Financial Policy Reforms Hurting Real Sector’s Growth-MAN

The Manufacturers Association of Nigeria (MAN) has said that some Central Bank of Nigeria’s (CBN) policy decisions are not adding value to the growth of the manufacturing sector.

The association said it was better for the apex bank to collaborate with fiscal authorities to reinforce the sector’s traditional role in driving significant employment, heightened productivity, steady forex earnings, and sustained economic progress in the country.

MAN lamented that the apex bank had increased the Monetary Policy Rate (MPR) for nearly two years without yielding positive results to the manufacturing and the country’s economy in general. 

Director-General of MAN, Mr. Segun Ajayi-Kadir, said that MAN had hoped that the CBN would explore alternative measures, particularly in addressing the underlying causes of inflation, primarily cost-push factors in the country.

Ajayi-Kadir urged the apex bank to carefully evaluate the impact of monetary policy actions on the manufacturing sector and adopt policies that promote the resilience and competitiveness of manufacturers in the country. According to him, these effects are intensified by the current monetary stance, contributing to constraints on investment and expansion. 

He pointed out that a combination of heightened borrowing costs and reduced liquidity would hinder manufacturers’ ability to invest in innovative technologies, expand production capacities, or venture into new markets.

“As a result, this could lead to delays or cancellations of planned initiatives, ultimately constraining the sector’s potential for growth and its overall contributions to economic growth and development,” he stated.

While speaking on the country’s current capacity utilisation, the economic expert said: “According to MAN survey, the capacity ultilisation of the manufacturing sector reduced from 56.4 per cent recorded in 2022 to 55.1 per cent in 2023.

Also, the growth of the sector reduced to 1.40 per cent in 2023 from 3.35 per cent and 2.45 per cent recorded in 2021 and 2022 respectively.” Ajayi-Kadir stressed: 

“MAN acknowledges the efforts of the current CBN management team at confronting the economic challenges facing the country, notably the fluctuations in inflation and exchange rates.

“While MAN understands the reason behind the MPC’s decision, it is crucial for the committee to thoroughly assess the potential impact on the real sector and the multiplier effect on the nation.

“MAN earnestly urges the CBN to carefully evaluate the effects of these monetary policy actions on both the manufacturing sector and the broader economy. “Achieving a delicate equilibrium between addressing macroeconomic challenges and fostering the growth and resilience of the manufacturing industry is crucial.

“Therefore, MAN advocates for robust collaboration between monetary and fiscal authorities and suggests considering the following policy measures:Implement targeted interventions aimed at mitigating the underlying cost-push factors driving inflation, thereby alleviating the financial burden on manufacturers.”

He, however, advised that the CBN should prioritise forex and credit allocation to the manufacturers and fast track the proposed recapitalisation of the banking sector, emphasise the development of infrastructure within industrial hubs and bolster nationwide investments in renewable energy sources to alleviate logistical expenses and enhance competitiveness, reduce the reliance of the country on imported products and raw materials by providing incentives for investment in backward integration and local sourcing to reduce the pressure on dollar to the barest minimum.