Cost of production may rise for manufacturers on imported inflation

Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), said that naira depreciation will increase the cost of production for Nigerian manufacturers who rely heavily on imported raw materials.

According to Yusuf, the increased cost of raw materials will translate into increased cost of production, as well as lower profitability and sales.

“Even when you, as a manufacturer, increase your price as a consequence of a hike in your cost of production, the purchasing power is not there. That is just the point here,” Yusuf said.

“In other words, you find out that the manufacturer or businessman’s cost, profitability and sales are affected negatively. In fact, it will be negative on both the monetary and fiscal sides. This will be

more difficult for manufacturers, some of whom are already complaining that they are being asked to go to inter-bank to source for funds,” he said.

Keith Richards Chairman of FMCG goods company Promasidor, affirmed that the low end investor may be close to being tapped out and may be unable to afford any attempts from manufacturers to pass on increased costs to the consumer.

“There is going to be a big hit from the CBN’s 15 percent devaluation which is highly inflationary,” Richards said, at the BusinessDay ‘future of energy series’ discussion in Lagos, held yesterday, with the theme ‘the impact of falling oil price on the Nigerian economy’.

“This does not bode well for the 20 percent at the bottom who are barely affording our products in N10 and N20 packages.”

On the global oil vagaries which are already a big threat to Nigeria’s revenue and economy, Remi Bello, president, LCCI, said economic diversification must be the central focus of the government, while efforts must be made to reduce international public travels and trainings by federal government officials, increase taxes on luxury items, and renew commitment to fiscal prudence.

Bello called for the scrutiny and review of budget leads such as consolidated revenue fund charges, service wide votes, presidential amnesty programmes, capital supplementation, debt service and refreshments and meals, among others.

According to Bello, there have also been flagrant violations of the provisions of the constitution and the fiscal responsibility act, with respect to remittance of funds to the federation account by government agencies.

He said this is one of the areas in which crass impunity has been consistently demonstrated, adding that there have been reports from the auditor- general of the federations and committees of the National Assembly, that express concern about these recurring breaches of the law.

“Estimates of such unremitted funds were in excess of N1 trillion annually. This is the time to ensure full compliance with the provisions of the law in this regard,” he said.

Businessday