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GDP: Nigeria’s manufacturing sector on tight ropes

Only two sub-sectors in the manufacturing space reported real growths.

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Manufacturing: Momentum in activities slows in January, CBN’s forex intervention has encouraged influx of raw materials - Manufacturers , Manufacturing: Activity level slumps on COVID-19

It is no longer news that Nigeria’s manufacturing sector contracted by 8.78% in the second quarter in real terms. This is a major decline when compared with a marginal growth of 0.43% reported in Q1 2020, and a contraction of 0.13 reported in the corresponding quarter of 2019.

According to the National Bureau of Statistics, only two sub-sectors in the manufacturing space – chemical & pharmaceutical products and motor vehicles & assembling, reported real growths of 3.79% and 6.95%, respectively. This is higher than the real growths of 0.58% and 1.04% in the first quarter, and a contraction of 1.27% and 1.5% in the corresponding quarter of 2019.

The other 11 sub-sectors in the manufacturing space all contracted.

READ: Manufacturing PMI dips further as recession scare looms

Among the sectors that contracted were eight subsectors that reported double digits contraction, with oil refining activities contracting the most by 67.6%, extending the streak of contraction by six quarters. It should be noted that the last time the sub-sector reported a major expansion was during the fourth quarter of 2018 (33.6%).

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The contraction in the activities of these subsectors is attributable to global & domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending, and high operating costs. Subdued operations caused by the lockdown and other containment measures to combat the pandemic also affected manufacturing activities.

READ: Manufacturing PMI slide into recession territory

The contraction in the manufacturing sector during the second quarter is consistent with analysts’ expectations, at least based on the CBN’s recent Manufacturing PMI reports. These reports signalled the contraction of the manufacturing sector in the second quarter, with the Manufacturing PMI for May and June standing at 42.4 and 41.1; well below the benchmark index of 50%.

Expert’s perspective

The Director-General of Lagos Chamber of Commerce and industry, Dr Amuda Yusuf, maintained a cautious stance on the economy. He said that “although there has been a gradual reopening of the economy, business and commercial activities would remain subdued”.

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He emphasized that with the protraction of the COVID-19 pandemic and lack of a vaccine, there is a high possibility that the economy would contract, though marginally, in the third quarter.

READ: Manufacturing sector in Nigeria and the reality of a “new normal”

The DG of LCCI further raised concerns about how the manufacturing sector has been struggling before the pandemic, despite being one of the biggest beneficiaries of CBN’s loan-to-deposit policy.

He explained that the weakness of the manufacturing sector was due to global & domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs.

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In his statement, he called for the removal of the structural bottlenecks to productivity through a mix of fiscal, monetary and regulatory measures.

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He counselled that, a proper blend of fiscal and monetary policies, with proper implementation of the sustainability plan among other measures, would give the economy a boost in the near term.

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Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor. He is a business owner and a stern advocate of Financial literacy, who believes in the huge economic prospect of the Nigerian Payment channels and Fintech space.

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Manufacturing

Notore chemicals shuts down 500,000 MTPA fertiliser plant for turn around maintenance

Notore Chemicals has shut down its fertiliser plant for turn around maintenance, in expectation of significant improvement in the Plant’s reliability index.

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Notore Chemical Industries Plc, Notore Chemical's plant at Onne, Rivers State, Company result, Fertilizer, Jobs, Profit, Notore Chemical Industries 2019 H1 Financial Statements

Notore Chemicals has shut down its fertiliser plant with a 500,000MTPA nameplate capacity for maintenance, in order to restore the plant’s productivity and facilitate a sustainable bounce back in operations.

This information became general knowledge after a notification issued by the Company Secretary, Mrs. Otivbo Saleh, was published on the website of the Nigerian Stock Exchange.

According to her, Notore Chemical Industries Plc had to shut down its fertiliser plant to pave way for the commencement of the Turn Around Maintenance, expected to return the Plant to its 500,000 MTPA nameplate capacity and improve the reliability index to 95%.

The TAM exercise was initially impacted by the COVID-19 pandemic, as the disruption to global businesses occasioned by the COVID-19 pandemic and its attendant restrictions by Governments all over the world affected the timely delivery of procured spares and the arrival to the site of Vendor Service Men (VSM).

Barring any unforeseen circumstance, the Turn Around Maintenance which has started should be completed on 8 March 2021.

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  • The company’s 2020 audited financial report tells a tale of effete operation, as the company made a Gross loss of N2.9 billion, due to the cost coming from the company’s operation completely eroding all the revenue generated from its operating segment.
  • The company managed to post a positive operating profit of N9.5billion at the back of N18.8billion revenue from contracts with customers. However, this was not enough to set the company on the path of profitability, as the heavy loan book of the company impacted its profitability in 2020.
  • Upon the completion of the TAM programme, the company expects a significant improvement in the Plant’s reliability index and sustained daily production output of 1,500MT.

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Business

BUA Cement signs contract to build 3 Plants in Adamawa, Edo and Sokoto States

BUA Cement Plc has disclosed that it is set to sign a contract for the building of additional production lines in three states.

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BUA group, NPA Decommissioning of Port Harcourt Terminal: We'll vigorously defend, protect our rights - BUA Group, NPA and BUA Group dispute to affect 1000 jobs, $500,000 monthly revenue, Terminal closure: BUA clears air on NPA’s claims , Forbes 2020 world’s richest rankings released: Only 4 Nigerians make exclusive billionaires list

The Management of BUA Cement Plc has disclosed that the Company is set to sign a contract for the building of additional three production lines, with an installed capacity of 3 million metric tonnes per annum each this week.

This disclosure was made by the Company in a notification issued and signed by the Company’s Secretary, Mr. Ahmed Aliyu.

In line with the information contained in the disclosure, the contract will be signed between the Company and Sinoma CBMI of China.

According to the statement issued by Mr. Aliyu, the three plants with an installed capacity of 3 million metric tonnes per annum each, will be located at Adamawa, Edo and Sokoto States.

This, however, when completed, is expected to increase the total installed production capacity of the cement manufacturer by a cumulative 9 million metric tonnes per annum.

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What you should know

  • In a publication by Nairametrics six months ago, the Chairman of BUA, Abdul Samad Rabiu, disclosed that the company was set to establish a three million metric tonnes cement plant and 50 megawatts power plant in Guyuk and Lamurde local governments of Adamawa state, in the North Eastern region of Nigeria.

The Chairman stressed that the Guyuk Cement Plant as proposed, would be a major investment in the North-East by BUA and the company would ensure that raw materials are sourced locally.

Why this matters

The additional three production plants with an installed capacity of 3 million metric tonnes each are expected to add to the robust infrastructure of the cement manufacturer.

  • These plants when completed in 2022, in addition with its 3rd cement line of 3millon mtpa in Sokoto which has been booked for commissioning in mid-2021, are expected to increase the total installed cement production capacity of the company from 8 million mtpa to 20 million mtpa.
  • This will enable the manufacturer to secure its place in the Nigerian Markets and unlock Pan-African opportunities elsewhere in the continent.
  • This move is expected to place the company higher than Lafarge as the second-largest cement manufacturer in Nigeria, with a total installed capacity of 10.5 million mtpa, but lower than Dangote’s total national installed capacity of 29.25 million mtpa.

What they are saying

The founder of BUA Group Plc, Abdul Samad Rabiu, in his statement at the 2020 Institute of Directors Dinner, said:

  • “I am happy to announce that our 3rd cement line of 3mmt per annum in Sokoto is expected to be commissioned in the middle of 2021, and I am also pleased to inform you that we are commencing the construction of 3 more cement plants of 3 million tonnes each in Sokoto, Edo and Adamawa at the cost of $1.050billion, which should be completed by the end of 2022. The contract signing is expected to happen this week.”

Speaking about impressive developments in the foods segment of the Group, Rabiu said:

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  • “BUA is also looking to combine our foods businesses – from sugar, flour, pasta to list as BUA FOODS on the NSE by the end of 2021. In sugar, we have our integrated plantation in Kwara State set to produce 200,000 tonnes of refined sugar, 20million litres of ethanol annually and 35MW of power – all utilizing the by-products of cane sugar.”

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Manufacturing

Dangote Cement given approval to export through land borders

Dangote Cement the approval by the Federal Government to export cement to West African countries through Nigeria’s land borders.

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The Nigerian government has given Dangote Cement the approval to export Cement to West Africa through Nigeria’s land borders, which have been closed for over a year. The cement manufacturer is the only company given such approval to export across the borders.

This was disclosed in a report by Bloomberg on Monday evening after an investor call by Michel Puchercos, Dangote Cement CEO.

READ: Rice: Can Nigeria attain self-sufficiency in two years?

What you should know

Nairametrics reported in October 2019 that the Federal Government of Nigeria ordered the complete closure of the Nigerian border, placing a ban on both legitimate and illegitimate movement of goods in and out of the country.

The Comptroller-General, Nigerian Customs Service, retired Col. Hameed Ali said all import and export of goods from the nation’s land borders are banned until there is an agreement with neighboring countries on the kind of goods that should enter and exit Nigeria.

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READ: Despite billions on agriculture, food inflation up by 108% since 2015

In December 2019, RenCap, an investment and securities firm declared that the closure of Nigeria’s land borders could lead to a slow-down in Nigeria’s economic growth in 2020. 

Nigeria’s trade sector is about the second largest contributor to Nigeria’s GDP but has suffered from poor economic growth since Nigeria’s economic crisis began in late 2014. “We believe the border closures contributed to the decline in wholesale and retail trade in 3Q19,” RenCap said.

READ: Lagos announces incentives as it reviews land use charge, reconsiders dusk-to-dawn curfew

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Dangote Chief, Pucheros, said the cement exports were made through “authorization given by this administration,” allowing Africa’s largest cement company to export to Niger and Togo during the 3rd quarter of the year.

He added that the volumes allowed for export were restricted and the Company group plans to export through seaports.

The exemption to Dangote Cement is seen as a softening of the government’s position on a border closure that started in August last year, and could open the way for other businesses to fully resume exports across the country’s land barriers.

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