BI-ANNUAL REVIEW OF THE ECONOMY
JULY – DECEMBER 2020
2.0MANUFACTURING SECTOR PERFORMANCE
2.1 Global Manufacturing Output
According to UNIDO, in the third quarter of 2020, global manufacturing output declined by 1.1% in a year-over-year comparison due to COVID-19 containment measures, following a significant drop of 11.1% in the second quarter of 2020. COVID-19, a pandemic that began in Wuhan China spread across the world, decapitating global economies as evident in the record death toll of man power; the crashing of crude oil price, the slowed global supply and demand; and the total halting of economic activities at the highpoint of the period.
2.2 Capacity Utilization
Manufacturing capacity utilization edged up to 53.7% in the 2nd half of 2020 from 43.2% recorded in the 1st half of the year; thus, indicating 8.5 percentage point increase over the period. However, it declined by 5.74% when compared with 59.44% recorded in the corresponding half of 2019. Capacity utilization in the sector averaged 49.5% in 2020 as against 56.8% recorded in 2019. The uptick in capacity utilization in the period is attributed to the relaxing of the COVID-19 containment measures, particularly the opening of the economy for business activities in the 2nd half 2020. The increase is also seasonally influenced as a result of Christmas celebration boosted economic activities in the last quarter of the year.
2.3Manufacturing Production Value
Manufacturing production value declined to N2.36 trillion in the 2nd half of 2020 from N7.38 trillion recorded in the corresponding half of 2019; thus, indicating N5.02 trillion decline over the period. However, it increased by N0.32 trillion or 15.5% when compared with N2.04 trillion recorded in the 1st half of the year. Production value in the sector totaled N4.4 trillion in 2020 as against N11.99 trillion achieved in 2019. The uptick in manufacturing production in the 2nd half over the performance in 1st half of the year was due to the opening up of the economy for businesses after over 5 months of lockdown to contain the spread of COVID-19.
Utilization of Local Raw-materials by manufacturers in the 2nd half of 2020 declined to 56.5% as against 64% recorded in the corresponding half of 2019; thus, indicating 7.5 percentage point decline over the period. It also declined by 1.9 percentage point when compared with 58.4% recorded in the 1st half of the year. Local raw-materials utilization in the sector declined to 57.45% in 2020 from 60.5% recorded in 2019. The decline in local raw-materials utilization in the sector was attributed to the opening up of world economies for trade after months of global lockdown. Manufacturers are therefore, able to increase import raw-materials.
2.5Unsold Inventory of Locally Manufactured Goods
Inventory of unsold finished manufactured goods increased to N303.22 billion in the 2nd half of 2020 from N202.16 billion recorded in the corresponding half of 2019; thus, indicating N101.06 billion or 50% increase over the period. It also increased by N28.83 billion or 10.5% when compared with N275.39 billion recorded in the 1st half of the year. Inventory of unsold manufactured goods in the sector totaled N577.61 billion in 2020 as against N402.42 billion recorded in the 2019. The increase in inventory in the period was attributed to the general low consumption and renewed imports in the economy as global economies generally opens after months of lockdown. Electrical and Electronic sectoral group accounted for over 33% of total inventory of unsold manufactured products in period. The group are having the challenges of low patronage, high smuggling and products counterfeiting which rubbed-off negatively on inventory.
Estimated cumulative manufacturing investment from 2013 to the 2nd half of 2020 was N5.73 trillion based on data generated from surveys conducted by MAN over the period. Manufacturing investment declined to N56.44 billion in the 2nd half of 2020 from N257.66 billion recorded in the corresponding half of 2019; thus, indicating N201.22 billion decline over the period. It also declined by N5.64 billion or 9.1% when compared with N62.08 billion achieved in the 1nst half of the year. Manufacturing investment totaled N118.52 billion in 2020 as against N496.11 billion achieved in 2019. Manufacturing investment declined in the period following the depressing fallouts from COVID-19 that gave no impetus for new investments in the sector.
At the end of the 2nd half of 2020, an estimated 1,655,331 historical cumulative jobs were created in the manufacturing sector following data generated from various surveys conducted in the last 8 years.
A total of 3451 new manufacturing jobs were created in the 2nd half of 2020 compared to 10,735 jobs created in the corresponding half of 2019 and 5241 jobs in the 1st half of the year. However, a total of 3903 jobs were lost in the sector in the period. This is marked two successive negative net job in the sector as job loss out-numbered new jobs created by the time the sector is recording a negative net jobs beginning from the 1st half of the year.
2.8Electricity Supply to Manufacturers
Energy information generated from the sector has shown consent improvement in electricity supply to the manufacturing sector. In the 2ndhalf of 2020 electricity supply from the distribution companies to the sector increased to 12 hours on daily average from 10 hours per day on the average recorded since the 1st half of 2019. Average daily power outage had constantly averaged 4 time per day. However, expenditure on alternative energy in the 2nd half of 2020 increased to N57.75 billion in the 2nd half of 2020 from N34.70 billion recorded in the corresponding half of 2019; thus, indicating N23.05 billion or 66.4% increase over the period. It also increased by N33.59 billion or over 100% when compared with N24.16 billion recorded in the 1st half of the year. Expenditure on alternative energy source in the sector stood at N81.91 billion in 2020 as against N61.38 billion recorded in 2019. The increase in alternative energy expenditures in the sector was attributed to the general high inflationary pressures in the economy. However, specifically, the increase in the petrol pump price exerted significant influence on prices of some of the fuel used by the sector to generate electricity.
2.9Cost of Funds to Manufacturers
Interest rate charged to manufacturers increased to 22.0% in the 2nd half of 2020 from 20% recorded in the corresponding half of 2019; thus, indicating 2 percentage point increase over the period it also increased by 2.5 percentage point when compared with 19.5% recorded in the 1st half of the year. Interest rate charged to manufacturers averaged 20.75% in 2020 as against 21.25% recorded in 2019. The increase in the interest rate in the 2nd half of the year was adduced to the opening up of theeconomy for business after months of lockdown due to COVID-19 and the attendant increase in demand for investible fund by manufacturers in the period.
3.0SUMMARY AND RECOMMENDATIONS
The year 2020 was a very difficult year for the economy and manufacturing sector due to the onslaught of COVID-19 Pandemic. COVID-19 had a staggering devastation on global economies as evidentin the huge death toll of manpower; the crashing of crude oil price, the slowing of global supply and demand; and the total halting of economic activities through the lockdown. The pandemic had a crushing impact onthe manufacturing sector as the sector fell into economic recession in the 3rd quarter of 2020. At the moment and following the impact of COVID-19 productivity in the sector is at the lowest and therefore require deliberately orchestrated action to rekindle significant productive activities in the sector. Based on the foregoing and with the intent to address the challenges of the sector, especially in this precarious time, we recommend as follows: