The Manufacturers Association of Nigeria (MAN) has confirmed the disbursement of N75 billion under the Presidential Palliative Programme, an initiative designed to alleviate the economic pressures faced by businesses due to recent government policies. This program, specifically targeting the manufacturing sector, was channeled through the Bank of Industry (BOI) as loans with a 9% annual interest rate. While MAN acknowledges the disbursement, it also highlights the limited reach of the program. Out of its approximately 2,500 members, fewer than 150, representing less than 10%, benefited from the initiative. This limited participation raises concerns about the program’s overall effectiveness in mitigating the economic challenges and its potential impact on reducing commodity prices. While acknowledging the program as a positive starting point, MAN emphasizes the need for more substantial interventions to address the widespread economic hardship experienced by manufacturers.
The N75 billion palliative package, part of a broader N1 trillion economic stabilization plan, was initially announced in December 2023. The program aimed to provide financial support to both Micro, Small, and Medium Enterprises (MSMEs) and larger manufacturing companies to cope with increased production and operational costs resulting from government policies such as subsidy removal and naira devaluation. However, bureaucratic hurdles significantly delayed the disbursement of funds for 14 months. MAN’s Director General, Segun Ajayi-Kadir, confirmed that while the funds have been disbursed by BOI, the relatively small number of beneficiaries raises questions about the program’s ability to significantly impact the manufacturing sector and ultimately influence commodity prices.
Despite the disbursement, MAN maintains that the N75 billion represents a minimal contribution compared to the vast needs of the manufacturing sector. Given the scale of the economic challenges and the sheer number of manufacturers facing difficulties, the disbursed amount is considered insufficient to significantly alleviate the economic strain or lead to a noticeable reduction in commodity prices. Ajayi-Kadir likened the N75 billion to a “drop in the ocean” considering the vastness of the manufacturing sector and the multitude of businesses struggling with escalating costs. He emphasized that while a reduction in production costs for a larger number of manufacturers could theoretically lead to lower prices, the limited reach of the program precludes such an outcome.
Furthermore, MAN refutes claims of preferential treatment in the disbursement process, asserting that the funds were distributed across various sectors based on applications received. The association stresses that the limited number of beneficiaries is simply a reflection of the program’s limited scope relative to the vastness of the manufacturing sector. Ajayi-Kadir reiterated that the program’s objective was not primarily focused on immediate price reductions but rather on providing some level of financial relief to manufacturers grappling with increased operating costs. The association anticipates that the government will follow through on the broader N1 trillion economic stabilization plan, hoping for a more substantial and impactful intervention for the manufacturing sector.
The current economic climate has created a challenging environment for manufacturers in Nigeria. MAN reports a staggering N1.24 trillion in unsold manufactured goods in the first half of 2024, a 357.57% increase compared to the same period in the previous year. This accumulation of inventory is attributed to declining purchasing power among consumers, largely driven by escalating inflation, the removal of fuel subsidies, and the devaluation of the naira. These economic factors have created a perfect storm, significantly impacting consumer spending and consequently, the demand for manufactured goods. The resulting decline in sales has left manufacturers with substantial unsold inventory, posing a significant threat to their financial stability and overall economic viability.
The economic downturn has also negatively impacted employment within the manufacturing sector. MAN reports a significant decline in job creation, with only 2,606 new jobs generated in the first half of 2024, a 37.83% decrease compared to the previous year. This reduction underscores the sector’s struggles amidst the challenging economic conditions. Adding to the difficulties, a 200% increase in electricity tariffs has further burdened manufacturers, significantly escalating operational expenses. The combined pressures of declining sales, rising inventory levels, and soaring energy costs paint a grim picture of the challenges faced by the Nigerian manufacturing sector. These factors highlight the urgent need for more robust and comprehensive government interventions to stimulate economic activity, boost consumer spending, and provide substantial support to struggling manufacturers.
