MAN: Detour from rate hikes needed for real sector recovery

The Manufacturing Association of Nigeria (MAN) is urging for a combination of strategies to alleviate the impact of critical macroeconomic factors on businesses. Among the suggested measures are prioritizing foreign exchange sales to productive sectors, a departure from the continuous increase in interest rates, and a reevaluation of electricity tariffs. Data from the Association's CEOs Confidence index reveals a surge in production and distribution costs by 24.4 percent, accompanied by a 5 percent decline in sector investments during the second quarter of the year. Segun Ajayi-Kadiri, the Director General of MAN, shed light on the current scenario during an interview with CNBC Africa. Ajayi-Kadiri emphasized the need for proactive adjustments to counteract the diminishing confidence of CEOs within the manufacturing sphere. He stressed that without immediate interventions, such as those proposed by the Association, the sector could face further challenges leading to decreased investment and profitability. Ajayi-Kadiri indicated that the Manufacturers' CEOs Confidence index serves as a barometer to gauge the sentiments of member industry leaders regarding the economic landscape. The downward trend in performance signals a non-conducive environment for manufacturing activities, prompting the call for government action to facilitate a more favorable operating atmosphere. The recommendations put forth by MAN encompass various areas including curbing inflation, stabilizing exchange rates, and enhancing forex accessibility. Ajayi-Kadiri highlighted the significance of the exchange rate for manufacturers heavily reliant on imported raw materials, machinery, and parts. In this regard, resolving outstanding issues related to redeeming forwards, amounting to $2.4 billion, and moderating electricity tariff increments are crucial steps to support production efficiency and profitability within the sector. Addressing lending rates and credit accessibility, Ajayi-Kadiri acknowledged the Central Bank of Nigeria's inflation-containment efforts but advocated for a review of the impact on the productive segment. He emphasized the necessity of insulation measures to shield manufacturers from adverse effects while commending government initiatives such as the allocation of funds at single-digit interest rates to support industry operations. Furthermore, the conversation extended to tax reforms and trade competitiveness enhancements. MAN expressed satisfaction with the progress made by the Presidential Committee on Fiscal Policy and Tax Reform, urging the swift implementation of recommendations to streamline taxation processes and boost compliance. Ajayi-Kadiri underscored the importance of policy consistency, highlighting the pivotal role it plays in inspiring investor confidence and stimulating growth. As the dialogue concluded, the discussion touched upon the recent decline in Nigeria's inflation rate to 33.4% in July, signaling a positive development. Ajayi-Kadiri emphasized the significance of sustained inflation moderation to alleviate cost pressures and encourage market activities. Additionally, he emphasized the need for streamlined export processes, reduced operational costs, and improved trade facilitation to enhance Nigeria's competitiveness within the African Continental Free Trade Area. In conclusion, MAN's advocacy for targeted policy adjustments, effective implementation of recommendations, and concerted efforts towards enhancing competitiveness underscores the imperative of revitalizing the manufacturing sector and propelling economic recovery.