Diesel consumes 80% of our profit, manufacturers cry out

 11th April 2024

Manufacturers in Nigeria have lamented the scorching operating environment, explaining that the sky-high price of automotive gas oil (AGO), otherwise known as diesel, used for production, gulps 80 per cent of their profits.

Speaking through their union, the Manufacturers Association of Nigeria (MAN), the local producers have begged the federal government to roll-out special AGO prices for manufacturers or risk driving them out of production in the near future.

Also listed as part of the issues peppering the manufacturers are; high cost of AGO, the new Customs exchange rate, interest rate, scarcity of foreign exchange (FX) and NAFDAC ban, which have put many manufacturing companies in critical situation with their bottom-line and revenue earnings deteriorating.

The Director General of MAN, Segun Ajayi-Kadir  had stated in a forum that Nigerians cannot be putting blames on the doorsteps of manufacturers for inflated prices ongoing in the country, saying government must do the needful to curtail the stringent factors fuelling rising cost of production in the country, unless more manufacturing firms may go under or exit the country in search of greener pastures due to  harsh business environment.

The MAN DG explained that the foundation responsible for skyrocketing inflationary prices of goods was borne out of harsh policies which have been counter-productive to the country’s manufacturing industry.

Ajayi-Kadir warned that already, the 335 manufacturing companies in distress could join those  that have already shutdown operations before half year, with the situation still harsh and biting hard for many.

On the new customs exchange rate, the MAN boss pointed out that many manufacturing companies have put on hold the clearing of essential manufacturing equipment imports from China, United States,  United Kingdom, Russia and Middle East and this would further take huge toll on goods manufacturing in the country.

“We have at different fora informed government and  relevant agencies of what to do to bring down this inimical worsening high operating costs in the country. Nigerians should not blame local manufacturers for increasing cost of goods, because they are being confronted with debilitating conditions. Do you know that diesel is taking 80 per cent profit of surviving manufacturing firms in Nigeria currently at the rate of about N1,700? Which manufacturer can cope with that astronomical price for energy to produce and you won’t expect him to increase his products in the country? Also, look at new Customs exchange rate, new interest rate, scarcity of foreign exchange (FX), NAFDAC ban and others. How do you want to cope in production and make profits? Government needs to intervene and stop the skyrocketing inflationary prices in the country in order to encourage manufacturers. If there are no positive improvements, more manufacturing firms may close shop or leave Nigeria again for greener pasture.”

However, distributors of Breweries products in the country have been crying out that the new interest rate  and Cash Ratio Rate (CRR) may scuttle their plans of approaching Nigerian banks for credits to adjust to the new prices for April.

The Lagos Chamber of Commerce and Industry (LCCI)  suggested that  government subsidise for crucial sectors like agriculture, transport and healthcare, manufacturing. Additionally, they recommended adopting lower duty rates for agricultural input imports and investing in building agro-industrial hubs nationwide.

“Small and medium-sized enterprises (SMEs), in particular, are disproportionately affected by the CBN rate hike policy.

On the burden of importation, the chamber urged the CBN and the Nigeria Customs Service to work together towards having a fixed import duty exchange rate that is lower than the official rate for importation of items in critical sectors like agriculture, manufacturing, power, and healthcare. “This will reduce the cost burden on operators in these sectors, boost their productivity and enhance their sustainability.

We recommend that the CBN explore alternative policy measures that promote credit access, stimulate investment, and support entrepreneurship.”

SOURCE:THE SUN

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