Resolving the Forex Challenge of Manufacturing Companies

On Aug 22, 2021

August 22, (THEWILL) – JOSEPH ABANG highlights the imperative of meeting the forex needs of manufacturing companies amid changing monetary policies of the Central Bank of Nigeria (CBN)

There is a peculiar challenge facing Nigeria’s economy. It is crystal clear. The cause for this is no one’s fault, to be honest, as it was driven by the economic fallout of the COVID-19 global pandemic. Almost every country in the world had their share of the economic downturn. However, what is more alarming is that you would expect the manufacturing sector to be the economic driver in a critical period like this, sadly, that is the same sector that is taking the heat of the economic downturn in Nigeria.

Growth rate in the manufacturing sector is projected to suffer further decline as operators come under a renewed wave of inflation and foreign exchange scarcity. The sharp increase in headline inflation was driven by a faster month-on-month inflation, which was up 10 basis points to 1.3 per cent, the highest since June 2017.

This development, according to the sector leaders, was already taking a heavy toll on the manufacturing companies and it has now been complicated by an increasing difficulty in getting foreign exchange to import foreign components for their production.

In truth, this should not be happening if Nigeria as a country is ready to stabilise the already fractured economy. The pandemic has wreaked havoc on the Nigerian economy, as it has on most other economies around the world. The difference is that these other countries are doing a lot to help their manufacturing sectors.

In fairness to it, the Central Bank of Nigeria recognised the importance of manufacturing: The Apex bank has made it a priority to create an enabling environment for local manufacturing. The CBN has continued to implement accommodative monetary policy steps that will help the economy recover faster by increasing the flow of credit to households and businesses in key sectors such as agriculture, information technology, and manufacturing.

But there is an urgent need to grab the bull by its horns – increasing difficulty to source foreign exchange (forex) is one major problem that the CBN needs to sort out.

A lot has been said by relevant stakeholders, the Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI) and others have voiced their concerns about the current state of the economy and the manufacturing sector.

In a discussion with the media, Engr. Mansur Ahmed, President, MAN, revealed that manufacturers have not been able to access the required foreign exchange (forex) from CBN for their operations and about 40 per cent of their forex needs are not met by the apex bank. This means that manufacturers can’t get the required amount of forex that they need to bring in raw materials that are not locally available or the…