Inventories fall 48% as made-in-Nigeria goods gain traction

Inventories of finished goods in Nigeria’s manufacturing sector have been declining significantly in the last 12 months, showing that locally-made goods are doing better in local and international markets.

Inventories of finished goods refer to stocks of manufactured products that are ready for sale.

Manufacturers were able to lower inventories sharply due to significant and continued growth of the country’s middle class, as well as by aggressive local and international marketing and improved technologies that ultimately reflected positively on the shape and packaging of many products, according to Manufacturers Association of Nigeria (MAN).

In spite of the improvements in the sector, manufacturers say there should be easy access to finance, elimination of multiplicity of taxes and levies, development of local raw materials and improvement of the power sector by new electricity managers.

Inventories of finished goods fell from N33.17 billion in the second half of 2012 (H2 2012) to N21.8 billion in the first half of 2013 (H1 2013), declining further to N17.34 billion in the last half of 2013 (H2 2013).

These figures represent a 47.7-percent fall between H2 2012 and H2 2013, and 20.27 percent fall between H1 2013 and H2 2013, data from MAN shows.

“In the last one year, manufacturers have been able to lower the quantum of unsold finished goods in their warehouses,” says MAN.

The technological innovations were possible due to massive investments in machines and technologies which stood at N1.434 billion by H2 2013.

The food, beverage and tobacco industry lowered inventory considerably from N10.11 billion in H2 2012 to N1.02 billion in H1 2013 and N389.5 million in H2 2013. Similarly, the textile, apparel and footwear sub-sector had its inventory decrease to N418 million in H1 2013, and further to N401.32 million in H2 2013, from N1.59 billion reported earlier in H2 2012, data from MAN shows.

Furthermore, the wood and wood products sub-sector saw its stock decline to N67.5 million in H1 2013 and N25 million in H2 2013, from N965 million posted in H2 2012. Similarly, pulp, paper and publishing players reduced inventory to N40 million by H2 2013 as against N1.54 billion posted in H1 2013. This, however, represents accumulation of inventory because stock of finished goods in H2 2012 was worth N1.13 billion.

The chemical and pharmaceutical industry reduced inventory to N195.75 million in H1 2013 as against N2.83 billion recorded in H2 2012. But this sector’s inventory accumulated significantly in H2 2013, reaching N1.16 billion.

Also, the non-metallic products sector’s inventory, which had risen from N801.76 million in H2 2012 to N9.48 billion in H1 2013, fell to N890.23 million in H2 2013.

The domestic/industrial plastic and rubber industry showed remarkable progress within the period, falling from N4.54 billion in H2 2012 to N1.12 billion in H1 2013, and then to N447.70 million in H2 2013.

BusinessDay findings show that another key reason why inventory fell within the period was that Nigerian manufacturers consistently looked outwards to markets across Africa, Europe and the Americas. Firms like PZ Cussons, Nestle, Unilever, Flour Mills of Nigeria, Everest Metal, Dangote Group, among others, were at the forefront of this adventure.

Deepak Singhal, CEO, Dufil Prima Foods, said the company’s exports to the West African, the Americas and other markets in 2013 were worth $50 million.

“We process crumb rubber and export nearly 100 percent of it to Bridgestone Tyre Company, one of the largest tyre companies in the world, with offices in Spain, Japan, Italy, Poland and a number of other countries,” said Ede Dafinone, CEO, Sapele Integrated Industries Limited, in an exclusive interview with BusinessDay.

But manufacturers say apart from poor access to finance resulting from high lending rates, inadequate infrastructure and multiplicity of taxes, the biggest challenge remains poor power supply to industrial areas within the period under review.

“We are an economy of traders, not manufacturers, a nation of importers of finished goods. When will the power sector come to our aid, the manufacturers?” queried Babatunde Odunayo, immediate past CEO, Honeywell Flour Mills plc, and currently chairman of MAN, Apapa branch, at a luncheon in Lagos last Thursday.

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