Manufacturers Association of Nigeria Raises Concerns Over Inflation’s Impact on Manufacturing Sector
The Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, has expressed concerns about the adverse effects of the current inflationary trend on the country’s manufacturing sector. He highlighted that elevated inflation is a clear indicator of underlying macroeconomic weaknesses that need to be addressed.
Ajayi-Kadir emphasized that addressing inflation requires coordinated efforts from various stakeholders, including the government, central bank, private sector, and civil society. He noted that the ongoing inflationary pressures can be attributed to recent government policies and measures, such as the removal of fuel subsidies and the unification of exchange rates. Additionally, concerns about rising energy costs and insecurity in food-producing regions are further exacerbating inflation.
He mentioned that the rise in inflation is eroding savings and incomes, leading the Central Bank of Nigeria (CBN) to increase the country’s benchmark interest rate, the Monetary Policy Rate (MPR), to its highest level in nearly two decades. The CBN’s efforts are aimed at curbing inflation and stabilizing the value of the naira, which has been declining in both official and parallel markets. The MPR was increased by 25 basis points in July, reaching 18.75%.
The increase in the MPR has resulted in higher production costs, including raw materials, labor, and other inputs, ultimately reducing profit margins for manufacturers. This has led manufacturers to pass on the higher costs to consumers in the form of higher prices for goods and services.
Opinion:
The concerns raised by the Manufacturers Association of Nigeria highlight the multifaceted impact of inflation on different sectors of the economy. Inflation not only erodes consumers’ purchasing power but also poses challenges for businesses, particularly in the manufacturing sector. The rise in production costs and reduced profit margins can lead to operational challenges for manufacturers, affecting their ability to remain competitive and invest in growth.
Addressing inflation requires a holistic approach that takes into consideration various economic factors, including fiscal and monetary policies, supply chain disruptions, and external market dynamics. Collaborative efforts among government agencies, central banks, private sector organizations, and other stakeholders are essential to formulate effective strategies that can mitigate the adverse effects of inflation on both businesses and consumers.