The Organised Private Sector (OPS) is kicking against the recent devaluation of the Naira by the Central Bank of Nigeria (CBN).
The CBN had last week adjusted the official exchange rate to N380 from N360.1 to $1, thereby leading to criticism from the Lagos Chamber of Commerce and Industry (LCCI), Manufacturers Association of Nigerian (MAN) and financial experts across the country.
The devaluation according to them, suggests that naira will automatically go up in the Foreign Exchange (FOREX) market.
Reacting to this development, operators in the maritime industry also lampooned the CBN for not taking into cognizance key indicators that will help the economy, even as a financial expert has predicted that with the devaluation of the country’s currency, activities at the Nigeria ports may nosedive by 35% attributable to reduction in importation owing to scarcity of FOREX.
In a chat with Shipping Position Daily, the Director General of Lagos Chambers of Commerce and Industry (LCCI) Mr. Muda Yusuf stated that devaluation of the currency will affect the country ‘s international trade. He also informed that the devaluation of the currency will cause liquidity crisis in the foreign exchange market.
Yusuf further stated that manufacturers may no longer source for raw materials due to the high cost of FOREX
According to him, “the depreciation in currency will naturally affect our international trade capacity, because we do business in foreign currency and now that foreign currency has become very costly and very scarce.
“It will cause liquidity in the foreign exchange market and then, there is an issue of the cost which is depreciation, so these two factors coming from the foreign exchange definitely will inhibit trade. If you don’t have the currency, what are you going to use to pay for your imports? So it’s a major problem.
“And that is why some manufacturers have not been able to get their raw materials; a lot of people who are selling things are not able to get those things and for those who have customers abroad who normally exchange credits to them, they have lost those credit lines.
“So depreciation of naira is a major setback for our international trade and it has affected almost all sectors of the economy, you know this economy is dependent on import”, he said.
Also speaking, the Director General of Manufacturers Association of Nigeria (MAN) Mr. Segun Ajayi Kadri criticized the CBN for the move.
He questioned why the apex bank will resolve to devalue the naira saying the act will lead to high cost of goods in the country, as importers will be left with no choice.
“Why do we devalue in the first instance, we devalue because we want to encourage export, that’s the fundamental, now in our situation here, if we devalue the naira, the cost of importation will increase and generally the market price will go up”
“Nigeria imports a lot and that means the costs of goods will be high, it will be more expensive to import raw materials and the cost of goods will go up, so generally it’s going to affect the cost of goods. This is not the time for it at all,” he argued.
Speaking also, a financial expert, Dr. Vincent Nwani, Managing Consultant RTC Advisory Ltd and former Director of Research and Advocacy at LCCI, analysed that with the current devaluation of the naira, activities at the nation’s ports may be seriously hit with 35 percent drop in activities.
Nwani explained that 65% of the country’s consumption are import contents, which means that with the devaluation, the country may suffer cost pushed inflation.
Nwani who is also a former Head of Research and Economic Intelligence at First Bank Nigeria Plc lamented that the action taken by CBN will leave importers with no choice but to pay the recent exchange, as most shipping companies and relevant government agencies such as NIMASA and NPA accept payment in dollars.
He added that, since dollar rate has increased by 25%, only few will be able to source for dollars, leading to a sharp drop in volume of imports.
Explaining further, he said, “Since the pandemic started we have seen the forex window moved up, from N306 TO 371 and now 382, interbank from N360 to 425 parallel market N365 to 472.
The implication of this is that cost-pushed inflation is acting on Nigerians, businesses and on everybody.
“During the period, inflation has also moved to about 13%, remember that 65% of our consumption are import content, so the meaning of that is that general price level is high
“Importers are no longer making profit, because they cannot transfer all the extra cost they are using to source for dollars on customers, if not competitors will take them out, so for businesses it is tough.
“For importers who have to pay shipping companies in dollars, landing cost is now higher, NIMASA, have to be paid in dollars, some terminal operators need to be paid in dollars, so also NPA and all that, and those dollars have increased by 25%, so the meaning of that is that this will affect the volume of our import, this also means the ability to buy will reduce because of COVID 19. Some of them have lost their jobs; some of them their salaries have been slashed while some of them are now feeding more people.
“And the maritime sector which is the major gateway in the country, that deals with non-oil export and imports, meaning that if the non-oil sector is not doing well, it means that Customs revenue will drop significantly which also means that the activities in the port will also take a hit of not less than 20% to 35%”, he predicted.
On his part, a former President of the National Association of Government Approved Freight Forwarders (NAGAFF) Mr. Eugene Nweke stated that devaluing the naira will also affect imports. including international trade.
Nweke questioned why the CBN will continue to devalue the naira, even when it’s not favourable to Nigerians; he alleged that the CBN may be devaluing the currency just to protect certain set of people in the country.
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