Capacity Utilisation in manufacturing sector falls to 54.6%
Capacity utiilisation in the manufacturing sector of the Nigerian economy declined slightly to 54.6 percent in the first half (H1) of 2018.
This indicates 0.43 and 4.64 percentage points decline from 55.03 percent recorded in H1 of 2017 and 59.24 percent reported in the second half (H2) of 2017 respectively, H1 Economic Review by the Manufacturers Association of Nigeria (MAN) says.
Capacity utilization measures the extent to which a plant uses its installed productive capacity. This figure, therefore, shows that the sector is not using 45.4 percent of its installed capacity (100-54.6=45.4).
According to MAN, the slight decline can be ascribed to the general low macroeconomic ambience in the country.
Analysis of sectoral group performance shows that capacity utilisation declined in the food, beverage and tobacco group to 58.88 percent, representing 5.1 and 3.62 percentage points decline from 63.98 percent recorded in H1 of 2017 and 62.5 percent recorded in H2 of 2017.
Capacity utilization in textile apparel & footwear group also declined to 50.17 percent in H1 of 2018, from 52.98 percent recorded in the corresponding half of 2017.
Capacity utilisation in motor vehicle and miscellaneous assembly group, however, rose to 56.38 percent in the period under review, indicating 11.05 and 2.88 percentage points increase from 45.33 percent reported in H1 of 2017 and 53.5 percent in H2 of 2017 respectively.
In Ikeja industrial zone, which is now seen as the manufacturing hub of Nigeria, capacity utilisation declined by 4.42 percentage point in H1 of 2018, from 59.6 percent recorded in the H1 of 2017 and 63.2 percent in H2 of 2017.
In Ogun zone, seen as the investment hub of the country, capacity utilisation declined by 6.54 percentage point in H1 of 2018, from 68.7 percent reported in H2 of 2017. It, however, showed an increase of 5.86 percentage point from 56.3 percent recorded in H1 of 2017. Also in Apapa zone, it declined in the period under review by 3.9 and 13.3 percentage points respectively, from 61.3 percent in H1 of 2017 and 70.7 percent of H2 of 2017. However, capacity utilisation in Anambra/Enugu zone showed an increase of 0.83 and 10.83 percentage points, from 51.3 percent and 41.3 percent in H1 of 2017 and H2 of 2017 respectively.
Nigerian manufacturers are facing high energy costs, as they rely on sources other than DisCos to power their plants. They also incur high logistics costs and multiple taxation. Smuggling and Apapa gridlock are also eroding their margins, hurting their capacity to produce and meet wage obligations of workers regularly.