As with most other years, 2022 brought fascinating developments in the industry sector and on businesses, especially as the path from the CIVID-19 pandemic was far from certain.
Given the strong rebound from the COVID-19 pandemic, global trade has experienced renewed adverse macro-economic headwinds such as persistent rising inflation, monetary policy tightening, and a slowing global economy. Supply chain disruptions on the back of the Russia-Ukraine crisis have had a negative impact on trade as evidenced by sharp increases in commodity prices as well as the inaccessibility to essential goods such as grains, gas, and fertilizer
During the year, Nigeria sustained the growth trajectory seen in the last three quarters, as latest report from the National Bureau of Statistics (NBS) has shown that Nigeria’s gross domestic product (GDP) grew by 2.25 per cent (yoy) in real terms in the third quarter of 2022.
Pertinently, the non-oil sector remains the overall growth engine as the oil sector’s performance remained marred by the trifecta impact of massive theft and vandalism, age-long infrastructure deficit and IOC divestments, given the challenging business environment and the move to cleaner energy sources.
Moreover, the non-oil sector’s resilience was supported by sturdy growth across the Telecommunications, Trade, Real estate, and Finance & Insurance sub-sectors. In the midst of these, the Agriculture sector’s performance remained underwhelming, while the Manufacturing sector contracted in Q3, 2022.
Speaking on the industry performance in 2022, the director-general of Manufactures Association of Nigeria (MAN), Segun Ajayi-Kadir said: “despite the higher oil prices as well as the improvement in terms of trade, the expansion of the growth of the Nigerian economy remains sluggishly above the population growth rate.
“The accompanying prospect of establishing a strong fiscal space and buoyant foreign reserve remains unutilized. Inflation is at a 17-year-high of 21.09 per cent and petroleum subsidy payment is not only draining the government’s coffers but accelerating the path of the economy to a debt peonage. While fiscal indiscipline, heightening insecurity, slow COVID-19 recovery, oil theft and the war-induced energy crisis are the lingering factors driving the economic headwinds, recent environmental and climatic challenges are significantly leaving a negative mark.”
Segun Ajayi-Kadir explained that Nigeria’s path to economic growth, industrialization and sustainable development has been compromised by inadequate attention to the numerous pressing challenges of the manufacturers who are meant to be the propellers of its long-term economic agenda.
He added that, achieving a stable rapidly-growing economy would require taking head-on the daily bottlenecks confronted by business owners within the manufacturing sector, considering its active inter-linkages with other key sectoral drivers of the economy, adding that, amidst the numerous challenges, forex scarcity, multiple taxation, exorbitant interest rate, high-cost business operating environment, smuggling, insecurity, energy crisis and epileptic power supply are leading the pack.
In order to restore the sector to an enviable position in the global business environment and in turn propel an inclusive growth of Nigerian economy, MAN hopes that the government will facilitate the formal service sector to widen tax net and avoid multiple imposition of tax on the manufacturing companies, tackle insecurity and smuggling, deploy means to reduce unemployment and boost productivity of the manufacturing by encouraging local sourcing of raw materials, improving infrastructural developments, resolving all credit and forex-related challenges, ensuring implementation of the Executive Order 003 and imposing cost-reflective electricity tariff and energy prices, among others.
Chief executive officer of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, stated that, the Nigerian economy during the year was characterized by diverse economic vulnerabilities, which include unprecedented surge in energy prices which had a very huge adverse effect on economic players across all sectors, unprecedented level of currency depreciation and currency volatility, increasingly weak fiscal space, acute foreign exchange scarcity with very profound effects on investors across all sectors, worsening Security situation, growing fuel subsidy burden, among others.
Yusuf said, all these headwinds have had devastating effects on businesses in the first half of the year, saying “however, the economy continues to demonstrate resilience amid all of these harsh investment environments.”
Analysts at Cordros Securities Limited noted that “after the 2021 full year initial post-COVID boost, domestic economic activities normalised in 2022 despite the lingering challenges to factory and business activity. Pertinently, the non-oil sector remains the overall growth engine as the oil sector’s performance remained marred by the trifecta impact of massive theft and vandalism, age-long infrastructure deficit and IOC divestments, given the challenging business environment and the move to cleaner energy sources.
“Moreover, the non-oil sector’s resilience was supported by sturdy growth across the Telecommunications, Trade, Real estate, and Finance & Insurance sub-sectors. In the midst of these, the Agriculture sector’s performance remained underwhelming, while the Manufacturing sector contracted in Q3, 2022.”
Reviewing economic and business environment in 2022, the president of Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole believed that the economy will end the current year 2022 in a positive growth territory within the region of three percent and four percent, saying that achieving faster recovery requires the fiscal and monetary sides of the economy to promote growth-enhancing and confidence-building policies that would encourage private capital flows to the economy.
He added that fiscal and monetary authorities must develop a medium-term growth plan anchored on boosting local production, supporting ease of doing business, attracting private investment, developing physical and soft infrastructure, business-friendly regulatory policies, economic diversification, and employment generation among others.