The Manufacturers Association of Nigeria (MAN) has attributed the rising stock of unsold goods to low real consumption in the economy.
According to the association, the situation is caused by accelerating inflation, smuggling, counterfeiting of Nigerian manufactured products as well as the general sluggishness of the economy due to delayed passage of the national budget.
Although capacity utilisation has continued to gain momentum, the inability of many local producers to offload already produced goods remains a concern for industry stakeholders as it negatively affects the sector’s contribution to the Gross Domestic Product (GDP).
This has far-reaching consequences on job profitability and job creation.
The latest data from MAN showed that members’ inventory (unsold goods) totalled N321.12 billion in 2017 as against N90.43 billion recorded in 2016. This indicates N230.77 billion or 255.19 per cent increase over the period.
Similarly, the May 2018 Business Expectations Survey (BES) conducted by the Central Bank of Nigeria (CBN) revealed that though the respondent firms’ optimism on the macroeconomy remained positive, they identified insufficient power supply, unfavourable economic climate, high-interest rate, unclear economic laws, financial problems, unfavourable political climate, and insufficient demand as the major factors that constrained business activities in the month under review.
There are worries that the inventory may rise further in 2018, considering the recursive nature of the delayed budget cycle and prevailing economic condition in the country.
A further breakdown of the data from MAN showed that unsold goods in the second half of 2017 were worth N161.53 billion, up from N35.42 billion recorded in the corresponding period in 2016, as capacity utilisation averaged 57.13 per cent due to relative stability in the forex market.
The increasing number of unsold goods is a reflection of lower purchasing power of the consumers. It portends job losses and lesser private sector capacity to create jobs this year.
A sectoral analysis of the data showed that a significant proportion of the inventory was observed in the basic metal, iron & steel fabricated metal group (N31.39 billion or 19.4 percent); chemical and pharmaceutical sector (N25.87 billion or 16.0 percent); food, beverage and tobacco (N20.7 billion or 12.8 percent); and domestic/industrial plastic, rubber & foam (N20.54 billion or 12.7 percent).
The Lagos Chamber of Commerce and Industry (LCCI) expressed worry that further delay in the implementation of the budget will slow down the economic recovery process.
According to the chamber, if funds for critical projects are not disbursed on time, the tempo of economic activities will be reduced, dragging the economy into a state of inertia and decline. The late passage of the budget is, therefore, a threat to achieving the ERGP targets and to Nigeria’s goal of becoming one of the top 20 economies by 2020.
In an interview with The Guardian, the chamber’s Director-General, Muda Yusuf, blamed the situation on a combination of factors, including low purchasing power, high unemployment and irregular payment of salaries in both public and private sectors.