Article Summary
- Unsold goods in Nigeria reached N469.66 billion in 2022, with rising diesel costs and other factors being blamed by the Manufacturers Association of Nigeria (MAN).
- MAN warns that if sales proceeds cannot cover business expenses, it could lead to factory closures, job losses, and a decline in exports.
- The high inventory is attributed to low purchasing power caused by sustained inflationary pressures and the cash crunch in the wake of the Naira Redesign policy. Rising diesel costs have also impacted businesses reliant on generators for power.
The Manufacturers Association of Nigeria (MAN) has blamed the rising cost of diesel and other factors as unsold goods in 2022 reached N469.66 billion. According to the Director General of MAN, Segun Ajayi-Kadir, the inventory of unsold goods in the sector is N469.66 billion in 2022, meanwhile, N384.58 billion was recorded in 2021.
According to the MAN President, Otunba Francis Meshioye, if sales proceeds can no longer sustain business overheads and operating expenses, businesses will be forced to scale down their operations which would result in factory closures, job losses, a decline in exports and much more.
Inflation
Vanguard reports that the bi-annual economic review of the Manufacturers Association of Nigeria (MAN), attributed the rise in inventory to a drop in the purchasing power of Nigerians occasioned by sustained inflationary pressures and worsened by the cash crunch that hit the economy in the first quarter of 2023, in the wake of the Naira Redesign policy.
Ajayi-Kadir emphasized that the high inventory recorded in the period is attributed to low purchasing power in the economy due to the declining real income of households following the continuous increase in inflationary pressures in the country. He said:
- “In the second half of 2022 as the cost of wheat and other food inputs increased; prices of fuels, particularly diesel rose by over 50%; cost of transportation logistics including shipping escalated even as the effect of the COVID-19 pandemic is yet to fully die down. In addition to these challenges was the CBN policy on redesigning the Naira.”
The diesel context
In the last year, Nigerian manufacturers and businesses have struggled with rising diesel costs. Many of these businesses are connected to the national grid and due to the epileptic power supply, they receive daily, have resorted to the use of diesel generators to run their businesses, especially in the operation of heavy machinery.
Due to this scenario, some run diesel generators for over 6 to 6 hours daily and the cost of diesel is impacting their revenues. The National Bureau of Statistics (NBS) Diesel Price Watch report for April 2023 states that Nigerians paid an average of N842.25 per liter for diesel in April 2023, a 28.69% increase from the N654.46 per liter paid in April 2022. Meanwhile, there was a 0.17% increase from the N840.81 per liter paid in March 2023.
What you should know
This price somersault for diesel is affecting the revenues of both small and large businesses across the country.
Nairametrics previously reported that in its results statement for the first quarter of 2023, Dangote Cement announced that it will explore the use of alternative fuels to cut power costs. According to the group, it has a cost containment plan to improve its energy mix, and one of the plans is to make use of compressed natural gas (CNG) for its trucks.
In its company results statement, Dangote Cement said fuel and power consumption increased slightly by 2.2% to ₦56.7 billion in Q1 2023 when compared to the ₦55 billion recorded in Q1 2022.
