60% Forex Allocation Saved Manufacturing Sector – Report

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  • 60% Forex Allocation Saved Manufacturing Sector – Report

Although the Central Bank of Nigeria’s preferential allocation of foreign exchange to the manufacturing sector was short-lived and fraught with controversies, a report has emerged showing that the initiative registered a huge impact and lent a boost to the manufacturing sector during the period.

The initiative, which commenced in August 2016, came to an end in February 2017.

An executive summary of the Manufacturers Association of Nigeria’s Economic Review of second half of 2016 attributed a 9.54 per cent increase in capacity utilisation (from 49.64 per cent in second half of 2015 to 59.18 per cent in the second half of 2016) to the 60 per cent preferential forex allocation to the manufacturing sector for importation of raw materials and machinery not locally available.

“Capacity utilisation averaged 51.74 per cent in 2016 as against 50.17 per cent of 2015, thereby indicating 1.57 percentage point increase over the period,” the report stated.

A further analysis of capacity utilisation based on sectors showed that it increased in the entire sectoral groups in the period under review.

“Capacity utilisation in Food, Beverage and Tobacco group increased to 60.3 per cent in the second half 2016 from 53.7 per cent recorded in the corresponding half of 2015, thereby indicating 6.6 percentage point increase of the period. It also increased by 10.5 percentage point when compared with 49.8 per cent recorded in the preceding half.

“Textile Apparel and Footwear (group) increased to 56.9 per cent in the period under review from 52.7 per cent recorded in the corresponding half of 2015, thereby indicating 4.2 percentage point increase over the period. It also increased by 15.3 percentage point when compared with 41.6 per cent recorded in the preceding half.”

Analysis across MAN industrial zones also showed that capacity utilisation increased in Rivers, Ikeja, Apapa, Kano Bompai, Ogun and Kaduna zones.

In Ogun Zone, for instance, capacity utilisation increased to 68.0 per cent in the period under review from 59.5 per cent recorded in the corresponding half of 2015, thereby indicating 8.5 percentage point increase over the period.

It also increased by 17.8 per cent when compared with 50.2 per cent recorded in the preceding half.

According to the report, total production volume in the sector equally increased to N8.38tn as against N7.71tn in 2015, indicating N0.67tn or 8.7 per cent increase over the period.

Manufacturing investment during the period stood at N448.94bn, out of which N313.62bn or 69.9 per cent went to Ogun Zone.

The impact extended to job creation whereby a total of 10,061 jobs were created in the manufacturing sector in the second half of 2016 as against 9,393 jobs created in the corresponding half of 2015, indicating an increase of 668 jobs over the period.

At the end of 2016, an estimated 1.63 million historical cumulative jobs were created in the sector, the report said.

Food, Beverage and Tobacco sectoral group was said to have accounted for most of the jobs created with 2,947 jobs.

The report noted, however, that a total of 4,408 jobs were lost during the period as against 12,400 jobs lost in the second half of 2015.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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