The continued scarcity of the naira notes and petrol in Africa’s biggest economy could cost manufacturers a 25 percent decline in monthly sales of domestic goods, if the situation persists for the next three weeks.
In an exclusive interview with BusinessDay, Segun Ajayi-Kadir, the director-general of Manufacturers Association of Nigeria (MAN), said the situation was not good for the industry, the government and the ordinary citizens.
“I would put a rough estimate of a 25 percent drop on monthly sales of domestic goods if the situation should persist for the next three weeks,” he said.
As purchases from the retail end are mostly transacted in cash dry up, you will immediately notice a sharp drop in wholesale purchases and instant build-up of unsold inventory in industries, he said.
“You will have a compounded crippling lack of patronage for the domestic manufacturer; the denial of government revenue that would have accrued from consumption taxes, the disruption of daily life and the needs of the average Nigerian,” Ajayi-Kadir added.
In October 2022, Godwin Emefiele, Nigeria’s Central Bank governor announced the plan to redesign the N200, N500, and N1, 000 naira notes, and directed Nigerians to deposit their old notes before January 31, 2023 when they would cease to be legal tender.
The deadline was extended last week, by 10 days from January 31 to February 10, to allow for the collection of the old naira notes.
Emefiele, in a statement, said the sensitisation exercise on the naira redesign by the apex bank has achieved a success rate of over 75 percent of the N2.7 trillion held outside the banking system.
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But since last week, cash, including old and new naira notes, have largely been unavailable from many banks’ Automatic Teller Machines (ATMs) and over-the- counters.
Bank customers who need small cash to pay for transport fares, and other urgent needs are finding it difficult to access their money.
More worrisome is the fact that some bank ATMs are dispensing N1,000 per transaction with N35 charges for other bank’s ATM cards. Point of Sales (PoS) operators charge N1, 000-2,000 to exchange N10, 000 old notes for new naira.
“This unpleasant situation actually confirms the apprehensions we had when the plan by the CBN to introduce the new notes was announced in October, without a clear roadmap for ensuring a seamless transition,” Ajayi-Kadir said.
He said they had cautioned that adequate measures be put in place to ensure a smooth currency transition, particularly in the unbanked areas in Nigeria.
“It would appear that those measures were either not taken on time or they have proved inadequate and failed to prevent the near bedlam that we are witnessing across the country.”
For energy, the scarcity of petrol which has been prolonged since the fourth quarter of last year has seen its pump price increase to N300 per litre from N170. This has led to long queues across petrol stations and hikes in food and transport costs across the country.
Last year, high inflationary pressures which rose to its highest levels in 17 years caused the manufacturing sector to contract in the third quarter, for the first time since the fourth quarter of 2020.
According to the National Bureau of Statistics, the sector shrank by 1.91 percent in Q3 (year-on-year), lower than the same quarter of 2021 and lower than the preceding quarter by 6.20 percentage points and 4.91 percentage points respectively.
The affected growth in the manufacturing sector also dragged the overall Gross Domestic Product (GDP) growth, which slowed to 2.25 percent in Q3, lowest since Q2 2021,
With our growth prospects heading further south, we can ill afford a downturn in our GDP, according to MAN.
“The negative impact it portends for local producers, the agricultural and distributive segments of our economy is huge and may worsen the bashing our economy has received from both external and internal shocks in recent times,” it said.
Ajayi-Kadir recommends strategic communication and joint operations to ensure widespread and sustained availability and circulation of the redesigned naira notes.
“We hope that the resumption of payment across the counter in the banks and the intensification of the CBN special cash swap arrangement in remote areas may yield positive results,” he said.
