Business: Rising inventory, infrastructure undermine government intervention in manufacturing sector

- in World News


While some sub-sectors in the manufacturing industry are beginning to witness a turnaround in their fortunes owing to significant improvement in access to foreign exchange for purchase of raw materials, as well as allocation based on priority demands, others are struggling with rising inventory.

Affirming the drop in prices of some commodities at the retail segment, the Manufacturers Association of Nigeria (MAN) stated that intervention from the Central Bank of Nigeria (CBN) has helped in addressing challenges through improved foreign exchange access, while many local producers are also intensifying their local sourcing activities.

Specifically, MAN President, Dr. Frank Jacobs noted that the food, beverages and tobacco sector experienced improved patronage and production while other sectors like the Basic Metal and Iron and Steel, Textile, Apparel, and Footwear, as well as Plastic and Rubber products sectors are witnessing high level of inventory mostly due to slow down in construction activities, global glut and competition from imported items.

Similarly, Jacobs decried the poor state of infrastructure in the country, noting that the manufacturing sector is still plagued by myriad challenges with infrastructure being the most worrisome.

According to the latest report from the World Steel Association (WSA), the international trade body for the iron and steel industry, crude steel production for 64 reporting nations spiked 5.8% year over year for July to 154.6 million tons (Mt).

Fears of renewed oversupply of steel in the market triggered by a surge in production in China to record highs in the recent months have gripped the steel industry lately. Chinese steel mills have been beefing up output to take advantage of strong profit margins since the four-month production restriction to curb pollution during the winter months was lifted by Beijing in March 2018.

The ramp up in Chinese output, notwithstanding the ongoing trade spat between Beijing and Washington, has raised industry-wide concerns that a glut of cheap Chinese steel will put downward pressure on steel prices globally.Jacobs also expressed worry that the inventory may rise further, considering the recursive nature of the delayed budget implementation cycle and prevailing economic condition in the country.

A breakdown of the data from MAN showed that unsold goods in the second half of 2017 was 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.He therefore sought government’s intervention in addressing some policy and infrastructure issues affecting the real sector.

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