Manufacturing slowdown fuelling FX shortage – NESG

From Abubakar Y Ojimaojo ABUJA

The Nigerian Economic Group Summit says Nigeria’s weak manufacturing is a major factor fuelling shortage of foreign exchange

The NESG Senior Economist, Dr Wilson Erumebor, disclosed this in a recent paper published by Foresights Africa.

The report, titled, “Nigeria in 2023: Bridging the productivity gap and building economic resilience’’, stated that the last seven years for the country had been plagued with hardship especially after battling two economic recessions.

He added, “In the last seven years, there have been a shift of economic activity towards agriculture and a slowdown of the manufacturing sector. Part of the problem facing the economy is the neglect of the manufacturing sector.

“Essentially, Nigeria Is not producing enough, for both local consumption and export. The consequences of having a weak manufacturing base for a country with such a large population are evident in its foreign exchange shortages, limited number of jobs created to accommodate workforce entrants, and an import bill that can hardly be met (nor sustained) by current export earnings.”

In the report, explained that the unemployment and underemployment rates increased to an all-time high of 56.1 percent in 2020.

Erumebor noted that “90 percent of workers are employed in sectors with low levels of productivity—agriculture and non tradable services.

“This means that the kind of jobs needed to generate income growth and lift many Nigerians out of poverty are not available in large numbers.”

He urged the incoming administration, to work with stakeholders, and develop an agenda for economic and social inclusion.

“At the heart of such an agenda must be improving the lives of the average Nigerian. This agenda must also include a practical strategy on how to structurally transform the economy, moving labor and economic resources from low productivity sectors to high productivity sectors.”

The senior economist further posited the need to design and implement national skills programmes aimed at upskilling young Nigerians, to ensure many more embrace digital skills and capabilities.

“At the middle of the productivity ladder sits manufacturing. The sector has a much higher productivity level than agriculture and can accommodate, in large numbers, the kind of labour that is abundant in the country. Nigeria’s rising population (which is projected to reach N428m by

2050), the existence of mineral resources, and the adoption of a single market in Africa—the African Continental Free Trade Area —present a case for why manufacturing would thrive in Nigeria.”

Erumrbor highlighted the need for the incoming government to address the burgeoning infrastructure deficit and inadequate power supply, which limit the competitiveness of the manufacturing sector.

Hammering on a clear cut strategy to develop an industrial policy, he explained that supporting the scale, efficiency, and competitiveness of local firms within the manufacturing sector was vital to building economic resilience against vulnerability and future shocks.

“Such policies must be integrated with Nigeria’s AfCFTA strategy and support transition of small-scale firms that are often the drivers of job creation in the country.”

The Nigerian stock market on Friday advanced a third time in a row showing resilience as Nigerians proceed to elect new leaders.

The Nigerian Exchange All-Share Index gained 0.55 per cent and raised the year-to-date gain to 7.22%. A total of 30 stocks gained, while 11 declined, according to market results released at the end of trading in Lagos.

It was the same trend on the Eurobond market, where the country’s bonds also gained on the eve of the polls. Out of the country’s Eurobonds, only two – those maturing this year and in 2025 fell in price, while the rest gained.

On the stock market, the consumer goods sector led the gainers, rising by 2.55% to a year-to-date gain of 11.78%.

Stocks in this sector that gained included ABC Transport (8.57%); Cadbury (6.17%); and FTNCOCOA (3.39%).

The banking sector came second, as the banks shook off the impact of the current pressure on them brought about by the naira redesign of the Central Bank of Nigeria. Some of the stocks in this stock recorded gains, led by ETI (8.33%);

The oil and gas sector came third in the gainers, rising by 1.29%. Stocks in this sector that gained significantly are Conoil (9.94%); MRS (9.89%).

With Friday’s result, this sector has gained 20.04% this year, nearly thrice the average market gain. This is despite the instability that has prevailed in the downstream of the Nigerian oil industry this year, with acute shortage of refined products being experienced across the country.

The technology sector also performed well, with two of the stocks – Computer Warehouse Group and Chams gaining, which gained 8.99% and 7.69%, respectively.

Chinenyem Anyanwu, Chief Executive Officer of Dependable Securities Limited, a Dealing Member of the Nigerian Exchange Limited, said the bulls took over the market a day before the elections because, “There is an expectation of a new Nigeria. Just take it from me, if by

Monday the right candidate wins, this All-Share Index will jump full mark.”