Nigeria’s manufacturers say the new CBN rules on the foreign exchange market will improve access to raw materials and stabilise the market.
Key real sector players who spoke to BusinessDay last night commended the CBN for allowing exporters to have unfettered access to their repatriated forex, stating that this will eventually improve liquidity and possibly revive the manufacturing sector, which is currently facing deep recession.
Nigeria’s manufacturing has seen negative growth in the last three to four quarters, and its Purachasing Managers Index (PMI) in May stood at only 45.8, though this was an improvement from 43.7 in the preceding month. A PMI below 50 depicts an unhealthy manufacturing sector, characterised by dwindling fortunes.
“There will be positives from the supply side,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry.
“This will help manufacturers as there will be more FX availability. This will also help stabilise the market. We expect that FX naira to be within the threshold of N300 or below threshold,” said Yusuf.
Nigeria’s manufacturers have been hard hit by FX unavailability, which threatened to close down a number of critical factories.
Some small-scale players who could not cope with the situation shut down, while a number of conglomerates and multinationals shed hundreds of thousands of jobs.
The Kaduna Chamber of Commerce, Industry, Mines and Agriculture (KADCCIMA) told BusinessDay in February that the poor FX management and dollar scarcity caused the loss of N1.46 trillion to the Organised Private Sector (OPS) between July and December.
Large enterprises said recently that they have lost N320 billion to lack of clear FX policy within the last six months.
Exporters have complained that the practice of not allowing them to have access to their FX repatriated from abroad is hampering their business and discouraging them from exporting more.
Ede Dafinone, CEO of Sapele Integrated Industries, a crumb rubber exporter, told BusinessDay recently that it was wrong for the central bank to force exporters to take their repatriated dollars at the official rate, when these exporters buy raw materials or source for FX at the parallel market at between N350 and N380. Non-oil export in Nigeria declined from $2.7 billion (2014) to $1.1 billion (2015).
Yusuf said this situation has changed with the new FX rules.
“We are happy that non-oil exporters will have unfettered access to their repatriated FX. This will help improve liquidity and also support manufacturing,” said Yusuf.
The CBN’s announcement, however, did not include the 41 items earlier banned. Most manufacturers who spoke with BusinessDay said the bank should have unbanned the items, given that the FX will now be determined by the forces of demand and supply.
Frank Udemba Jacobs, president of Manufacturers Association of Nigeria (MAN), told BusinessDay that though government meant well by banning those items, it should have unbanned some of them that are critical to the manufacturing sector.
“I know government meant well by banning those products. But I still do not see how some of these items should still be placed on ban when the FX market is market-driven. However, I must point out that banning many of the items will support the manufacturing sector. But some of these items are still critical for us and should be unbanned, as we still do not have the capacity to produce them now,” Jacobs said.
According to him, the CBN should have included all the banks as primary dealers, praying that the system will create no room for rent-seeking.
