By Joshua Yousouph
Following the incessant and indiscriminate hike in foreign exchange (Forex) rate in the country, stakeholders, especially manufacturers and importers have called on the Central Bank of Nigeria (CBN) to grant concessional Forex allocation at the official Forex market to manufacturers for the importation of productive inputs that are not locally available.
The request comes even as stakeholders in the Nigerian maritime industry lament that the crisis of forex is affecting their businesses too. They also seek government intervention.
Recall that the Central Bank of Nigeria (CBN) ended the sales of Forex to Bureau De Change operators in July 2021 on grounds that the parallel market had become a conduit for illicit Forex flows and graft. However, this decision has led to a free fall for the Naira.
As of July 29, Naira depreciated against the U.S. dollar at the official market, declining 0.66 per cent to N429.00 per dollar from N426.20 it traded at the Nafex window in the previous session on July 28. Last week, the currency at the parallel market traded at N700-N710 per dollar amidst a shortfall in foreign exchange supply as demand increased.
The Director General of the Manufacturers Association of Nigeria (MAN), Dr. Segun Ajayi-Kadir, noted that the manufacturing sector in Nigeria has come under a severe hit as a result of a shortage of foreign exchange required by manufacturers to import locally-unavailable raw materials and machinery.
Ajayi -Kadir said in a bid to ease the burden of Foreign exchange scarcity for manufacturers, the CBN initiated a couple of policies to ameliorate the scenario but very little impact is being felt by manufacturers. He however noted that for the survival of the sector, the Federal Government should grant concessional Forex allocation in sufficient volume at the official Forex market to manufacturers for the importation of productive inputs that are not locally available.
“Forex crisis in which the Naira value depreciates among convertible currencies such as the US Dollars strangulates and reduces the size of manufacturing in the country. This is because depreciation in Naira value causes manufacturing raw materials and machinery imports to be more expensive. The high cost of import bills for the productive inputs decreases manufacturing working capital and feeds into manufacturing commodities prices, thereby making the sector less competitive.
“It is important, therefore, that the available forex policies and guidelines should be appropriately reviewed to support manufacturing, particularly at this precarious time. The issues of usage of Forex’, exclusion of items from the official forex window and concessional Forex allocation to critical manufacturing should be reviewed to ensure a production enabling Forex management in the country” Ajayi –Kadir noted.
On his part, Director, Importers Association of Nigeria, Special Task Force, of Lagos state chapter, Major Segun Ibikunle (rtd) told Shipping Position Daily that most industries in Nigeria depend on imported raw materials, adding that the high exchange rate is seriously working against the importers as it has led to a shortage.
Ibikunle however called on the government to create a window where importers can access Foreign exchange at cheap official rates and also extend some benefits in order to make the business environment more favorable to the importers.
“The high exchange rate is really working against the importers. When there is a high exchange rate, it means that the rate of export will be low and the rate of import will be high. Most of our industries depend on raw materials from abroad and it is importers that import them. The cost of importation is now high; by the time you change Naira to a dollar to buy the same item that you have been buying before.
“This is not going to help the importers because the consumers are not having an increase in their income. It will lead to a shortage in the patronage of the importers. You will import your goods but only a few people will buy them because they don’t have the resources to buy them. When the exchange rate is low the business of importers will be advantageous and more profitable.
“We are aware that the Government has been sending some assistance to the exporters. We would like the same assistance to be extended to the importers. Probably they can help us provide Forex at cheap official rates instead of us going to buy at an unofficial rate which is going to affect the business. The Ministry of Trade and Industry should also set up measures that will make the business environment more favorable to the importers” Ibikunle concluded.
Also speaking, Mr Wole Obey an importer and car dealer at PTML at Tin Can port lamented that nothing is happening at the ports, even as he added that importation has dropped drastically.
Obey called on the Federal Ministry of Finance and CBN to review the Forex policies to make the importation business more friendly.
“We are not coping. Nothing is happening in the port, importation has dropped drastically. Clearing agents do not have jobs to clear. The little one jobs on ground are for those that can do it. Vehicle importation is worse. Most of the cars that come into Nigeria are above 10 to 15 years but the law permits only vehicles above 10 years.
We want the Federal Ministry of Finance and Central Bank of Nigeria to address and review their policies” Obey pleaded.
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Also speaking, a clearing agent and Public relations Officer of the Tin Can Chapter of the African Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON) Mr Clinton Okoro, noted that the scarcity of foreign exchange in banks is really affecting the industry.
“This is affecting the industry badly. Dollar is scarce, the politicians are probably saving it for the 2023 elections and we heard about what they used Dollar for during the primary elections. The major people using it for business couldn’t see it anywhere to buy to the extent that CBN is crying over that. The Exchange rate is not affecting importers, which is the major source of inflation in the country. You hardly see anything that is cheap. The few importers manage to buy at a high rate; they will still sell at a high rate. You can hardly see dollars in any bank but when you go to the black market you will see them calling you to come and buy” Okoro lamented.
Another clearing agent; Rev. Alex Nwokedi told Shipping Position Daily that many of government policies are implemented to create loopholes where it can benefit their pockets to the detriment of the masses. He however noted that there is a need to engage the government to do the needful by making relevant efforts to proffer solutions to the quagmire of the nation’s economy.
“When there is a freight deficit in a country, the country continues to lose. There must be a balance of trade. When the value of your money goes down, it shows your goods are not sufficient enough to compete with the ones existing outside. We are not doing enough in export that is why our goods are going down and the prices of goods are going up causing inflation and the devaluation of the Naira.
“There are several barriers in trade in Nigeria. There is a need to engage the government to do the needful. We need to do something tangible in order to avert this economy that has been in a quagmire for a very long time and ensure that the government begin to address all these issues, and make relevant efforts to proffer solutions” Nwokedi said.
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