By Dele Sobowale

“An economy can only be as strong as its manufacturing base.” Akio Morita, Harvard Business Review, May-June 1992. (VANGUARD BOOK OF QUOTATIONS, VBQ, p 45).

When Morita wrote the article from which that statement was lifted in 1992, I was a Senior Lecturer/Consultant at the Nigerian Institute of Management, NIM, and an avid reader of the Harvard Business Review. That explains why the VBQ is filled with insights from the HBR. But, in 1992, Japan was the second largest economy in the world and the second biggest manufacturer; the USA was first in both. China was nowhere in sight and the VBQ was still fifteen years away from being published. But, I had started on it.

It is perhaps no coincidence that China is now the second largest economy in the world today and perhaps the largest manufacturer. Japan has dropped in the pecking order. That is a lesson for us in Nigeria as we enter 2016 and much of our manufacturing base is being eroded. Ask any manufacturer,

if they were not closed down by December last year, and you will be told about mounting inventory of unsold merchandise. Two giant beverage producers – Nigerian Brewery and GUINNESS – ran sales promotion campaigns for two of their flag-ship brands – GULDER and GUINNESS STOUT – well into November last year.

Desperation could not have been more boldly written. In my days as the chief Marketing executive of three breweries, sales promotion was embarked upon only during the rainy season when consumption is predictably low. By mid-September, the hot sun drives consumers to gulp more liquid beverages than they ordinarily want to. So, no sales promotion campaigns.

What happened last year was probably unprecedented in our nation’s history since the Structural Adjustment Programme, SAP, faded from memory in 1993-4. Manufacturers and importers sent products to the market only for them to sit on shelves on account of low demand. In most states of Nigeria, where states provided a large percentage of the personal for people, the inability of state governments to pay salaries, as and when due, reduced aggregate consumption to its lowest level in years. For brand managers, what used to be friendly rivalry became cut-throat competition – all in pursuit of dwindling aggregate demand.

Virtually, all the discussion about the 2016 Budgets – Federal, States and Local Governments – have been focusing on the financial aspects. None had taken a critical look at what the budgets portend for manufacturers and the nation. Most commentators, including professors of economics, can be forgiven for the benign neglect of aggregate consumption in the economic equation. Those of us who have been charged with literally “bringing water out of stone” know better. When the economy slows down from 6-7% per annum to 3.2%, or worse, it is not an academic exercise for the Marketing Director or Production Manager; it is a major crisis.

Secure jobs are suddenly at risk, salaries are delayed, promotions are shelved and the wave of disaster spreads all the way down to the gateman. One thing is certain, aggregate consumption will drop and with that GDP growth and hopes are dashed. In 2016, with the Federal Government budgeting to spend less; and most states, except a few self-deluded states, also planning to reduce expenditure, it requires no gift of prophecy to predict that the huge stock of unsold products brought forward from 2015 will remain on the shelves for a while.

Furthermore, it is a safe bet that manufacturing output will drop significantly and purchase of raw materials and other inputs will plummet as a result. In 1984, when the nation experienced a sharp drop in crude oil prices, such as we are now facing, many manufacturers closed their gates for ever. That is precisely the problem. When the downturn of 1984 started, most observers thought it was only temporary. But, we have since learnt that global economic downturns are seldom temporary – especially when they involve the nations that have driven the previous boom.

China and the Asian countries as well as the rest of the BRICS (Brazil, Russia, India, China and South Africa) are either in recession or slowing down all at once. That is bad news for everybody. So, this downturn may not be transient. In that event, this economic downturn threatens to take down with it several manufacturing companies on account of lower than expected aggregate consumption.

The question now remains: what is to be done? The obvious answer is: stimulate consumption. But, that is easier said than done. The 2016 provided some of the answer. The plan to provide N5000 per month to unemployed graduates will certainly increase aggregate demand and promote production. The fear is, with crude oil prices still heading for the basement, the unemployed might be forgotten in the struggle to pay those already employed.