Manufacturers and forex

The Manufacturers Association of Nigeria (MAN) has cried out over the defiance by Nigerian banks of a Central Bank of Nigeria (CBN) directive to allocate 60% of all forex allocations to manufacturers. According to MAN’s National President Frank Jacobs, the situation has led to avoidable operational challenges for manufacturers, leading to the closure of many […]

The Manufacturers Association of Nigeria (MAN) has cried out over the defiance by Nigerian banks of a Central Bank of Nigeria (CBN) directive to allocate 60% of all forex allocations to manufacturers. According to MAN’s National President Frank Jacobs, the situation has led to avoidable operational challenges for manufacturers, leading to the closure of many factories and the loss of jobs by thousands of workers and bread winners.
CBN had in a letter dated August 22, 2016 and signed by its acting Director, Trade and Exchange Mr W. D. Gotring directed all commercial banks and other authorised dealers in the foreign exchange market to ensure that they channel 60 per cent of total forex purchases from all sources, including Interbank, to end users strictly for the purpose of importation of industrial raw materials, plant and machinery.
CBN justified its action with its review of returns on the disbursement of forex and observed that a negligible proportion of forex sales were being channelled towards the importation of raw materials for the manufacturing sector. To stress its intentions for the forex market the apex bank stated further that “the balance of 40 per cent should be used to meet other trade obligations, visible and invisible transactions.” The initiative by CBN is apparently informed by the heavy dependence of the nation’s manufacturing sector on imported industrial inputs such as raw materials and facilities which include machinery and sundry equipment. The scarcity of forex has exacted a significant toll on the sector.
However, even as the banks and dealers may be accused of starving the manufacturing sector of forex, the report hardly does credit to Nigerian manufacturers, especially in the light of the present state of the nation’s economy, as they are virtually begging cap in hand for the very facilitation the nation expects from them. It is easily recalled that in the manner of past and present administrations, Nigerians expect the nation’s manufacturing sector to drive the process of diversifying the Nigerian economy and generating forex from exportation of its products. Sad as the lament of the MAN may be, the sector is not likely to match expectations with performance.
Experts believe that the present state of preponderant dependence of the manufacturing sector on forex is due to
The alien nature of most Nigerian manufacturers, particularly in the formal sector who are hardly anything beyond mere assembly plants and finishing shops that hardly add value in local content to foreign goods sold in Nigeria. Their dependence on forex without commensurate export driven operations renders them as technical drains on the nation’s forex since they remain mere extensions of their parent companies whose operational systems hardly provide for the use of Nigerian inputs in their production cycles.
Ordinarily, the circumstances of the recession into which the economy has lapsed offer ample opportunities for creative manufacturers to exploit the use of local inputs for profitable business. Given the nation’s endowments the entire African continent offers itself as a huge market waiting for Nigerian export quality goods from the manufacturing sector. It is significant that the crisis reported by the formal sector manufacturers is not acute for the informal sector, where operators are making good business.
Hence, while CBN needs to enforce its regulatory measures on the banks and sundry forex dealers with respect to obliging the manufacturers, the time has come for the country to change the story of the manufacturing sector from a prostrate beggar of forex to the principal generator of same.