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FX scarcity puts importers on edge ahead yuletide

Few weeks into the festive season, importers are presently agitated as they now find it very difficult to access foreign exchange (FX) needed to bring in vehicles, finished products, semi-finished goods, and even raw materials for local industries.

To them, though the Christmas and New Year season comes with various degrees of celebration that makes it a peak period for almost all businesses, companies that depend on imports are practically struggling to survive while many employees are losing jobs due to low-profit margins caused by issues around FX scarcity.

BusinessDay finding shows that the coming festive season would likely be an uninteresting one following the issues around scarcity and volatility of dollars.

In addition, the global supply chain difficulties have led to the high cost of freight, as importers now pay as much as $15,000 to move a 40-foot container from India or China to Nigeria, which formerly cost less than $4,000 before the outbreak of COVID-19.

Tony Anakebe, a Lagos-based clearing and forwarding expert, says the scarcity and volatility of the exchange rate have really affected the importation business.

According to Anakebe, volumes of ships coming into the nation’s seaports to discharge imports are now very few compared with what it used to be.

Read Also: Nigeria’s imports trapped overseas over container scarcity

“Many importers are not able to place an order with their suppliers due to scarcity of foreign exchange, and when available, the rate is also very high. And if there is no foreign exchange, there will be no business in the port industry. This challenge has worsened the problem of high freight that importers are presently facing in the global shipping industry,” Anakebe states.

Given the high exchange rate of Nigeria’s currency to US dollar, he notes, importers are finding it difficult as much naira is now required to get one dollar at N420 per dollar (official rate), and when the import finally comes in, the importer hardly breakeven despite the increasing market prices of goods.

He warns that the development will likely result in a drop in the volume of ships coming into the country despite the fact that the Christmas season used to be the peak period for businesses around the world.

Confirming this, Degun Agboade, president, Nigerian Association of Small and Medium Enterprises (NASME), says importation has reduced drastically because businesses are finding it extremely difficult to get sufficient FX to import.

“The scarcity and shortage in supply of FX, especially US dollar, is really affecting our businesses and also our productions,” Agboade says.

Citing an example, a Lagos-based importer, who does not want his name in print, states that beyond the volatility of FX, insufficient supply has become a threat to many Nigerian-based businesses.

According to the importer, who is into aluminium business, he recently applied for the dollar equivalent of a little above N300 million after opening letters of credit with the Central Bank of Nigeria (CBN) to enable him to bring in about 60 containers of aluminium products.

He was only granted about $1,400, which seriously impeded his business, he says.

“At the end, my company was only able to bring in two containers of the product we needed using the dollar that we sourced from the black market. The situation has become challenging, and I have been wondering how we will survive if this continues. Christmas is around the corner and no critical inputs to continue production,” the importer says.

On his part, Fidelis Ayabae, managing director/CEO of Fidson Healthcare plc, notes that some companies in Nigeria have had reason to scale down operations while some came to a point of total closure of their operations due to lack of material availability during this period.

Ayabae, who is also the chairman – PMG, Manufacturers Association of Nigeria, says the cost of running manufacturing operations in Nigeria that depend largely on imported materials for their production has become so high to the point that small and medium manufacturing companies are now struggling to survive.

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