Manufacturers in dilemma over forex scarcity – The Sun Nigeria

By Merit Ibe, [email protected] 

Some  Nigerian manufacturers have expressed fear that the current scarcity of foreign  exchange for businesses to conduct their operations  is now threatening their existence. This challenge is coming  amid a recent plea by Organised Private Sector to the CBN to prioritise and  review its foreign exchange (forex)  regime to allow manufacturers source forex for raw materials’ imports through a special window .

President, Manufacturers Association of Nigeria (MAN), Mansur Ahmed, while assessing the situation lamented that current forex regime where forex is allocated to both importers of finished goods and raw materials importers at the same rate in the same window is a disincentive to the real sector. He  noted  that  most of the raw materials that manufacturers use were imported “because we don’t have a very big raw materials base in this country. “We cannot source the forex to bring in the raw materials, because the dollars have gone too high. Today,    the exchange rate is at over N620/$. How would you be able to produce at that exchange rate and still be able to sell? There will be no market. “We are appealing to the government and its agencies to take a second look at the situation.

According to the Director General, MAN, Segun Ajayi-Kadir,  manufacturers are being constrained to exchange their export earnings at official rate of N420 even though they source 95 per cent of their forex needs at N620 from the parallel market. “With the entire rebate what you will be getting for your export is N480 per dollar against N620 per dollars that you used to import raw materials to produce.”

In addition, a new fiscal regime that commenced in January imposed excise levies on carbonated soft-drinks. This came soon after the VAT was increased from 5.0 to 7.5 per cent. All of these results into poor sales as the purchasing power of Nigerian consumers are being crushed daily by low income, inflation and depreciation of the Naira.”

On the heightening insecurity situation in the country,  Ajayi-Kadir said  it was worsening matters for manufacturers. It has led to the shutdown of several industries, especially in the North-east region.

For  his part, MAN Apapa branch, Frank Onyebu, operators are having difficulty surviving in the present-day economic realities.

He berated the fact that the letter of credit which is submitted to the bank for funding is no more funded, saying the situation is bad. “A lot of manufacturers, expecially those depending on foreign import may end up winding down. Some have shut down operations especially due to the inaccessibility of forex for raw materials importation and more are shutting down.”

He noted that some manufacturers are resorting to black market which is more expensive, adding that “We cannot access forex. You wait on the banks for months yet you don’t get half or one quarter of the forex  you need for business. We are not getting forex at all. I don’t know where the FX remitted into this country are going into, it’s definitely not getting to the manufacturers. When you go to the banks they clearly tell you no  forex. Most businesses patronise the black market now. We are not talking about raw materials but machinery.

“The FX rate at the black market is high between #630 and #650. At that rate how can one import, sell and make profit. It’s difficult because you can’t just increase the price of your products, the economy can’t sustain that.”

He said  the SMEs are worst hit, as the big businesses might have their way because some of them have connections with government.

Raw materials are not coming in except from those buying FX from the black market, that is one reason price is going high.”

He said though some companies have started looking inwards to source their raw materials for those who can,  a lot of companies can’t get their materials locally.

“Those that can source locally are better off, but insecurity has added to the pain. And processing of raw materials have not been easy.

Despite the plea for government to give priority to manufacturers, nothing has been done. If government realises that manufacturers are the engine of the economy, they will try as much possible to keep the sector moving, because the sector will engage a lot of unemployed persons,  thereby reduce the crime rate. “When you keep these youths busy, they cannot indulge in. Crime.

“The country is still selling oil, where is the revenue going. Manufacturers can’t get FX but politicians are distributing them for politics.

The government seems not to be  sensitive to the economy of this country. A lot of people still engage in oil bunkering, breaking the pipelines  and stealing crude oil. We are still importing fuel which we should not do. It’s ridiculous.  I advise every one to get their PVC and vote in the right persons for a positive change.”