• Friday, November 15, 2024
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Forex scarcity, soaring costs threaten Nigeria’s manufacturing sector – Onafowokan

Forex scarcity, soaring costs threaten Nigeria’s manufacturing sector – Onafowokan

George Onafowokan, the Chairman of the Ogun State Manufacturers Association of Nigeria (MAN)

George Onafowokan, the Chairman of the Ogun State Manufacturers Association of Nigeria (MAN), has raised alarm over the unprecedented crisis facing Nigeria’s manufacturing sector following the government’s decision to float the Naira in 2023.

Speaking at the 39th Annual General Meeting of MAN on Tuesday in Ogun State, Onafowokan, who also serves as the managing director of Coleman Wires and Cables Industries Limited, addressed the theme, “Dollar to Naira Cost, the Nigerian Manufacturers’ Daily Dilemma: Exploring Strategies for Business Sustainability.”

Read also: ‘Local raw material sourcing, stable power will boost Nigerian manufacturing’

He highlighted the soaring exchange rate, which has surged to NGN1,900 to $1 by early 2024, as a key driver of the sector’s challenges. “This policy move has caused a severe forex scarcity, making it nearly impossible for manufacturers to access affordable dollars for essential imports,” Onafowokan stated.

Due to the limited availability of forex at official rates, many manufacturers have turned to the parallel market, where rates have skyrocketed to NGN900 to $1, causing a significant rise in production costs.

The economic impact has been substantial. Inflation has risen to 28.92% as of December 2023, and 16 major manufacturing firms are estimated to have incurred cumulative losses amounting to N792 billion. Capacity utilisation has plummeted, with inventories of unsold goods now valued at over N350 billion.

Onafowokan also highlighted the added burdens of inadequate infrastructure and rising energy costs.

He noted that key roadways in Ogun State, critical for transporting goods and materials, remain in disrepair, causing frequent accidents and increasing logistics expenses.

In addition, recent electricity tariff hikes by the Nigerian Electricity Regulatory Commission have further strained manufacturers’ operational budgets, squeezing already narrow profit margins.

Acknowledging the Ogun State government’s efforts to improve infrastructure, Onafowokan urged the administration to expedite ongoing projects to relieve some of the pressure on manufacturers.

Read also: Manufacturing investments seen shrinking on high interest rate

He also called for a more efficient tax system and proposed a “Buy Made-in-Nigeria” initiative to stimulate local demand and provide much-needed support for the struggling sector.

Onafowokan’s recommendations underscore the urgent need for policy measures to support the manufacturing industry, which he emphasised as vital for Nigeria’s economic resilience and growth.

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