Apapa ports, logistics hobble productivity in manufacturing sector

Despite upswing in the Manufacturing Purchasing Managers’ Index (PMI) last month, challenges at the Apapa ports continue to limit the rate of expansion, even as clearing costs take toll on raw materials importation.

Already, latest financial report of companies in the fast moving consumer goods sector showed that production costs, and consequently gross margin were pressured by rising energy costs and increased raw material clearing costs due to challenges at the Apapa port.

With an increase to 57.4 index points, the current position of the PMI represented an expansion in the manufacturing sector for the 24th consecutive month, up from 57.1 points in February.

However, there are concerns for operators that depend on imported raw materials for production, as operating expenses continue to rise due to delivery time of products from the ports.

Indeed, while production level, supplier delivery time, employment level and inventories grew at a faster rate, new orders grew at a slower rate in March.

The Lagos Chamber of Commerce and Industry (LCCI) notes that the gridlock in the Apapa axis has imposed and continued to impose unbearable cost on businesses, adding the dysfunctional state of the port and associated logistics for cargo clearing have become a nightmare.

“The cost to business is horrendous and this includes high interest cost (borrowed fund) used for import transaction, high demurrage charges, high insurance premium of vessels coming to Nigeria, high shipping cost, low capacity utilization due to problem of access to raw materials from the port as well as traffic congestion which has extended to the metropolis from the port.”, the chamber added.

According to the report by the CBN, at 56.7 points, the new orders index grew for the 24th consecutive month, indicating increase in new orders in March 2019.

Eight sub-sectors reported growth, four remained unchanged, while two contracted in the review month.

In all, 11 of the 14 sub-sectors surveyed reported growth in the review month in the following order: cement; food, beverage & tobacco products; fabricated metal products; furniture & related products; paper products; chemical & pharmaceutical products; plastics & rubber products; electrical equipment; printing & related support activities; transportation equipment and non-metallic mineral products.

But the textile, apparel, leather & footwear; petroleum & coal products and primary metal subsectors recorded decline in the review period.

On the other hand, at 58.3 points, the production level index for the manufacturing sector grew for the 25th consecutive month in March 2019.

The index indicated a faster growth in the current month, when compared to its level in the month of February 2019. Nine of the 14 manufacturing sub-sectors recorded increased production level, while five recorded decline.

The report showed that the manufacturing supplier delivery time index stood at 58.4 points in March 2019, indicating faster supplier delivery time.

The index has recorded growth for 22nd consecutive months as 11 of the 14 sub-sectors recorded improved suppliers’ delivery time, while one remained unchanged and two recorded decline in the review period.

“The employment level index for March 2019 stood at 56.9 points, indicating growth in employment level for the twenty-third consecutive month.”

“Of the 14 sub-sectors, nine reported increased employment level, one reported unchanged employment level while four reported decreased employment in the review month.

“The manufacturing sector inventories index grew for the 24th consecutive month in March 2019. At 57.1 points, the index grew at a faster rate when compared to its level in February 2019. “Eight of the 14 sub-sectors recorded growth, three recorded unchanged, while three reported declined raw material inventories in the review month,” the report stated.