By Seun Ibiyemi
The Manufacturers Association of Nigeria (MAN) has said the moderation of Nigeria’s headline inflation to 15.39 per cent in August has yet to translate into lower production costs for manufacturers.
The association said although the decline from 15.43 per cent recorded in July was a positive development, the marginal 0.04 percentage-point reduction showed that the improvement remained fragile.
MAN, in its assessment of the August inflation figures, said the critical issue for manufacturers was not merely whether the inflation rate was declining, but whether the cost of producing goods was actually falling.
It identified high energy costs, logistics challenges, exchange-rate pressures, elevated raw-material prices and multiple fiscal and regulatory charges as major factors keeping production costs high.
According to the association, manufacturers are unable to fully pass rising production costs to consumers because of weak purchasing power, leaving businesses with squeezed profit margins and higher working-capital requirements.
“When input prices rise, manufacturers require more funds to purchase the same quantity of materials,” the association said.
MAN warned that persistent cost pressures could also constrain investment and capacity utilisation, as some manufacturers may find it commercially difficult to expand production or operate additional shifts.
The association further said high domestic production costs were weakening the competitiveness of Nigerian-made products against imported goods and could affect manufacturers’ ability to create additional jobs.
MAN urged the Federal Government to use the period of relative inflation moderation to implement measures that directly reduce the structural costs of manufacturing and improve productivity.
On electricity, the association called for dedicated and reliable power supply to major industrial clusters, priority access to gas for industrial users and incentives for manufacturers investing in captive power and renewable-energy systems.
It also called for a review of electricity tariff structures affecting productive industries.
According to MAN, the effectiveness of government interventions in the power sector should be measured by the cost of energy required to produce a unit of manufactured output, rather than simply by increases in electricity generation.
The association also called for the rehabilitation and maintenance of major transport corridors linking ports, industrial clusters, agricultural production zones and major markets.
It urged the Federal Government to work with state governments to eliminate unnecessary road charges and overlapping transport-related levies.
MAN also called for effective implementation of relevant provisions of the new tax laws to promote equity, fairness and transparency.
The association urged the government to eliminate multiple taxation and overlapping levies, while ensuring that tax reforms do not create additional burdens for local production.
It further called for effective implementation of the Nigeria First Policy to encourage the procurement and consumption of locally manufactured products, particularly in government procurement.
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To address financing constraints, MAN proposed a targeted long-term manufacturing financing window at below-market rates for working capital, machinery and productivity-enhancing investments, particularly for micro, small and medium-sized manufacturers.
The association said the latest inflation figures provided a modest positive signal for the economy but stressed that sustainable economic growth would require more than a gradual decline in the headline inflation rate.
It said manufacturers need improved access to affordable energy, finance, foreign exchange and logistics, alongside greater local sourcing of production inputs, to enable the sector to produce more at lower costs, attract investment, create jobs and compete effectively.
