Home Latest Insights | News As MAN Reports 767 Closed Manufacturers, 335 Under Distress, The Central Bank of Nigeria Should Test This Hypothesis

As MAN Reports 767 Closed Manufacturers, 335 Under Distress, The Central Bank of Nigeria Should Test This Hypothesis

As MAN Reports 767 Closed Manufacturers, 335 Under Distress, The Central Bank of Nigeria Should Test This Hypothesis

Remember your neighbour as Nigeria’s “Main street” is struggling even as the Broad street people (stock market,  banks, mega investors) are having great moments: “In a sobering report released by the Manufacturing Association of Nigeria (MAN), the state of the manufacturing industry paints a grim picture as the country’s economic challenges escalate.

“According to the findings, a staggering 767 manufacturing companies closed their doors in 2023, while an additional 335 faced severe distress. This unsettling trend, the report said, stems from a confluence of economic hurdles, including exchange rate volatility, escalating inflation, and a general deterioration of the investment climate.”

I remain bullish on Nigeria because it will rise. But we need to look at our policies to accelerate that ascension. According to MAN, “the capacity utilization in the [manufacturing] sector has declined to 56%; interest rate is effectively above 30%;…” 

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Nigeria has a huge inflation and that continues to drive the benchmark rate hikes by the central bank. The question now is this: have the rate hikes been effective? I think using rates the way we have used them has not worked because Nigeria’s economy is not “typical”; we have many fudge factors which require trying new things.

I posit that Nigeria’s inflation is as a result of Supply scarcity, not due to excess cash. If that is so, when we raise benchmark rates at the central bank, we are effectively raising interest rates on companies which are the main vehicles to boost Supply since consumer lending in Nigeria is so small that rate hikes hardly affect consumer spending (i.e. the Demand side is hardly affected with rate hikes). (This contrasts with US, Uk, etc where they have credit cards, which on high prime rates, set by their central banks, could affect consumer spending at scale)

I wish there could be an experiment on my thesis where the Central Bank of Nigeria will select Ovim, Abia State, to reduce benchmark rates, in a walled way,  making it possible for companies to access bank loans at 9%. I am confident that Supply of products and services  will increase through improved production even as Demand remains the same as consumer lending in Ovim is negligible. If that should happen, ceteris paribus, inflation will drop in Ovim since we will have more goods.

MAN Statement:

The imposition of EEL poses a potential impact on the manufacturing sector and the economy at large. This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.

“The manufacturing sector is already beset with multidimensional challenges. In the year 2023, 335 manufacturing companies became distressed, and 767 shut down.

“The capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”

Comment on Feed: Ndubuisi Ekekwe maybe this will give better perspective to what informed CBN decision on tackling inflation. You can see the figures for money supply which has moved from 26.7T as at January 2019 to 93.7T as at January 2024. The currency outside bank from 1.7T to 3.2T within the same period. Many of the funds disbursed as intervention loans are never repaid. Net domestic credit from from about 28T to 113T during the same period out of this credit to private sector moved from about 22T to over 76T. Figures, figures, figures………don’t lie. These funds are in the system but in few hands.

My Response: That does not matter. They raise rates today, they do Ways and Means which is another name for printing money the next day. What they’re taking from rates, they are injecting via Ways and Means. So, that is why it is not working.  They need to try another hypothesis.


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1 THOUGHT ON As MAN Reports 767 Closed Manufacturers, 335 Under Distress, The Central Bank of Nigeria Should Test This Hypothesis

  1. It’s as if only those at the CBN understand monetary policy, probably they are the only ones that see it correctly…

    There is a supply challenge, there’s also excess cash challenge. Those trillions of naira printed under Buhari and the ones printed subsequently, who’s keeping track of them and where are they? The cash wasn’t burnt up neither did it disappear, it’s within Nigeria. If we can rigorously and meticulously trace the disbursement of those trillions, we will start having a handle on the excess cash side of the problem. For the supply side of the problem, MAN is perhaps the most important association to lead the recovery.

    We keep dancing around.

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