The September 2024 Business Expectations Survey (BES) paints a bleak picture for Nigeria’s manufacturing sector. The survey, conducted jointly by the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS), reveals that manufacturers are grappling with a host of challenges, including insecurity, high interest rates, and multiple taxes.
While the manufacturing sector remains pessimistic, other sectors, such as services and agriculture, have shown optimism. The services sector, which includes market services and non-market services, recorded a sentiment index of 3.2 points, indicating optimism. Similarly, the agriculture sector registered a sentiment index of 2.7 points, signaling positive expectations.
The total confidence index (CI) of these sectors, according to the survey, was 3.2 points in September, showing that respondent firms were optimistic about the macroeconomy because they anticipated better business conditions.
Insecurity and High Costs Hamper Manufacturing
The challenges faced by the manufacturing sector are multifaceted. Insecurity has disrupted supply chains, increased transportation costs, and deterred investment. High interest rates have made it more expensive for manufacturers to borrow funds, while multiple taxes have eroded profit margins.
Francis Meshioye, president of the Manufacturers Association of Nigeria (MAN), echoed these concerns. He highlighted the impact of rising production costs, high borrowing costs, and low consumer patronage on the sector. Meshioye emphasized the need for policy interventions to improve the operating environment for manufacturers.
“As critical stakeholders in the Nigerian economy, we shall continue to present the government with policy inputs and options and partner with them with a view to co-creating innovative solutions that will free the Nigerian economy from its lacklustre performance and place it on the path of productivity, sustainable growth, and development,” he said.
Export Businesses Drive Optimism
Despite the challenges, there are pockets of optimism within the Nigerian economy. Export-oriented businesses are driving the overall positive outlook. The survey revealed that export-oriented businesses are expected to be the major driver of optimism in both the short and medium terms.
Construction (24.4 points), non-market services (18.3 points), mining, quarrying, electricity, gas, and water supply (16.0 points), agriculture (8.8 points), and market services (7.6 points) are the anticipated drivers of macroeconomic optimism in October 2024, the survey states.
According to the study, firms that are export-oriented are predicted to be the most optimistic for the next three months (23.9 points), followed by importer-oriented businesses (21.0 points), export-oriented businesses (21.0 points), and businesses that are neither import- nor export-oriented (3.2 points).
All business categories are anticipated to generate optimism over the next six months, with import and export-oriented enterprises (29.9 points) being the main drivers, according to the overall business outlook broken down by business type.
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However, it is important to note that these positive expectations are contingent on various factors, including global economic conditions, exchange rate stability, and government policies.
If You Ask Me
The September 2024 Business Expectations Survey underscores the complex economic landscape in Nigeria. While some sectors exhibit optimism, the manufacturing sector remains under pressure. Addressing the challenges faced by manufacturers is crucial for Nigeria’s economic growth and development.
