By Yinka Kolawole
THE Manufacturers Association of Nigeria, MAN, has warned that the country’s manufacturing sector is in acute recession, adding that the 2023 Fiscal Policy Measures (FPM) recently released by the Federal Government may lead to the total collapse of the sector, especially the non-alcoholic beverages sub-sector.
In a statement made available to Vanguard yesterday, MAN President, Francis Meshioye, said the exponential increase in excise duty in the 2023 FPM is coming at a time when the manufacturing sector was already immersed in unprecedented crisis.
His words: “The increase is coming at a time when the manufacturing sector is immersed in unprecedented crisis and an acute recession, due to extraordinary challenges, namely: sustained scarcity of naira (which has led to a crash in consumer purchases); limited access to foreign exchange (which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs); record inflation (which further drive-up cost of operation and prices of products) and a struggling economy.
“These extraordinary challenges have led to a massive decline of 169% in profit before tax for the brewing sector in Q1 2023. Industry turnover for non-alcoholic beverages and tobacco declined by 15%, while gross profit and profit before tax declined by 31% and 96% within the same period, respectively.
“The Naira scarcity and limited access to foreign exchange have exacerbated the continued impact of systemic challenges such as high cost of operations, multiplicity of taxes, limited electric power supply and infrastructural challenges.
“For instance, the Nigerian manufacturing sector recorded a 36% downturn in profit margins from 2021 to 2022 and over 400% increase in energy costs, further constraining growth of the sector.
“In addition, the tobacco sector has actively began to reduce its export production from Nigeria as it has over N39 billion trapped in Export Expansion Grant incentive not yet released to it by the federal government to manage its operations. Thus, this is not the time to impose additional increases in excise.”
Meshioye further stated that the manufacturing sector has been struggling with crashing sales, mainly attributable to the sustained naira scarcity.
He added, ‘‘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.”
