The Director General of the Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi-Kadir, has raised the alarm that the rising inflation in Nigeria, a country that is just recovering from recession is worrisome.
In a statement at the weekend, the MAN DG said “It is more so for the manufacturing sector that remained in recession, even after the technical exit of the country’s economy. As you are probably aware, the manufacturing sector posted a growth rate of -1.51 percent in the Q4 2020 from -1.52 percent in Q3 of the same year.
According to him: “The 18.17% inflation rate is not healthy for the well-being of the people and the growth aspiration of the economy. It should therefore be properly managed before it spirals out of control. The current inflationary condition in Nigeria adversely affects the profitability of the manufacturing sector and is partly responsible for its competitiveness. The latter being a major contributor to the low-export penetration of goods manufactured in the country into the international market.
He called for an urgent need for Government to intentionally ensure price stability before the situation becomes deplorable.
In addition, pursue consumer price stabilization measures that will, stimulate growth in agricultural output, deliberately support the manufacturing sector to guarantee improved output that can engender the reduced intensity of too much money chasing after fewer goods, further diversify the country’s revenue sources and action a CBN sustainable plan to improve the external reserves to a defensive capacity that will raise the months of imports of Nigeria to a dependable level. This can be achieved by deliberately and sincerely partnering with the productive sector to grow non-oil export.
He called on the Federal Ministry of Finance (FMF) and CBN to work more closely when designing policies that affect the real sector of the economy. This is to prevent a situation where policies are working at cross purposes. For instance, while CBN was creating funding windows at single digit interest rate to encourage production, Government increased VAT from 5% to 7.5%. Similarly, Government increased minimum wage and also allowed increase in electricity tariff, and so on.
Ajayi-Kadir, said government, in partnership with the manufacturers, should select strategic products, particularly those with high inter-industry linkage, for backward integration support and upscale the drive for the resource-based industrialization agenda
Give priority allocation of forex to manufacturers to import inputs that are not locally available and for which there are no immediate plan or resources to produce locally. Since policies are dynamic, they could change as soon as we develop local capacity.
“Also, there are quite a number of moribund industries in the country. There should be an industrial clinic to engender their resuscitation in order to boost output and ultimately achieve price reduction.
“It is evident that there is a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates. Therefore, in the immediate government should assist manufacturing productivity with credit at competitive price. This could be in the form of enhancing existing special credit windows or creating additional ones for this important sector of Nigerian economy.
The MAN boss added that there is need to give effect to these measures immediately as the current security situation and the continued incidence of COVID-19 is negatively impacting businesses and lowering their resilience capacity.