The Lagos Chamber of Commerce and Industry (LCCI) has warned that as the second quarter of 2022 approaches, the manufacturing sector is likely to experience shocks from the rising cost of diesel, logistics, currency and other illiquidity due to the Russian-Ukrainian war. which triggered supply chain issues in the energy and agriculture markets.
This was revealed by LCCI Chairman, Dr. Michael Olawale-Cole during LCCI’s quarterly press conference on the state of the Nigerian economy on Tuesday in Lagos.
The LCCI has also warned of dwindling production of goods for Nigerian manufacturers as they try to adjust to bottlenecks created by the conflict.
What they say
The LCCI has warned that if the war continues, Nigerian manufacturers will be hit by low productivity as access to raw materials shrinks and rising diesel costs continue to impact operations.
Olawale-Cole said: “Job losses are also very likely due to limited production and disrupted supply chains, all of which will likely reduce growth potential in the second quarter of 2022.
“As we enter the second quarter of 2022, the manufacturing sector is likely to experience shocks from rising diesel costs, logistics, currency illiquidity, domestic inflationary pressure, weakening power procurement, poor public infrastructure and port-related challenges.
“These may continue to present headwinds to sector performance.
“Additionally, with the war in Ukraine worsening disruptions to supply chains for raw materials like wheat, barley, soybeans, sunflowers and corn, rising production costs may not subside any time soon. .”
He warned that Nigerians should expect headline inflation to remain high, citing supply chain disruptions caused by the Russian-Ukrainian war, food supply shocks, foreign exchange policies, higher energy costs, currency illiquidity, increased insecurity in major food-producing states, which would continue to put pressure on consumer prices.
“We believe that broad harmonization of fiscal and monetary policies aimed at addressing identified structural constraints will contribute significantly to mitigating short-term inflationary pressures.
“It has also become imperative now that Nigeria needs to have reserves of these essential commodities in order to cope with sudden supply slumps.
“We have always advocated the removal of fuel subsidies and that these recovered funds be diverted to subsidize the production of goods and services in the face of rising manufacturing costs.
“The Central Bank of Nigeria (CBN) should engage in easing the economy while keeping an eye on controlling rising prices.
“Credit to the private sector should increase and aim to support growth sectors and export promotion sectors,” he added.
In case you missed it
Nairametrics reported earlier that Ayobami Omole, an equity and thematic research analyst at Tellimer Research, said the high cost of diesel, partly caused by the Russian invasion of Ukraine, and negatively impacting the manufacturing sector in Nigeria, is expected to push inflation in Nigeria for Q2 around the 16% rate.