The manufacturing sector’s real GDP growth was 2.20% in Q2 2023, a 26.8% decrease compared to the 3.0% recorded in Q2 2022, but an increase of 36.6% from the 1.61% recorded in the previous quarter.
The sector’s contribution to the real GDP in the second quarter of 2023 was 8.62%, a decline from the 8.65% recorded in the second quarter of 2022, as well as a drop from the 10.13% recorded in the first quarter of 2023.
The Manufacturing sector comprises industries in cement production, beverages, oil refining, food, tobacco, textile, rubber processing, footwear, paper, chemical and pharmaceutical production etc.
The manufacturing sector grew modestly by 2.45% in 2022, reflecting the negative impact of CBN’s hawkish rendition, especially in the second half of the year.
In fact, the sector contracted by 1.91% in Q3 2022, the first contraction since covid hit in 2020.
Though at a slower pace, the CBN has maintained its hawkish stance and the fortunes of the sector appeared to have worsened with the latest reforms of the new administration such as the fuel subsidy removal and the unification of the exchange rates at the various windows.
Though the sector’s growth rate improved slightly to 2.2% compared with 1.61% in Q1 2023, we believe conditions will worsen in H2.
Based on new data from the aggregate Manufacturers CEO’s Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN), Manufacturers’ confidence in the nation’s economy dropped to the lowest in nearly two years in the second quarter of this year, declining for the third straight quarter to 52.7 points in Q2 from 54.1 points in the previous quarter.
In our view, there is an urgent need to address the numerous issues plaguing the manufacturing sector. We recognize the importance of prioritizing forex intervention for manufacturers through the official market.
Also, swift resolution of the problems bedevilling the power sector will also be critical to boosting the sector’s prospects.
Finally, it is critical to end the multiple taxes levied on manufacturers in order to help them protect profit margins.
According to NBS, manufacturing sector contributed the highest tax payments to the Federation account in Q1 2023.
How can a “crawling” sector be said to have paid the highest taxes?