The Manufacturers Association of Nigeria (MAN) has raised the alarm that macroeconomic challenges have taken huge toll on its bottom line and production, saying it has resulted to inventory of unsold goods in the sector hitting N469.66 billion in 2022 as against N384.58 billion recorded in 2021. MAN Director-General, Mr. Segun Ajayi-Kadir, made this known to New Telegraph, saying that macroeconomic challenges, including low purchasing power due to declining household income is impacting negatively on rising stocks inventory of unsold goods. According to him, unsold products in the manufacturing sector increased to N282.56 billion in the second half of 2022 up from N169.75 billion recorded in the corresponding half of 2021; thus, indicating N112.81 billion or 66 per cent increase over the period.
In addition, it also increased by N85.46 billion or 51 per cent when compared with N187.1 billion recorded in the first half of the year. He said: “The high inventory recorded in the period is attributed to the worsened Naira Re- design policy which began in the last quarter of 2022. “The withdrawal of large amount of the ‘old Naira’ without commensurate replacement with the ‘new notes’ resulted to cash crunch in the economy with very limited means of purchasing items by households across the country.”
The MAN DG warned that significant low sales volumes will lead to business restructuring and a reduction in investment across the impacted sectors. “The manufacturing sector has been struggling with crashing sales, mainly attributable to the sustained naira scarcity in recent times. A continuing decline in sale volumes will necessitate production cuts and a re-evaluation of investments in the sector. “Specifically, if sales proceeds can no longer sustain business overheads and operating expenses, businesses will be forced to scale down their operations which would result in factory closures, job losses, a decline in exports and much more.”
While talking about one of the major indices that could posed threat to high inventory of unsold goods and Foreign Direct Investment (FDI), Ajayi- Kadir stated: “It is instructive to note that the excise duty increase is a direct attack on Foreign Direct Investment (FDI) and low sales volumes of goods. The National Bureau of Statistics (NBS) three-year trend shows an FDI decline. It is important to Note the negative decline in 2022, with the biggest decline since the implementation of the 2022 roadmap.
“The World Bank noted a 59 per cent fall in FDI over the last 11 years with an FDI depreciation from $5.97 billion in 2010 to $2.45 billion in 2021. Data from the National Bureau of Statistics (NBS) showed that FDI into Nigeria fell by 33 per cent in 2022. FDI decline would continue in this trajectory should the excise increase be implemented as planned in June 2023.” Speaking on the low tax revenue to government, the MAN helmsman affirmed: “The ultimate burden on consumer good is usually passed to consumers whose disposable income are already stretched. “Consequently, consumers will begin to source alternative products from unapproved channels, especially the illicit market in line with their declining disposable income.
“For instance, Illicit trade in tobacco products would most significantly spike from its current levels of 15 per cent to undesirable levels of above 50 per cent of the sector. “The decline in profitability of the industry will result in a decline in the industry’s total tax contribution to the government, because companies income tax (CIT), value added tax (VAT) and education tax are directly tied to the performance and profitability of the company.” He stressed that in Q1’23, while tobacco manufacturer’s contribution to excise grew by seven percent, its VAT contribution dropped by -36 percent compared to the same period in 2022.”