CBN is urged to formulate a framework for credit interventions within the manufacturing sector.

To expedite the realization of the Federal Government’s $1 trillion economy plan, the Manufacturers Association of Nigeria (MAN) has urged the Central Bank of Nigeria (CBN) to establish a sustainable framework for directing credit interventions into the manufacturing sector, beyond direct intervention. MAN suggests that the CBN should collaborate with commercial banks to facilitate intentional provision of long-term, single-digit interest loans to the manufacturing sector.

In the “Manufacturing sector outlook for 2024,” as communicated by Segun Ajayi-Kadir, the Director-General of MAN, to Sunday Vanguard, MAN emphasizes the need for enhanced collaboration between the CBN and the fiscal authority, particularly the Federal Ministry of Finance and the Tariff Technical Committee (TTC). This collaboration aims to align policies appropriately, specifically regarding the Harmonized System (HS) Codes for items where Nigeria possesses sufficient capacity to discourage imports and conserve foreign exchange.

Ajayi-Kadir advises, “Achieving reasonable stability in the monetary policy environment, with the CBN focusing on its conventional roles and actively improving forex supply to the productive sector for the import of non-locally available inputs, is crucial.”

He expresses hope that the government will recognize the manufacturing sector as a pivotal driver of sustained economic growth, deserving of prioritized attention. Looking ahead to 2024, Ajayi-Kadir forecasts a sectoral real growth of approximately 3.2 percent, with a contribution to the economy likely exceeding 10 percent. He anticipates that the Manufacturers’ CEOs Confidence Index will surpass the 55-point threshold by the end of Q4 2023.

Despite projecting an average capacity utilization hovering around 50 percent due to forex-related challenges and high inflation rates, Ajayi-Kadir believes there may be a modest improvement in manufacturing output from the third quarter onward as challenges related to forex and interest rates subside. Additionally, ongoing concessions of seaports, airports, and roads are seen as potential opportunities for the cement sub-sector, contributing to infrastructure upgrades that enhance overall manufacturing productivity.

He expressed, “The imminent tax reforms and the planned bank recapitalization hold the potential to effectively tackle the issues of multiple taxation and restricted access to credit, persistently hampering the manufacturing sector’s performance, provided they are successfully executed.

Discussing the Electricity sector, the Manufacturers Association of Nigeria (MAN) anticipated a proactive implementation of the Electricity Act 2023. This, they believe, will attract more private investment in renewable energy, enhance energy efficiency, and upgrade electricity supply to the manufacturing sector.

The anticipated improvement in electricity supply aims to alleviate inadequacies, minimize disruptions caused by frequent outages, and consequently enhance energy security.

To enhance the sector in the coming year, MAN proposed redirecting cost savings from fuel subsidies to implement a range of production-focused policies. They emphasized the need for additional structural measures to address inflationary pressures arising from insecurity, energy costs, and transportation expenses. Additionally, they called for a comprehensive overhaul of the power sector and the provision of incentives for investments in renewables to boost electricity generation and promote energy-cost efficiency.

The recommendation also included a call for the government to lead by example, prioritizing the use of locally made products in all its purchases, contracts, and projects. They urged the government to actively promote made-in-Nigeria products by reducing dependence on imports, enforcing the implementation of Executive Order 003 across all three tiers of government, especially in their ministries, departments, and agencies.

Furthermore, MAN suggested that the government should foster local sourcing of raw materials by introducing comprehensive and integrated incentives. This approach is seen as a solution to address the challenges of low productivity and imported inflation,” Ajayi-Kadir concluded.