Why there is large inventory of unsold goods - manufacturers

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As manufacturers consider options for keeping their machines revving in the face of depressed consumer demand, stakeholders have proffered the basic challenges facing the real sector. 

Deroju Odunsi, vice president, NECA Network of Entrepreneurial Women (NNEW), has attributed the dropping consumer demand to the fact that banks are no longer giving credit facilities to businesses. "Businesses are cash strapped due to their inability to access credit as they normally did from banks. As a result, they do not have working capital to pay staff salaries and suppliers," she said.   

She added that the reduction in interest rate on lending was not having any significant effect because the banks were no longer even giving credit. Odunsi said another factor was the influx of cheap manufactured goods into the country.     

Duro Kuteyi, Nigerian Association of Small Scale Industrialists (NASSI), said the only way forward to prevent the economy from collapsing as a result of closures of more manufacturing concerns was for energy to be available at reduced costs.   

"Prices of Nigerian manufactured goods are too expensive because the cost of production is high. Once the energy costs drop, Nigeria-made goods would have better chances of competing with cheap foreign ones. Due to poverty, our people cannot be stopped from purchasing foreign-made second hand goods. Meanwhile, government agencies at the ports should be cautioned to curb smuggling of imported goods into our market", Kuteyi said.   

For Shuaibu Idris, deputy managing director, Dangote Flour Mills plc, "there are factors that have made most manufacturers and traders unable to dispose of their goods. Most of the banks are not lending. There is credit squeeze in the system despite enormous liquidity of the banks. Secondly, the major spender in the economy being government has had some hiccups in its operation.  The absence of Mr President for over three months made the machinery of government to be at a stand still. Some states and local governments were in arrears in most payments including salaries. This affected the citizen's purchasing power and disposable income.   

"Thirdly, investors, particularly foreigners, first mistook the name Niger Republic with Nigeria when the military took over power in that country. Investments were withheld albeit temporarily. As if all these issues were not enough, the Jos crisis came to worsen the already bad situation. Investors thus shied away and withheld their funds.   

"Finally, manufacturers and traders alike did not read the market well enough hence flooding the markets with goods beyond the markets' capacity. Equilibrium position between demand and supply is difficult to achieve and even when achieved, may not be sustained for a long time. Some manufacturers and traders are saddled with stocks they bought at higher prices hence the huge stocks of unsold goods in a number of the sub sectors of the manufacturing sector.   

Hakim Egberongbe, chairman, industry group, Lagos Chamber of Commerce and Industry (LCCI), said stocks remain unsold because of consumer resistance brought about by inflation. "Poor infrastructure is the main problem - there are issues of power, bad roads and water. Companies have become their own local governments providing these essentials on their own. The resultant effect is high cost of production. Under such a situation, employers cannot increase wages. There is therefore weak demand by consumers", he said.   

For Simon Okolo, national president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the rising inflation level has caused undesirable increase in the price of goods, both local and foreign.   

"Apart from the challenge of basic infrastructure the value of the naira has depreciated and the consequences are inflation and the increase in prices of goods, both local and foreign," he stated.

Why there is large inventory of unsold goods - manufacturers

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