Nigeria’s manufacturing sector growth slowed to its lowest in three years due to the cash crunch that paralyzed the economy during this period.
According to the new Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS), the growth of this sector grew by 1.61 per cent (year-on-year) in real terms in the first quarter of 2023, up from 2.83 per cent in the fourth quarter of 2022 and is less than 5.89 percent. percent in the same period last year.
The business sector also slowed to 1.31 per cent in Q1, the lowest in two years from 4.54 per cent in the previous quarter and 6.54 per cent in Q1 2022.
These sectors contributed to the overall decline in Nigeria’s GDP growth as it fell to 2.31 percent in Q1, down from 3.52 percent in Q4 2022 and 3.11 percent in Q1 2021.
“The deceleration in growth is attributed to the adverse effects of liquidity crunch experienced during the quarter,” NBS said.
It said that although the industry sector growth improved to 0.31 per cent as against 6.81 per cent recorded in Q1 2022, agriculture and industry sectors contributed less to the total GDP in the quarter under review as compared to Q1 2022.
Since the beginning of the year, Nigerians have been faced with a chronic cash crunch due to the naira redesign policy of the Central Bank of Nigeria (CBN). This has disrupted economic activities and negatively impacted the livelihood of Nigerians.
The currency in circulation fell to the lowest level in 14 years and five months in February to N982.1 billion, from N1.39 trillion in the previous month, CBN data showed.
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But it rose 71.41 percent to N1.68 trillion in March, when the CBN increased its money to deposit banks in response to a Supreme Court order to expand the legal tender status of the old N200, N500, and N1,000. Transferred Naira notes from the vault. Note on December 31, 2023.
“Every aspect of the economy was affected by the cash crunch. “Whether you are a roadside or a small-scale retailer of services, the cash crunch has significantly reduced the country’s GDP,” said Gabriel Idahosa, vice president of the Lagos Chamber of Commerce and Industry.
He said manufacturers have been hit the most as they are already bearing trunk costs like raw materials and warehouses full of goods.
“So, it’s no surprise that we have such an influence on manufacturers.”
But Idahosa expects the sector to improve in the second quarter as money slowly trickles into the economy.
The latest monthly Purchasing Managers’ Index (PMI) by Stanbic IBTC Bank rose to 53.8 last month after contraction in March (42.3) and February (44.7).
A reading above 50.0 indicates an improvement in business conditions, while a reading below 50.0 indicates a deterioration.
In February, the Manufacturers Association of Nigeria (MAN) told BusinessDay that they are already seeing a drastic reduction of more than 25 per cent in sales of locally manufactured products.
MAN Director-General Segun Ajayi-Kadir said, “What should be a generally welcome monetary policy reform is CBN management of the naira currency, which has been characterized by slow implementation and unnecessary disruption to businesses and people’s daily lives. “
A recent report by SBM Intelligence that covered 46 businesses across five geopolitical zones showed that 76 percent of business owners were affected by the Naira shortage.
It added, “From egg producers to rice traders who had to lower their prices to make sales, most business owners interviewed said they were negatively affected by the cash crunch.”