BASED on review of the business environment, stakeholders in the manufacturing and industrial sector have pin pointed the two major challenges militating against the Nigerian manufacturing sector to include macro issues which have impacted on all sectors of the economy and sector-specific issues.

ting an example of the just concluded year, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf pointed out that power supply constituted a major setback as  firms reported that the most  unbearable energy cost was a consequence of the appalling state of the power sector. The outcome of the escalating cost of diesel (AGO), LPFO, aviation fuel and gas was that profit margins of many firms were considerably eroded and the survival of many businesses put at risk.

”The second most critical problem reported by firms during the year was access to credit and the high cost of funds.  Many firms could not access credit due to the impossible conditions given by the banks.  Collateral requirements were far beyond the capacity of many borrowers.  The few firms that were able to get credit did so at intolerable rates.  The CBN monetary policy tightening in the second half of the year worsened the situation.”

He further pointed out that  firms also lamented the recurrent upward review of lending rates even on existing facilities, adding that this created planning and costing problems for the firms. “There were reports that some banks set a minimum credit to corporate bodies at between N20m to N25m, which meant an exclusion of many small businesses from accessing credit in such banks. Dearth of long term funds in the banking system was also an issue for concern.”

He, however, noted that beneficiaries of the CBN intervention fund in the manufacturing sector applauded the initiative as it brought significant relief to them in reducing their cost of fund and easing their cash flow.

“But the concern was that the beneficiaries were very few and the facility was only for those firms that had existing facilities with the banks.”

“We  noted with concern the sharp depreciation of the naira exchange rate in 2011 with its attendant implications for business operating costs.  The rate depreciated from N151 in January to N162 to the dollar in December.  The implications for investors were as follows: high cost of inputs, especially imported raw materials, machineries and equipment, high import duty, VAT and ports charges, all of which are percentages of cost of imports.”

The LCCI DG  complained about the volatility of the exchange rate and the challenges it posed for business operations, especially planning further hoping that the same would not happen in 2012.

“For the government to realise its aspiration of economic transformation, it would be useful to address the varied concerns and challenges that have been highlighted by the private sector players in this report.