According to the Central Bank of Nigeria’s October 2024 Business Confidence Survey, average capacity utilization fell by 4.3 percentage points to 51% down from 55.3% in the previous month. Each sector of the economy exhibited varying levels capacity utilization. Mining and quarrying, electricity, gas, and water supplies had the highest levels of utilization in October at 57%, followed by manufacturing at 52%. Compared to the average installed capacity of 51%, the agriculture sector reported the lowest level of utilization at 48%, suggesting there is room to increase the sector output.
The low level of utilization is partly due to high interest rates, insecurity, complex tax structures, and inflation. These factors have all contributed to a less advantageous business environment, resulting in lower capacity utilization. Declined capacity utilisation signals a negative consequence on the economy which could result in output levels below potential and low export volumes. Low capacity utilization posits a challenge to the aspiration of the government to achieve a $1 trillion economy by 2030. Hence, the government needs to address the insecurity issue, prioritize infrastructure development and maintenance, lower the interest rate, and improve the efficiency of energy sources and alternatives.
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