Solving the Forex Challenge of Manufacturing Companies
August 22 (THE WILL) – JOSEPH ABANG underlines the imperative to meet the foreign exchange needs of manufacturing companies in the context of changing monetary policies of the Central Bank of Nigeria (CBN)
The Nigerian economy faces a particular challenge. It is crystal clear. The cause of this is nobody’s fault, to be honest, as it was driven by the economic fallout from the global COVID-19 pandemic. Almost every country in the world has had its share of the economic downturn. However, what is more alarming is that you would expect the manufacturing sector to be the economic engine in a critical time like this, unfortunately this is the same sector that is taking the brunt of the economic downturn. in Nigeria.
The growth rate of the manufacturing sector is expected to decline further as traders experience a new wave of inflation and currency shortages. The sharp rise in headline inflation is driven by faster month-over-month inflation, which rose 10 basis points to 1.3%, the highest since June 2017.
This development, according to industry leaders, was already taking a heavy toll on manufacturing companies and is now complicated by increasing difficulty in obtaining foreign exchange to import foreign components for their production.
In truth, this should not happen if Nigeria as a country is ready to stabilize the already fractured economy. The pandemic has taken its toll on the Nigerian economy, as it has in most other economies around the world. The difference is that these other countries are doing a lot to help their manufacturing sector.
In all fairness, the Central Bank of Nigeria has recognized the importance of manufacturing: Apex Bank has made it a priority to create an environment conducive to local manufacturing. The CBN continued to implement accommodative monetary policy measures that will help the economy recover more quickly by increasing credit flows to households and businesses in key sectors such as agriculture, technology, information and manufacturing.
But there is an urgent need to take the bull by the horns – the growing difficulty in sourcing foreign exchange (forex) is a major problem the CBN must address.
Much has been said by relevant stakeholders, the Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI) and others have expressed concerns about the current state of the economy and manufacturing sector.
In a discussion with the media, Ingr. Mansur Ahmed, president of MAN, revealed that manufacturers have not been able to access the required foreign exchange (forex) of the CBN for their operations and that around 40 percent of their foreign exchange needs are not satisfied by the umbrella bank. This means that manufacturers cannot obtain the amount of foreign exchange they need to import raw materials that are not locally available or the equipment they need to continue their operations.
Sadly, many of these companies have invested millions of naira in the Nigerian economy, even during a difficult time when economies and businesses have been hit hard by the COVID-19 outbreak, but they are struggling to keep up. Business. Earlier this year, Procter & Gamble (P&G) announced a $ 35 million investment in collaboration with Colori for the local production of Oral B, one of P&G’s oral care products, as part of the company efforts to locate production in Nigeria. Not only will these massive investments boost the Nigerian economy, but they will also create many job opportunities for citizens.
Last year, GBfoods completed a 20 billion naira tomato processing plant and industrial farm in Kebbi, as well as localized the production of its Bama mayonnaise. The factory is the second largest in Nigeria and the only fully integrated upstream factory in ECOWAS – and it has the largest tomato farm in Nigeria. When all phases of the project are completed, the plant will be the largest fresh tomato processing plant in sub-Saharan Africa.
There is no denying that investments like those of P&G and GBfoods are exactly what Nigeria needs to fuel its declining economy. But the crucial question is: are these companies receiving adequate support in return from the government?
The CBN should seek out companies that have made Nigeria their manufacturing hub and never hesitate to invest significantly in the economy. These businesses need to be given a boost. After all, building a strong economy is always a collaborative effort between government and the private sector.
Nigeria should be inspired by a country like India. The country marked a turning point; an economic program to stimulate economic growth and job creation this decade. It immediately jumped into action with three sets of policy interventions that could, if implemented in conjunction with actions that manufacturing firms themselves can take, specifically accelerate the growth of manufacturing value chains.
The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, reaffirmed the bank’s commitment to encourage companies willing to invest in the Nigerian manufacturing sector to develop the economy and it is nothing less than a lodge. But now, more than ever, it’s time to speak up.
There is therefore a need for the government to continue to conduct the program of upstream integration and resource-based industrialization prudently, in full consultation with the private sector, while ensuring that, in the meantime, forex is more accessible for manufacture in the country.
• Abang is a public affairs analyst.