How border closure aided local raw materials utilisation

Utilization of Local Raw-materials in the manufacturing sector increased marginally in the second half (H2) of 2019, attributable to the closure of the country’s land borders by the Federal Government during the period, the Manufacturers Association of Nigeria (MAN), has said.

According to MAN in its data for the second half of 2019, local sourcing of raw-materials in the manufacturing sector increased to 64.0 percent from 63.7 percent recorded in the corresponding half of 2018; thus representing 0.3 percentage point increase over the period.

Latest raw materials utilisation figure also indicates an increase of 7.0 percentage point when compared with 57.0 percent recorded in H1 2019.

To the operators, the rise in local sourcing is impressive, particularly coming on the back of a fall in local sourcing of raw materials in the sector.

MAN had in its half year report for 2019, made available to The Guardian, indicated that local raw-materials utilization in the manufacturing sector maintained downward trends since the first half of 2017 when the Central Bank of Nigeria (CBN) commenced policy intervention in the official foreign exchange (forex) market.

The operators stated that the relatively more available forex resulting from the intervention may have been rubbing off negatively on backward integration agenda as firms prefer to import raw-materials as against inward looking.

Also, latest data from the National Bureau of Statistics (NBS), equally confirmed the fall in importation of raw materials between Q4 2019 and Q1 2020.

In Q1 2020, the value of total trade in raw material stood at N341.1billion. The import component was valued at N307.3billion while the export component stood at N33.8billion, lower than the value recorded in Q4 2019. In the preceding quarter, total trade in raw material stood at N356.9billion. The import component was valued at N335.8billion while the export component stood at N21.1 billion.

During the Q1 2020, Urea worth N10.5billion and N5.4 billion were exported to Brazil and Uruguay, respectively. Technically specified natural rubber worth N1.0 billion was exported to Spain. Leather further prepared after tanning valued at N2.2billion was also exported to Spain.

In terms of imports, Cane sugar meant for sugar refinery worth N44.3 billion was imported from Brazil, Milk preparation worth N7.4 billion were imported from Ireland, N3.8 billion from Malaysia, and N2.2billion from Australia.

Other products were mixtures of Odoriferous substances worth N9.5billion from Ireland and N2.0billion from Swaziland. Mixed alkylbenzenes worth N11.4 billion was imported from Spain, and other Glutamic acid worth N3.3billion were imported from China.

To manufacturers, local raw-materials utilization in the manufacturing sector averaged 60.5 percent in 2019 or 0.02 percentage point fall compared with 60.3 percent recorded in 2018.

Sectoral analyses show that utilization of local raw-materials in Textile Apparel and footwear stood at 64.0 percent in H2 2019, against 57.6 percent and 54.6 percent recorded in the corresponding half of 2018, and H1 2019; thus indicating 6.4 and 9.4 percentage points decline, respectively. Local sourcing of raw-materials averaged 59.3 percent in 2019 against 60.15 percent recorded in 2018.

In the Motor Vehicle and Miscellaneous Assembly group, local sourcing of raw-materials increased to 64.7 percent in H2 2019 against 54.8 percent recorded in H2 2018, thus indicating a 9.9 percentage point increase. It also increased by 7.2 percentage points when compared with 57.5 percent of the preceding half.

In the Motor Vehicle and Miscellaneous Assembly group, local sourcing of raw-materials averaged 61.1 percent in 2019 and 58.8 percent in 2018.

In the Food, Beverage and Tobacco group, local raw-materials utilization stood at 65.1 percent in the second half of 2019, representing 3.4 percentage point decline from 68.5 percent recorded in the same half in 2018. It however, increased by 2.2 percentage points when compared with 62.9 percent recorded in the first half of 2019. Local sourcing of raw-materials in the group averaged 64 percent in 2019 and 65.23 percent in 2018.

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