Nigerian manufacturers adjust operations to survival mode

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Nigerian manufacturers have been forced to rethink the way they operate as they struggle to survive in the face of worsening production challenges and macroeconomic indices.

Many manufacturers have resorted to revising their operating models to avoid shutting down operations or incurring more debt.

Frank Onyebu, chairman of the Manufacturers Association of Nigeria (MAN), a subsidiary of Apapa, told BusinessDay that the first half of the year has been turbulent and many manufacturers have struggled to keep their businesses going.

“Manufacturers are better prepared to weather the storm in the second half. Some have started to source inputs locally; many of them are now considering gasoline-powered generators; some factories are no longer producing at full capacity and some have had to lay off workers even if they did not want to,” he said.

According to Onyebu, the production process has many inputs and factors, including power supply, the cost of which has increased significantly, forcing manufacturers to rotate operations to reduce energy costs.

He added that some of them were exploring gasoline-powered generators as an alternative, either renting them or considering buying them.

He said amid rising costs and macroeconomic challenges, manufacturers are facing weak product demand even as the government pressures them to meet financial obligations.

“Manufacturers need tax exemptions now; many of them are on the brink of collapse, but their resilience continues to push them,” he added.

Anthony Ajulo, executive director of the Colton Group of Companies, in a phone interview with BusinessDay, said his company had to raise prices for its products twice, with another hike on the horizon.

“Currently, overhead costs are up over 600%, raw material sourcing is up over 100%, employees are demanding a raise as inflation erodes the value of their income, and we have many other financial obligations, but we have to keep operating,” he said.

Ajulo said the company may relocate its production operations to another country “where the business environment is friendlier and more conducive.”

“Currently, no textile factory is operating at full capacity and many of them are simply waiting for orders to be produced before producing anything to avoid going into debt on unsold inventory because making a price increase does not is not an option,” Kwajaffa Hamma, chief executive of the Nigerian Textile Manufacturers Association, said.

He added that even if profits erode, manufacturers still need to stay in business and hope things improve in the future.
Also read: Manufacturers face reduced productivity due to foreign exchange scarcity’

Usman Imanah, managing director of Friska Farms Limited, said some manufacturers had to pass on rising costs to consumers, others were looking for alternative means of production while some had been looking for ways to make affordable product sizes to increase. production in a context of rising costs without compromising quality.

“We had to absorb the rise in the cost of energy, which eats away at our margin; however, we have tried to expand our market and sell larger volumes to increase our chances of profitability. The government has so far encouraged Nigerian brands to export; so we are expanding our international market and looking at export options to also increase currency availability,” he said.

Since the start of the Russian-Ukrainian crisis in February, manufacturers have had to deal with a diesel price spike of more than 90% and an intensification of the reduction in the supply of raw materials, among other problems, with a negative effect on their production. and operational activities.

The Manufacturer CEO Confidence Index (MCCI), which measures changes in operator pulse and trends in the first quarter of 2022, fell to 53.9 points from 55.4 points in the fourth quarter of 2021, according to MAN. .

Although the decline in the MCCI was marginal and above the 50-point benchmark, MAN said the manufacturing sector was under severe pressure with its health at the margins and below the desired performance threshold.

“Manufacturers’ feedback identified a limited supply of electricity; high cost of local and imported raw materials; the persistent acute shortage of foreign exchange for the import of machinery, raw materials not available locally and the persistent insecurity in the country are major challenges limiting the performance of the manufacturing sector during the period under review,” he said. added.

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