Local raw materials sourcing rises to 53.5% in H2 2022

By Business A.M. 

The manufacturing sector’s local raw materials sourcing increased to 53.5 per cent in the second half (H2) of 2022 from 50 per cent recorded in the corresponding half of 2022, indicating 3.5 percentage points increase over the period.

This was contained in the Manufacturers Association of Nigeria (MAN) Bi-Annual Economic Review for the second half  of 2022.

The review also showed that local raw materials sourcing rose by 1.5 percentage points when compared with 52 per cent recorded in the preceding half, as local raw materials utilisation in the sector averaged 52.8 percent in 2022 against 51.5 per cent recorded in 2021.

Segun Ajayi-Kadir,the director-general of MAN, attributed the increase in the local raw materials utilisation in the sector during the period to increased difficulty in sourcing forex which compelled manufacturers to look more inward for raw materials notwithstanding the associated huge cost.

Ajayi-Kadir  also notified the government on the importance of re-evaluating its role in local development and production of raw materials in terms of funding

“For instance, the development and production of Active Pharmaceutical Ingredients (APIs) has continuously eluded due to limited funding of the Raw Materials Research and Development Council (RMRDC) by the government,” he noted.

According to the MAN DG, the absence of local production of APIs has been having dire consequences on pharmaceutical production, particularly in the current situation of acute shortage of forex.

He added that manufacturing production was severely affected in the second half of 2022 by the absence of implementation of new capital project by the government as they focused on the election.

According to Ajayi-Kadir, production in the sector was also negatively affected by limited purchases by households due to the naira redesign policy, the high inflationary pressure in the country, high cost of energy, particularly, diesel and gas, acute shortage of forex for importation of raw materials and machinery needs of the sector that are not locally manufactured in the time being and many more.

“Unfortunately, the issues of the basic metal group whereby duty of Annealed Cold roll was reduced to five percent from the previous 45 percent; the suspension of motorcycles in some areas across States, the increase in the duty of paper from five percent to 20 percent and so on are still effective,” he noted.

He further said, these challenges, in addition to the perennial issues, contribute enormously to the dip in the production of the sector in the period under review.

On how to improve raw materials production, supply and utilisation, he called for incentivised investment in local development of raw materials, seeking attention to domestic production of Active Pharmaceutical Ingredients (API) and Basic chemicals.

Ajayi-Kadir advised the government to refocus on backward integration and resource-based Industrialisation; reverse the duty for Annealed Coldroll back to 45 per cent from the new five percent; and re-invigorate the backward integration policy through the use of local resources to provide raw materials to the industries.