 2019 during which interest rate 22.5 percent. For the 2018, 23.01 percent interest rate was charged in the first half and 21.4 percent in the second half of the year.
In the period under review, inventory of unsold manufactured goods stood at N200.26 billion, representing N51.03 billion (34.19 per cent) increase from N149.23 billion recorded in the corresponding half of 2018, but however said it declined by N25.63 billion (11.34 per cent) when compared with N225.89 billion recorded in the second half of 2018.
The delay in the passage of the national budget and the slow implementation of the capital budget were said to be the reasons for high unsold stocks..
“Inventory of unsold goods in the sector was also influenced by high inflation and smuggling of contraband products into the country in the review period,” MAN added.
The Organised Private Sector (OPS) said local raw-materials utilization in the manufacturing sector maintained a downward trend since the first half of 2017 when the Central Bank of Nigeria commenced policy intervention in the official forex market, adding that the relatively more available forex resulting from the intervention may have been rubbing off negatively on backward integration agenda as firms are preferring to import raw-materials as against inward-looking.
“However, in the first half of 2019, Local sourcing of raw materials in the manufacturing sector increased marginally to 57.0 percent from 56.87 percent recorded in the corresponding half of 2018, representing 0.13 percentage point increase over the period. It however declined by of 6.7 percentage point when compared with 63.7 per cent recorded in the preceding half. The retained average performance of local raw-materials utilization in the period is due principally to poor access to credit and adequate economic infrastructure needed inward development of local inputs,” MAN gathered.
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