Federal govt forex policy creates new hurdles for local manufacturers

Nigeria’s foremost Banker, Mr. Godwin Emefiele.

Nigeria’s foremost Banker, Mr. Godwin Emefiele.

THE Central Bank of Nigeria (CBN)’s efforts to stabilise the naira and encourage local production by restricting access to foreign exchange to importers may be hurting local manufacturers, many of who say, they may have to close shop should the policy be sustained.

The Guardian learnt that, already, while some companies have temporarily shut down, many that are able to beat the ‘vague forex policy’ have had to cut production by 25 per cent due to delays and refusals in accessing foreign currencies.

Meanwhile, Nigeria Agribusiness Group (NABG), an agro-business sector operators’ platform, led by Mr. Sani Dangote, has thrown its weight behind the Central Bank of Nigeria (CBN)’s foreign exchange policy as well as the refusal of the apex bank to devalue the naira as is being suggested by international finance institutions and multi-lateral agencies.

The companies, it was learnt, are appealing that the CBN reconsiders the policy, alleging that officials at the apex bank “might not know the core inputs to productions in these companies, the procurement of which the policy is frustrating,” and that Nigeria risks relapse to worse case of unemployment if measures are not taken to stem the tide.

In a circular in June, the CBN had announced the restriction of foreign exchange to importers of some 41 goods and services from the forex market, noting that the move was in order to encourage local production.

Though the business community cried foul, stressing that Nigeria has a long way in creating an enabling environment to foster local production, the CBN insisted on its stance and is even planning on adding more items to the initial list.

The list of the items include cement, margarine, palm kernel, vegetable oil, poultry products (chicken, eggs and turkey), Indian incense, tinned fish in sauce (Geisha, Sardines), cold rolled steel sheets, galvanized steel, roofing sheets, wheelbarrows, head pans, metal boxes and containers, and enamel ware.

Others are steel drum, steel pipes, wire mesh, steel nails, wire rods, security wire, wood particle and board, wood fibre boards and panel, plywood board and panel, wooden doors, toothpicks, glass and glassware, kitchen utensils, tableware, tiles and wooden fabrics, plastic and rubber products, soap and cosmetics.

But the Chairman of Nestle Nigeria, who also chairs the board of Cutix Plc, a local cable manufacturing company, David Ifezulike, said the CBN policy is hurting local manufacturers, just as devaluing the naira twice within six months had seriously affected firms.

He said: “In spite of the fact that the naira has been devalued twice in six months, the CBN came out with a circular that contained the list of items that are no longer valid for foreign exchange. The vague nature in which the items were described in the circular impeded the access of several local manufacturers to foreign exchange for procurement of their raw materials.

The business community is making appropriate presentations to the CBN and we hope that this would lead to further clarification on the items that should be affected by the circular.”

President of the Cables Manufacturers Association of Nigeria, Ifeanyi Uzodike, said his members are weighed down by the policy, as “a couple of them closed down for sometime within the year due to economic problems, chief among which was the CBN directive.”

He added that most of the companies have cut production by about 25 per cent, and that the restriction from getting forex from the parallel market was stifling.

According to him: “The CBN forex restriction is seriously affecting the cable industry. We are finding it difficult to get foreign exchange to purchase raw materials. The CBN does not seem to appreciate that. We have written several letters. The only good news is that the Federal Ministry of Commerce and Industry called us a few weeks ago and asked for the statistics on the capacity of our members, and we sent it to them. We believe that they would take the information to the CBN.

“But the apex bank has not shown any interest in resolving the situation. What happens is such that one puts in a bid for foreign exchange and for four weeks, one would get nothing. This is because the CBN does the allocation and tells no one anything about it. The net effect is, if care is not taken, most of us would soon have to cut our capacities. And if we do, that would create unemployment in the country. I don’t think anyone in the CBN knows what it takes to make cables; that is why they are adamant on their stance.”

Associate Professor of Economics and an expert on Public Policy in the Department of Economics, at the University of Lagos (UNILAG), Femi Saibu, said though the policy means well for the economy and the blacklisted items ordinarily, shouldn’t be imported, companies that are finding it difficult to source raw materials would have to explain their predicament to the CBN, except their activities border on illegality.

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