Producers GDP Shrinks 15% over Inflation, Interest, FX Hurdle
Nigeria’s large buckets of uncertainties stoked pressures on the productive segment of the economy in the second quarter of 2023, according to recently published data from the statistics office. Growth slumped in the second quarter, an aftermath of multiple pressures facing the economy.
In the second quarter of 2023, the manufacturing sector growth rate slipped negative, down by about 15% in three months amidst uncertainties triggered by running inflation, interest rate and foreign exchange hurdles.
Worrisome macroeconomic indicators affected the sector’s performance, according to corporate analysts. Amidst tight household wallets, there have been continuous rises in price levels, forcing manufacturers of goods and services to adjust prices upward.
Despite pressures on producers’ costs, some companies continue to shy away from further price hikes to maintain their market share. “Double-digit inflation, interest rate – the twin evils- and weak purchasing power are a major downside to growing producer’s economy.
“Two things must have happened: companies in the fast-moving sector of the economy must have increased their borrowing appetites to maintain production volume or reduce activities level to work within their means”, LSintelligence Associates said.
In the first half of the year, a growing number of manufacturing companies’ earnings declined due to the negative impacts of inflation on input costs, in addition to pressures from local currency fluctuation.
Naira has lost half of its purchasing power since the beginning of the year, according to market data and the local currency is projected to dip further as the apex bank buffer weakens. Fluctuating naira remains a downside risk to companies that rely heavily on foreign inputs to drive production. Data from the Nigerian Exchange showed that major listed companies lost billions to a devaluation of the Naira in June 2023.
In its latest update, the National Bureau of Statistics (NBS) said nominal gross domestic product (GDP) growth of the manufacturing sector in the second quarter of 2023 was 29.90% (year-on-year.
The record growth was 24.69% points higher than the figure recorded in the corresponding period of 2022 when it printed at 5.21%. Meanwhile, it was 12.05% points higher than the preceding quarter figure of 17.85%.
However, a quarter-on-quarter review showed that the manufacturing sector slipped to negative growth. Data showed that in the second quarter of the year, the manufacturing segment declined by -5.76% during the quarter.
The contribution of Manufacturing to Nominal GDP in the second quarter of 2023 was 14.55%, higher than the figure recorded in the corresponding period of 2022 at 12.97% and lower than the first quarter of 2023 at 15.70%.
Real GDP growth in the manufacturing sector in the second quarter of 2023 was 2.20% (year-on-year), lower than the same quarter of 2022 and higher than the preceding quarter by 0.81% points and 0.59% points respectively.
“The growth rate of the sector on a quarter-on-quarter basis stood at – 14.98%. The Real contribution to GDP in the 2023 second quarter was 8.62%, lower than the 8.65% recorded in the second quarter of 2022 and lower than the 10.13% recorded in the first quarter of 20232, NBS said. #Producers GDP Shrinks 15% over Inflation, Interest, FX Hurdle
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