Manufacturers’ demand for forex nears $2b amid scarcity, weak naira |

Naira

• Middle-class Nigerians shop for stable ‘dollar’ as FX crisis continues
• Naira in moment of decision, trades at N570/$

Despite improved confidence in the economy as shown in the latest Manufacturers Confidence Index (MCCI) by local manufacturers, demand for foreign exchange (forex) on the back of outstanding obligations has risen to about $2 billion as local producers appear to be running out of options for survival.
   
With a weakened currency that traded at the weekend at N570 to the green back, as well as the effect of inflation on household incomes, local producers are worried about their inability to access foreign exchange for raw materials and needed machinery.
   
Already, some of them with parent companies abroad are putting pressure on the supply chain while equally dealing with a weakened currency and pass-on effect on consumers.
  
According to data made available to The Guardian, manufacturers in the chemical, food and pharmaceutical sectors are the worst hit by the demand challenge.

  
While a request of about $1.45 billion from various firms has been put forward to the apex bank in the first quarter of the year, an additional $300 million demand was submitted in the second quarter; thus, pushing outstanding demand to at least $1.75 billion.
  
Last year, a similar trend was observed, forcing many local producers to resort to the parallel market, in a move that triggered inflation and affected demand for locally produced goods.
   
Beyond the rising demand for foreign exchange, the second quarter report of manufacturing activities showed that while production and distribution expenses are contracting, capacity utilisation, production and sales are still sluggish, attributable to the erosion of firms’ budget and households’ income by the persistently high inflationary pressure on the economy.

HOWEVER, with the Central Bank of Nigeria (CBN) stoppage of forex sales to Bureaux De Change (BDCs), the apex bank has been urged to allow BDCs receive diaspora remittances as is done in other economies of the world. The estimated annual remittance by Nigerians in the diaspora is $34 billion and a large part of it never makes it into the country.

Financial experts have, therefore, advised the CBN to institute a framework that will allow BDCs, which have automated their operations, to receive these funds into the economy to boost dollar reserves and save the naira.

Globally, Nigeria is one of the few countries that attract funds from migrant workers. Others are Pakistan, Canada, USA, Australia and Vietnam. Nigeria is on the side of those that have many migrant workers in other parts of the world and therefore earn foreign currencies they want to remit home, but there is a huge problem that limits the funds from getting home.

ABCON President, Alhaji Aminu Gwadabe, said globally, BDCs remain one of the channels through which the diaspora remittance funds come into countries. He said the BDCs remain at the…