Commodity prices to go up
• As Rising Cost Of Energy, Inflation Strain Production
• Manufacturers Blame Govt’s Inaction
As rising cost of energy and inflationary pressure continue to affect operations of many manufacturers, local operators are already considering an upward review in commodity prices, even as value-chain operators increase export to earn foreign exchange.
Operators have equally blamed economic managers for the woes currently experienced in the country, noting that the economic fundamentals of the country are not so bad when weighed alongside the level of uncertainty created by inaction and absence of fiscal policies.
Already, cement manufacturers are considering another increase in the price of the commodity from N2300 at the end of August last year, to about N2600, while producers of other consumable goods are towing the same line.
Cement Manufacturers Association of Nigeria (CMAN) had last year raised prices of brands by N600 or 44 per cent per bag in factories, including additional N100 cost for haulage. This increased retail prices from N1, 600 to N2, 300 depending on location. In some areas, prices have shot up to N2, 350 or higher.
The Guardian learnt that the hike is not unconnected to difficult operating environment.
Indeed, many operators that hitherto never had challenges with energy costs have expressed worry about the rising costs of operations amidst lull in the economy, rising inflation and dwindling consumer-buying power.
Although, the Automotive Gasoil (AGO) marketing industry, otherwise known as diesel has been deregulated, sustaining operations at N265 per litre for many businesses and $7.56 for one standard cubic metre of gas for gas users, instead of $2.56, has become unbearable.
Speaking on the prevailing economic challenges, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf stated that the hike should be expected considering the price of diesel when weighed against the cost of operations and logistics.
He added that there is need for economic managers to address the growing concerns, which are becoming unbearable for the common man on daily basis.
President of Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs decried the state of the operating environment and lack of infrastructure.
“The price of gas has been increased from what it used to be and it is also being charged in dollars despite being produced locally. This has also increased the cost of production and this will also affect the prices of commodities. Coupled with inflation, producers are going through a lot.
The wide margin in foreign exchange is a concern for producers,” he said.
The National Bureau of Statistics (NBS) had noted that the 18.72 per cent rise in inflation rate in January makes it the 12th straight monthly increase in the inflation rate and the highest in more than 11 years, and was driven by surges in food, transport and electricity.
A separate food index also rose to 17.82 per cent from 17.39 per cent in December, the statistics office said.
According to the Bureau, the faster pace of growth in headline inflation, year on year, were recorded in the following products; bread and cereals, meat, fish, oils and fats, potatoes, yams and other tubers, wine and spirits, clothing materials and accessories, electricity, cooking gas, liquid and solid fuels, motor cars and maintenance, vehicle spare parts and fuels and lubricants, for personal transport equipment, passenger transport by road.
Furthermore, a review of audited financial reports of many of the firms for the 2016 financial year by The Guardian revealed a struggle between balancing rising input cost pressures and passing the inflationary pressures on already constrained consumers, by raising prices of some products during the period.
Some of the input cost pressures being encountered by many manufacturers border on foreign exchange losses on dollar loans, inability to access foreign exchange, high cost of production, as well as poor electricity supply and tariff hike.
Others are prolonged gas supply shortages, which forced companies to rely on more expensive backup, monetary policies, and constrained consumer purchasing power.
Similarly, the Central Bank of Nigeria said in its Purchasing Managers’ Index released during the week that the country’s manufacturing activity fell to 48.2 index points in January 2017, down from 52.0 recorded in December.
The report showed that while the manufacturing PMI dropped to 48.2 index points, the non-manufacturing PMI stood at 49.4 points, indicating a slower decline compared with the 47.1 points recorded for December 2016.