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Manufacturers seek review of Forex policy, rates unification in Nigerian economy

*The Manufacturers Association of Nigeria has said the acute shortage of foreign exchange resulting in the erosion in Naira parity is a major operational nightmare to manufacturers in the country

Alexander Davis | ConsumerConnect

In the continued efforts at steering the economy to recovery, manufacturers and industrialists have appealed to the Federal Government and the Central Bank of Nigeria (CBN) for a review of the available foreign exchange (FX) policies in the country.

This would support the import of unavailable local inputs for manufacturing to enhance the lot of the real sector of the economy.

It was gathered Mansur Ahmed, President of MAN, Wednesday, February 10 stated that the review is pertinent in view of Nigeria’s efforts to steer the economy to the path of recovery.

The acute shortage of FX resulting in the erosion in Naira parity has been a major operational nightmare to manufacturers in the country, Ahmed said.

According to the MAN President, traditionally, foreign exchange rate plays an important role in investment determination via its relationship with inflation and interest rates.

He stated that the variability and large depreciation in exchange rates value constitute an obstruction to economic activities while leaving the real sector without insulation.

The association has consistently observed that foreign exchange crisis in which naira value depreciates among convertible currencies strangulates and reduces the size of manufacturing in the country.

He added that depreciation in Naira value has caused raw-materials manufacturing and machinery imports to be more expensive in the country.

Ahmed noted: “The high cost import bill for the productive inputs decreases manufacturing working capital and feeds into manufacturing commodities prices, thereby making the sector less competitive.

“In addition, COVID-19 rode on the wings of the low international commodity prices, particularly crude oil prices, to trigger the prevailing FX crisis.”

He also observed that the acute shortage of FX resulting in the erosion in Naira parity has been a major operational nightmare to manufacturers in the country.

“In the current survey (Q4 2020 MCCI), most manufacturers reported not being able to adequately source FX for importation of productive raw-materials and machinery that are not available locally.

“Most worrisome is the inability of manufacturers to meet transactional obligations with oversea suppliers as required,” said he.

The MAN Chief added that “a favourable exchange, a case of appreciation of the Naira, would present good omen and improves manufacturing production.

According to him, issues of exclusion of items from the official FX window, concessional FX allocation to critical manufacturing sectors and the introduction of Wholesale Dutch Auction System (WDAS) need to be thoroughly considered by the authorities.

He advocated the fast-rack of the unification of all FX windows in the country towards evolving a productive FX management in Nigeria.

In the same vein, Mrs. Toki Mabogunje, President of the Lagos Chamber of Commerce and Industry (LCCI) urged the review of the foreign exchange management framework to expand the scope of market mechanism in the determination of the exchange rate.

Mabogunje said that the unification of the exchange rates needed be prioritised for expediting recovery and bolstering investor confidence.

The LCCI President stated:  “While the Lagos Chamber appreciates efforts of the Central Bank of Nigeria (CBN) at preserving the scarce foreign exchange resources at a time the country is faced with relatively lower oil price and production, we reiterate our position that a disproportionate reliance on demand management strategies is not a sustainable solution to the recurring foreign exchange crisis.

“In year 2021, we urge the CBN to de-emphasise demand management policies and intensify efforts in improving the supply side of the foreign exchange market.

“We welcome the CBN’s recent policy stating that beneficiaries of Diaspora Remittances should be paid in foreign exchange.

“The policy is a step in the right direction in resolving the liquidity issue in the currency market by ensuring availability of foreign exchange, especially at the retail segment.”

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