COVID-19 outbreak in 2020 forced Nigerian manufacturers to reduce their investments by 76.11 percent within the year, according to the second half 2020 economic review released to The ICIR by the Manufacturers Association of Nigeria (MAN) on Tuesday. 

Manufacturing investment hit a rock-bottom 118.52 billion naira in 2020 as against 496.11 billion naira achieved in 2019. The 118.52 billion is the least amount of investment made by Nigeria’s manufacturers at least since 2014.

“Manufacturing investment declined in the period following the depressing fallouts from COVID-19 that gave no impetus
for new investments in the sector,” MAN, headed by Mansur Ahmed, said in the review.

In 2020, COVID-19 dislocated supply chains worldwide, incapacitating firms, especially manufacturers importing their raw and packaging materials from different parts of the world. The virus forced many manufacturing firms to close down to avoid outbreaks in factories. Brewery firms were not allowed to open for months while many firms which managed to open faced low patronage due to general lockdowns and inter-state movement restrictions.

In Guinness Nigeria’s nine-month to 2020, year-on-year revenue fell by 78.6 percent, majorly due to COVID-19 and lockdowns which lasted for months across states. Nigerian Breweries (NB), the biggest brewer controlling 56 percent market share, reported a revenue decline of 11 percent to 151 billion naira in the first half (H1) of 2020.

The GDP report released by the National Bureau of Statistics (NBS) in the first quarter (Q1) of 2020 (before the pandemic) said that activities in the manufacturing sector recorded a performance of 0.43 percent growth. However, in the second quarter (Q2) of the year, in the heat of the COVID-19 pandemic which disrupted economic activities, the sector contracted by 8.78 percent, indicating struggles faced by manufacturers during the period.

“Lingering foreign exchange crisis was perhaps the most significant challenge for the sector in 2020 as most industry players found it increasingly difficult to access foreign exchange meant for importation of critical factor inputs,” the Lagos Chamber of Commerce and Industry (LCCI) said.

Matthew Ibeabuchi, a manufacturer  of chemicals in Enugu, South-East Nigeria, noted that most big investors in manufacturing sector  struggled to stay afloat, with others  showing caution due to uncertainties in 2020.

“You cannot make big investments when your patronage is low and when you are not sure of raw materials supply,” he said, expressing hope that things would bounce back.

Past investments

Nigerian manufacturers made investments valued at 5.73 trillion naira between 2013 and 2020,  MAN said. In 2014 and 2015, manufacturing investments worth 691.77 billion naira and 489.55 billion naira respectively were made by the real sector players. More so, manufacturers made investments valued at 614.55 billion naira and 508.98 billion naira in 2016 and 2017 respectively. Also, total investments of 552.64 billion naira and 496.11 billion naira were made by manufacturers in 2018 and 2019 respectively.

Lagos and Ogun top the chart

A break-down of the 2014-2019 data shows that out of 691.77 billion naira worth of investments made by manufacturers in 2014,  Ogun got 514.87 billion while Lagos got 100 billion naira. This means that both states had a share of 88 percent of total investments within the year. On the other hand, 34 other states shared 12 percent of the investment largesse. In 2015, out of 489.45 billion naira total new investments made by manufacturers and agro processors, Lagos got 29.79 billion naira as against Ogun’s 430.56 billion naira.  Hence the two states had a share of 94 percent while other 34 states took only six percent share of the investments.

Also, Lagos got 94.83 billion naira value of investments in 2016 while Ogun received 351.13 billion naira out of N614.55 billion total investments.

In other words, Lagos and Ogun contributed 73 percent to the total investments while the rest had a share of 27 percent.

Also, out of a total of 508.98 billion naira investment made in 2017, Lagos received 235.61 billion naira as against Ogun’s 94.32 billion naira, representing 65 percent of the total. Other 34 states contributed 35 percent of total investments. MAN’s data further show that out of 552.64 billion naira investment in 2018, Lagos welcomed 287.16 billion naira whereas Ogun got 186.47 billion naira, indicating that both states contributed 86 percent of the total investments. Other 34 states shared 14 percent.

More so, a total of 496.11 billion naira investments were made in 2019, out of which Lagos got 180.63 billion naira and Ogun, 105.05 billion naira, indicating 58 percent share of the total.

Why Lagos and Ogun?

Analysts say Lagos is attractive to investors due to its proximity to a booming market of over 20 million people and presence of infrastructure such as seaports.

Olusegun Osidipe, director of research and statistics at MAN, said it was easier to check who owned a piece of land on the system in Lagos.

“You know how much to pay on Land Use Charge in Lagos. There is certainty around these things in Lagos ,” he said.

On the other hand, Ogun is leveraging its proximity to the Lagos by making cost of doing business easier.

“There are a few landmarks in Ogun State. Manufacturers and other investors have more room for expansion,” Ambrose Oruche,  director of corporate affairs in MAN, said recently.

“Lagos and Ogun states provide access to markets driven by population. In addition, Lagos promises high security which many investors appreciate. Ogun State is also ranked high in the ease of doing business with its business friendly policies and environment,” he said.

“Another important factor is the availability of the ports in Lagos which makes it easier to receive goods, especially when the market is proximate. Long distance between ports and market or consumers will affect competitiveness, quality and quantity of the goods,” Oruche further said.

Manufacturers complain that many other states have poor security network and infrastructure that can aid business success.

We will invest

Despite the flip-flops in 2020, there is likelihood of higher investments in 2021 due to subdued COVID-19 situation and roll-out of vaccines.

In a recent interview, Santosh Pillai, managing director of PZ Wilmar, a palm oil firm, said the firm, which had invested over 150 million dollars in Nigeria, would continue to pump money into the economy.