“Without doubt, therefore, the future of manufacturing will remain bleak in the near future in the present circumstances” Dr. Frank Udemba Jacobs (MON), President MAN
With the foreign exchange market fraught with uncertainty in recent months, it has been a tale of agony for Nigeria’s beleaguered manufacturers, who are unable to plan with the current haziness around a critical aspect of their business.
Saddled with the task of providing lacking infrastructure like power, water and sometimes roads, manufacturers are often adept at navigating the myriads of hurdles on their path. It is however a different ball game when the frustrations are coming from policy makers, who are meant to create a conducive environment for them to operate.
The impact of the fall in oil prices have been unforgiving to a country that failed to heed the various warnings and relied heavily on oil as her source of foreign exchange. With the declining oil revenues, came a reduction in earnings and a corresponding dent on the country’s external reserves. The devaluation of the Naira in November 2014 was therefore inevitable as the foreign reserves had clearly become insufficient to continue to defend the weakening Naira. The Central Bank of Nigeria (CBN) however, against all odds, has managed to peg the Naira precariously at N197/$ since then and is doing her best to douse the pressure on the currency.
One of such steps was the recent barring of 41 items from access to the Nigerian foreign exchange market via a circular dated June 23, 2015. That decision nevertheless, has left many manufacturers and importers in the lurch as they suddenly discovered they could not conclude trade transactions initiated before the change in policy. Equally, many of them are struggling to come to terms with the inclusion of essential raw materials for their production in the list of items not valid for foreign exchange.
Disturbed by the various complaints lodged by their members and the looming danger of industries shutting down due to lack of raw materials, the Manufacturers Association of Nigeria (MAN) had recently intervened by engaging the Central Bank of Nigeria (CBN) in a dialogue, in a bid to resolve some of the issues. It is however instructive to note, from the communique released by MAN after the meeting, that the CBN insisted they will only consider the finished items suggested for inclusion and not the essential raw materials listed to be excluded. Even the assurance made to MAN to look into the case of their members who have confirmed letters of credit issued before the release of the circular and give them priority, sounded non-committal.
Little wonder that the President of MAN; Dr. Frank Udemba Jacobs in a press conference, made the damning verdict quoted at the top of this piece. He went further to note the association’s apprehension that the new policy could cause an increase in the general price level which consequently could lead to higher inflation. He also pointed out that noticeable increase had already been observed since the beginning of the fourth quarter of 2014, sending signals of rising inflation. In his words, “The association feels that local capacities of the affected items are not adequate enough to fill the gap, avoidable shortages will be created in the economy, which will lead to escalating inflation and untold hardship as industries may close down due to lack of input material…”
The CBN would therefore do well to give serious consideration to MAN’s position and send a positive signal to the beleaguered manufacturers, who are desperately looking for a ray of hope. They can’t possibly renounce the well articulated motive of that controversial circular; to facilitate the resuscitation of domestic industries and improve employment generation. So much is at stake, as the country cannot afford the redundancies that will result from a shutdown of industries.