Manufacturing job losses spike to 108.7% in Nigeria. Analysts call for urgent policy reforms.



The Manufacturers Association of Nigeria (MAN) has reported a 108.7% increase in job losses within the manufacturing sector for the first half of the year in Africa’s biggest economy, marking the highest point in three years.



In comparison to the same period in 2022, the number surged from 1,709 to 3,567. This trend follows a 31.7% rise in job losses during the second half of the previous year, totaling 2,708.



This comes as the International Monetary Fund (IMF) revised Nigeria&#8217;s economic growth forecast down to 2.9% from the initially projected 3.2% in April. Major contributors to this downturn include demonetization effects, high inflationary pressures, and shocks in agriculture and hydrocarbons. The IMF&#8217;s World Economic Outlook underscores the challenges facing Nigeria.



MAN&#8217;s latest half-yearly review report attributes the decline in job creation to &#8220;an unfriendly business environment, primarily influenced by hastily implemented policies. The residual effects of the currency redesign policy, leading to a naira crunch, further compound the challenges faced by the manufacturing sector.&#8221;



The report emphasizes the urgent need for a reevaluation of these policies to stimulate job growth and ensure economic stability.



Despite the gloomy outlook, there is a glimmer of hope as the IMF suggests a potential moderation to 3.1% growth in 2024.



President Bola Tinubu&#8217;s administration&#8217;s recent reforms, including energy subsidy removal and the unification of exchange rates, are acknowledged as positive steps. The IMF expresses optimism that these measures could contribute to an upward trajectory in growth, offering a silver lining amidst the prevailing economic challenges.



The call for decisive and positive policy changes resonates with analysts as stakeholders grapple with the challenges in Nigeria&#8217;s manufacturing sector and the broader economy.



In response to these developments, Nigerian analyst Damilare Asiwaju expresses deep concern about the economic implications, emphasizing the inevitable consequences.



&#8220;It was bound to happen, the shutting down of big industries and Micro, Small, and Medium Enterprises (MSMEs). The cost of doing business under these current economic realities is unimaginable. If it is not a total shutdown, then downsizing,&#8221; Asiwaju remarks to FORBES AFRICA.



He laments the potential repercussions of the decline in MSMEs, underscoring their substantial contribution to the country&#8217;s Gross Domestic Product (GDP). &#8220;Sadly, with MSMEs being a significant contributor to our GDP, we might be in for more trouble,&#8221; he warns.



Asiwaju does not shy away from pointing fingers at both the previous and current administrations, accusing them of failure to implement business-friendly policies. &#8220;The previous government failed to promote and establish policies that make running a business in Nigeria easy and seamless, and this current administration has continued in that path.&#8221;



Expressing urgency, Asiwaju concludes with a stark prediction for the future: &#8220;If there isn&#8217;t a drastic turnaround in terms of policies, we might be heading into something more terrible than this.&#8221;



Also responding to the issues, business analyst Liadi Oluwaseyi Jimoh tells FORBES AFRICA: &#8220;The increase in job losses is alarming and underscores the challenges facing the manufacturing industry in Nigeria. This could have far-reaching implications for our economy.&#8221;



Jimoh highlights the multifaceted nature of the challenges.



&#8220;Various factors such as economic downturns, weak market demand, production costs, poor infrastructure, and global supply chain disruptions contribute to the challenges faced by the manufacturing sector.



&#8220;The consequences of these job losses extend beyond the sector itself,&#8221; he continues. &#8220;Unemployment can lead to income inequality, poverty, and social unrest, hindering overall development.&#8221;



Jimoh acknowledges the downgrade of Nigeria&#8217;s growth prospects, stating, &#8220;This further intensifies the challenges. A lower growth rate means slower economic expansion, impacting job creation and investment opportunities. Policy interventions and structural reforms are urgently needed.&#8221;



Providing insights into potential solutions, Jimoh emphasizes, &#8220;Creating a favorable business climate, investing in critical infrastructure, promoting vocational training, facilitating access to financing, encouraging diversification, and improving trade facilitation are key areas for policymakers to focus on.



&#8220;Addressing these areas and implementing appropriate policies is crucial for revitalizing Nigeria&#8217;s manufacturing sector, generating employment, and fostering sustainable economic growth.&#8221;

Man working in aluminium can processing plant

Manufacturing Job Losses Hit Three-Year High In Nigeria In H1 Amid IMF’s Downgraded Growth Forecast To 2.9%

Zimbabwe’s Reserve Bank has borrowed $985 million from African banks to purchase fuel and other critical imports with current reserves covering imports for just four weeks, underscoring the severity of dollar shortages, governor John Mangudya said.



The southern African nation last month ditched a discredited 1:1 dollar peg for its surrogate bond notes and electronic dollars, merging them into a lower-value transitional currency called the RTGS dollar.



Mangudya said the central bank borrowed $641 million from the African Export and Import Bank, $152 million from Eastern and Southern African Trade and Development Bank, and $25 million from Mozambique’s central bank, among others.



The loans, which would be repaid from future gold earnings, have a tenure of between three and five years and attract an interest of up to 6 percent above the Libor rate, Mangudya said.



Gold is Zimbabwe’s single biggest mineral export earner, accounting for a third of its $4.2 billion earnings last year after a record output, central bank data shows.



“These loans are well structured facilities contracted last year. They will be paid from future (gold) export receivables,” Mangudya told a parliamentary committee.



The central bank takes 45 percent of dollar sales from gold producers and half from other miners to fund imports like fuel and power and repay foreign loans.



But the miners only have 30 days to keep their dollar balances in local foreign currency accounts, after which they must sell them. The companies have asked the central bank to extend the period they may keep their dollars to 90 days, according to mining executives.



<h4 class="wp-block-heading">OVERDRAFT LIMIT</h4>



Unable to get funding from foreign lenders like the International Monetary Fund and World Bank due to arrears of more than $2.4 billion, Zimbabwe has looked to financiers from the continent and local banks to shore up its budget.



The central bank chief said Zimbabwe had just $500 million in reserves, enough to purchase four weeks’ worth of imports.



Mangudya said government borrowing from the central bank reached $2.99 billion in December, about three times its permissible overdraft limit.



 President Emmerson Mnangagwa’s government has promised to curb borrowing in 2019 under reforms to revive the southern African economy, after the budget deficit soared last year following a spike in spending ahead of elections.



Finance Minister Mthuli Ncube said last week that the local RTGS dollar, Zimbabwe’s new de facto currency, will be backed up with fiscal discipline and the government would allow it to fluctuate but would manage excessive volatility.



On the interbank forex market on Monday, one U.S. dollar fetched 2.5 RTGS dollars, the same rate as on Feb. 22 when the central bank sold some dollars to banks. That compares to a rate of 3.5 RTGS dollars per U.S. dollar on the black market. -Reuters



-MacDonald Dzirutwe

UP1EF1H0SAU16

Zimbabwe Central Bank Borrows $985 Million From African Banks

Decisions made by major rating agencies come and go. The more they change, the more they stay the same. Standard &amp; Poor’s has been the latest credit bureau to cut South Africa some slack, in not cutting the sovereign to a non-investment grade. Similar leniency has been shown by Fitch and Moody’s over the past 12 months. In the following year, they may however not be that patient, demanding more tangible progress with reforming the labor market, political cohesion and overcoming the challenges that poorly managed state-owned enterprises (SOEs) pose to economic growth.
Admittedly, no one likes being told what to do. That applies to decision makers in the public sector as well as in the private sector. South Africa continues to flirt with the makings of a recession, where another slip on the credit rating ladder could open up the possibility of borrowing funds from the International Monetary Fund (IMF). While this conjures up images of a bailout, it may not necessarily be as bad as it sounds. Loans come with prescribed conditions to them. The biggest will be boosting GDP growth to a more respectable level, from the lethargic level of 1% it appears destined to grow by over the next few years. The détente that was brokered this year between the government and leaders in the private sector, to halt a further slide in the country’s rating, is significant. It shows the two sides being poles apart on many things, but that the success of the economy is not the preserve of only one side.
Public-private partnerships (PPP) have emerged as a credible tool in meeting infrastructural development challenges, by harnessing the strengths of the private sector and government. The private sector provides technical know-how, management and finance for any key infrastructure project. The public sector offers security for private sector investment and also guides the PPP process through a legal and regulatory framework. A special purpose vehicle is established by the private sector, which raises a combination of debt and equity to finance the project. This structure is particularly important for SOEs; the financier will look more at this structure than it will at the cash-strapped public entity.
This framework is internationally recognized and respected. It encompasses a spending program of more than $58 billion, stretching over the following three fiscal years. Much success has already been seen with Africa’s largest PPP project –the Gautrain Rapid Rail Link, which came in around $1.7 billion. Renewable energy projects have also been successful.
However, the Infrascope project, financed by the World Bank to investigate how prepared and willing 15 African countries were to implement key PPPs, found that the process had challenges. Projects can be difficult to execute, legislative and regulatory processes can be tricky, and a high level of financial skill, sectoral knowledge and familiarity with the different structures which PPPs are needed. International investors also observe that bids have a large element of non-price factors, such as the promotion of black economic empowerment, job creation, socio-economic development and industrialization. Foreign bidders say that these local factors are too demanding and play a larger role than they should. Local stakeholders, such as trade unions, are also skeptical of PPPs, mistaking them for privatization of government assets and wary of the job losses which could accompany such projects.
It is not enough that South Africa’s GDP is growing by less than 1%, nor is it enough that reforms in the labor market have been insufficient to dent a 27.1% unemployment rate. It is also not sustainable that around half of South Africa’s population receives some form of welfare and dependency benefits.
How long it takes to rebuild the economy is difficult to say. It will take at least as long as the 33 consecutive months at which the annualized rate at which the South African Reserve Bank’s leading indicator has contracted.
Amid all the uncertainty, the one mantra which remains steadfast is that politics leads economics.

An Uneasy Partnership  That may be necessary

In the last year, the cedi has lost more than 40% of its value and was the worst performing currency in Africa, the third worst in the world, in 2014. It was so bad that the government called in the International Monetary Fund.
To make matters worse, power cuts are plaguing the land. In the gloomy streets of Accra, they call it ‘dumsor’ – a colloquial expression meaning ‘on and off’.
Ghana is suffering from power rationing – a hark back to the dark days of 2007 – where people have to check a load shedding timetable to find out when their lights will go out. In February, the Ghanaian government purchased 80 megawatts (MW) from neighboring Abidjan so the nation could watch the African Nations Cup final between the Black Stars and the Mighty Elephants of Ivory Coast; it was the same story when Ghana celebrated 58 years of independence on March 6.
All of this is a blow to President John Dramani Mahama. When he took power, he promised to end load shedding in three months. Halfway through his tenure the lights are still going out.
One cause is the fall of water levels at the Akosombo Dam on the Volta River. The dam produces 558MW of power, or 20% of the Ghana’s needs, 17% down on the electricity it generates at full tilt.
The Ghanaian Institute of Statistical, Social and Economic Research has estimated that the power crisis has cost between approximately $85 million to $243 million.
Many who run businesses here say the power crisis has been devastating and expensive; as the number of generators sold increases, the rise in the price of fuel piles on the costs. It is estimated Ghana spends $3 million a day on diesel fuel for its generators. To remedy these rising costs, small and medium enterprises have even gone as far as having two price points for their services – a dumsor price and a non-dumsor price. Even if you have power, the rising cost of it is causing uproar among Ghanaians.
The Cocoa Processing Company and Nestle Ghana complain the lack of power has stalled new projects.
The government has made efforts to rectify the electricity shortage with new power plants in the pipeline. Ghana has also seen a new wave of entrepreneurs, in energy, step forward.
A few minutes’ drive from Kotoka International Airport, a meandering road running alongside the famous Accra Polo Grounds, solar powered streetlights light the way. The plan is to do the same on other roads.
Infrastructural development of Accra over the last few years has been immense but has come at a cost with the Electricity Company of Ghana (ECG) unable to keep up.
Despite the economic hardship, the country is still able to attract foreign direct investment and the government has made efforts to rectify the power shortage.
The Atuabo power plant, which will receive gas from Ghana’s offshore Jubilee oil field, has overcome teething problems and is now in operation. It could generate up to 550MW; Ghana’s power shortfall is estimated to be around 400MW.
Another solution could be the numerous thermal power plants scattered across the country, namely the Asogli, Kpone and Aboadze plants. The problem is a lack of maintenance has seen many of these thermal plants either closed or working below capacity.
Then there is the problem of the bureaucratic ECG; many in Ghana have called for it to be privatized. A poor revenue collection system has led to growing debt that is another unwelcome hazard when it is trying to keep the lights on.
Surely, for this to carry on, is dumsor.

The Dumsor Down Of The Economy

It’s the third month of 2015; some people are still trying to find their footing while others already feel the need for a holiday. Some are chief executives of companies who are trying to stay abreast with economic activity to maintain the status quo, or go one better, and increase profits.
Many are not rosy over this year’s economic growth, but there’s still a bit of confidence in their ability to keep the performance of their companies stable. They believe global economic growth will decline more than twice. The International Monetary Fund (IMF) has cut South Africa’s growth forecast to 2.1%.
According to PriceWaterhouseCoopers’ (PwC) Global CEO Survey, only 29% of South African chief executives, compared to 37% globally, anticipate global economic growth will improve in 2015.
PwC’s Senior Partner for Africa, Suresh Kana, says chief executives are facing a multitude of challenges and uncertainties in global markets, which is affecting global growth.
“The government’s response to fiscal deficits, debt burdens and social instability are more concerning than a year ago,” he says.
The reports states that the emergence of digital technology has completely changed how companies do business. Mobile technologies are seen by 90% of South African CEO’s as most important to their company, including data mining and analysis, cybersecurity, battery and power technologies as well as cloud computing.
Information technology affects many organizations and they will be left behind if they do not keep up with the changing trends, says Hitachi Data Systems’ Executive Vice President of Global Services, Hicham Abdessamad. He says there is a huge shift happening in the market of cloud transformation not seen before and it is happening quickly. Companies should take advantage of this change and adjust with the market.
“It’s about staying relevant,” says Abessamad. “By 2015, 35 percent of IT spend will be managed outside the IT department’s budget.”
Kana says that chief executives know that they must adapt to disruptive changes in technology and in their markets.
Many chief executives see technology as a key vulnerability for their organizations. Technological change saw the second biggest increase of all the threats. The PwC report states that the pace of change is inescapable: less than a decade after its initial public offering, Google’s revenue soared from $3 billion to $60 billion.
“[CEOs] need to put technology at the core of their business to create value for customers. Finding new ways of thinking and working in this new competitive landscape is critical to success,” says Kana.
When technology is a strength, there are significant opportunities for growth.
Business leaders are increasingly aware that fundamental forces of change will affect their industries over the long term, according to PwC’s report. Technological advances, demographic changes and a shift in global economic power are some of the disruptive trends that companies need to be aware of. The interplay between them is transforming the macroeconomic landscape.
But challenges remain in other spheres of their businesses. Sixty eight percent of South African CEOs plan to implement a cost-reduction initiative over the next nine months. This includes cutting their workforce.
According to the report, about 22% of chief executives plan to cut their workforce. Retail company, Edcon, announced job cuts in February. In November, Edcon reported a loss of $94 million in the 26 weeks to September 27, from $111 million a year earlier.
To be able to build for success in 2015, the report suggests that companies should focus on what they are good at. They must re-evaluate the business they are in; anticipate policy issues; build diverse yet aligned partnerships; transform through digital and also develop a good mix of talent. Only 39% of the head of companies expect to increase their headcount, compared to 50% globally.
To stay in the game, business leaders must think strategically and
be adaptable.

Keep Up  Or fall Behind

Mauritius has enjoyed robust growth of between 5 and 6% for decades. The country has developed from an agrarian base into a diversified middle income economy through prudent management of the economy.
Mauritius’ economy relies on four sectors: sugar; textiles; tourism and financial services. The authorities are keen to diversify the economy further towards services. One ambition is to transform the economy into an information and communications technology hub.
The Mauritian economy generated $19.28 billion and expanded by 4.1% in 2011. The International Monetary Fund (IMF) attributed this to its tight macroeconomic policies. The Washington-based lender also put the country’s good performance down to its response to the global crisis but expects the economy to drop below 4% owing to the European sovereign debt crisis.
In light of the Eurozone crisis, in January, the Minister of Finance, Xavier-Luc Duval, announced that the government is developing a contingency in case of a partial or full dissolution of the European Union. Mauritius’ economy is tied to Europe. Two-thirds of Mauritian exports go to Europe and thousands of tourists fly the other way. The Eurozone is also a major source of investment for the island.
To buffer against the Eurozone crisis, this year the government announced an expansionary budget. The focus of expenditure is infrastructure development to improve the efficiency of the economy. This is likely to boost investment.
The expansionary fiscal stance will be complemented by an expansionary monetary policy. Following the dip in growth, the Bank of Mauritius (BOM) in December 2011 cut interest rates from 5.5% to 5.4%. The BOM is likely to move towards a loosening bias in 2012 given the downward inflation profile. Consumer inflation in February fell to 4.1% year-on-year; from 4.8% a month earlier. The IMF expects inflation to be 5% year-on-year in 2012.
The European crisis has also led to a dip in tourist arrivals. Tourist arrivals remain below the one million mark. The authorities have turned their attention to Asia, where growth remains robust.
In January, Mauritius won, for the third year running, the title of World’s Leading Island Destination and the World’s Leading Beach Destination.
Despite slowing growth prospects, investors are likely to remain interested in Mauritius in their search for yield. Investors are likely to recognize that slowing growth prospects are due to exogenous factors and not as a result of economic mismanagement
The Wall Street Journal and the Heritage Foundation, a US think tank, ranked Mauritius in the world’s top 10 most economically free countries, making it the only sub-Saharan country to achieve this. The survey ranked Mauritius eighth, with a score of 77. This ranking put Mauritius ahead of G4 (US, UK, Japan and France) countries. The survey ranks 183 countries in 10 freedom categories which are then converted into an index, with 100 being the highest possible score.
In addition, Mauritius was ranked 46th out 183 countries in Transparency International’s Corruption Perceptions Index 2011. Only Botswana (32) is ranked higher in Africa.

Tag: International Monetary Fund

FORBES AFRICA SOCIAL MEDIA

Manufacturing Job Losses Hit Three-Year High In Nigeria In H1 Amid IMF’s Downgraded Growth Forecast To 2.9%

Zimbabwe Central Bank Borrows $985 Million From African Banks

An Uneasy Partnership That may be necessary

The Dumsor Down Of The Economy

Keep Up Or fall Behind

Europe Could Dim Africa’s Shining Star