Business

Imperatives of data collection on insolvent firms

Recently, the Nigerian Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA) stated that it would commence collection of data expected to provide empirical report on the number of insolvent firms in the country. Taiwo Hassan reports

The private sector plays a vital role in the Nigerian economy in terms of revenue generation, strategic partnerships, job creation, investment facilitation and trade promotion, among others. In particular, the private sector accounts for over 80 per cent of total economic activities in the country. So, it is therefore important to ensure an enabling operating environment for investors in the economy. However, it is regrettable that the fiscal and monetary policies from governments that are expected to uplift many businesses in the country, at the same time, boost aggregate demand across economies, have been posing major risks to growth in the country’s real sector of the economy with profound trajectories hitting many industries and factories in the process.

COVID-19

There is no gainsaying that the emergence of COVID-19 played a major role in the negative trajectories that affected the bottom lines of many businesses in the country. This came in the form of restrictions and lockdown across countries. In fact, many firms could not have access to raw materials for production, forcing them to embark on cost cutting approaches to weather the stormy situation.

Security challenge

In addition, the worsening security challenge in parts of the country also forced production of some industries to shrink as production bases remain under siege, and supply chains are disrupted, leading to scarcity of goods in the markets. With worsening security perception about the country, some manufacturing firms suffered heavy inventories of unsold goods in their warehouses since logistics and transportation segments hugely affected distribution.

Economic woes

Besides, the Nigerian economy, for a while, has been confronted by several challenges, including subdued business and commercial activities across various sectors (evidenced by PMI data trend), significant FX pressures (evidenced by widening premium between official and parallel market rates), revenue pressure from oil and non-oil sources, inflationary pressures, subdued purchasing power, weak employment levels, worsening internal security situation and weak investor confidence. All these challenges in one way or the other affected the country’s productive sector as lots of factories struggled to overcome the difficult situations.

Manufacturing sector at a glance

A report by the National Bureau of Statistics (NBS) on the country’s GDP performance indicated that manufacturing sustained a positive growth trajectory after contractions in 2020, partly supported by developmental finance interventions of the Central Bank of Nigeria amid numerous headwinds that confronted industry players. In fact, the NBS report noted that the country’s manufacturing sector sustained a positive trajectory as it contributed 15.59 per cent to nominal GDP in the third quarter of 2021, higher than the 13.56 per cent recorded in the corresponding period of 2020 and higher than the second quarter of 2021 at 14.18 per cent. Foreign exchange scarcity, domestic inflationary pressure, weakening purchasing power, poor public infrastructure and port-related challenges have continued to present headwinds to the sector’s performance. Segments of manufacturing with high levels of backward integration had lesser degrees of shocks from foreign exchange crises in the economy.

NACCIMA’s data for ailing firms

However, the macroeconomic challenges, coupled with COVID- 19 and others gearing up NACCIMA to start the collection of data that would provide empirical report on the numbers of insolvent industries in the country. The Director-General of NACCIMA, Ambassador Ayo Olukanni, in a communiqué at the 4th Quarter Council Meeting of NACCIMA, which was held in Benin City, Edo State, recently, stated that NACCIMA, being the highest regulatory body of chambers and commerces in Nigeria, was already collating data that will portray the actual numbers of manufacturing companies in the country that have gone under due to insolvencies encountered in the course of operations in a harsh business environment in the country. In fact, the NACCIMA Council, in the communiqué, said the findings on the number of insolvent firms in the country would be the first of its kind as it will help government, members of the organised by the private sector and micro, small and medium scale enterprises (MSMEs) to apply it as empirical research and made amendments to the containments for future outlook. The communiqué partly reads: “Council announced the decision to commence data collection on insolvent industries across the country through the NACCIMA secretariat. This is to help drive private sector activities, in collaboration with member-chambers, for advocacy, business development and trade promotion activities. “These activities will focus on promoting market access opportunities, as well as develop an empirical report on the state of insolvent industries and factories within each state of the federation.” In fact, many firms are experiencing unstable activities amid high debts, skewed machinery for production, forex scarcity and others, thereby forcing them to close shop.

Last line

Industry stakeholders have lauded NACCIMA’s move, saying it’s imperative for the country to have a data on insolvent firms for record purposes.

 

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