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Nigeria’s forex scarcity could trigger more business failure in Kano

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Manufacturing activity in Kano State, northern Nigeria’s industrial hub, which has been on the downward trend for some time now, is further constrained by the mounting foreign currency scarcity being experienced in the country.

This development, industry experts say, is making it difficult for the few manufacturing companies that are struggling to remain in operation in the state to access some critical components of their raw materials that they need to import from overseas.

According to the experts, the prevailing difficulties in accessing forex is expected to further create a contraction in the economy of the state, and others in the northern part of the country.

Kano, with an estimated population of over 12 million, ranks second in the latest NBS ranking of states in the area of unemployment and there is a growing concern in the state that the present foreign currency crisis could trigger more unemployment in the state, as many of the companies whose raw materials are import-dependent and may have to scale down operations.

One of the companies that are heavily affected by the forex scarcity is Ammasco Petrochemical Company Limited, an indigenous lubricant production entity based in the state, which needs foreign currency to import a key component of its raw materials for it to continue to function.

Mustapha Ado, founder and chief executive officer of the company, who confirmed this development to BusinessDay on Wednesday in Kano on the sidelines of a recent visit by a delegation from the Federal Ministry of Trade and Investment, led by the director in charge of planning and strategy, Tijjani Inuwa Babura, and the leadership of the Kano Chamber of Commerce, Industry, Mines, and Agriculture (KACCIMA), stated that the forex shortage is the biggest challenge industries operating in the state are being confronted with.

Ado disclosed that his company which at the moment is providing direct employment for over 2,000 people in the state is being forced to scale down operations as a result of the delay in accessing raw materials occasioned by the forex scarcity.

The industrialist also disclosed that his plan to scale down operations due to raw material delay is giving an opportunity to some criminally minded individuals based in the UAE who have perfected the strategy of faking some of his company’s premium products.

He explained that faked products are being brought into the country through Nigeria`s land borders in the northern part of the country with Niger Republic.

“I am indeed glad to have this delegation of the Federal Ministry of Trade and Investment and the Kano Chamber of Commerce visit us today. The biggest problem which many businesses are facing today in Kano is that of the scarcity of foreign currency. I am aware that the challenge is principal as a result of the slowdown of the global economy which is affecting the price of petroleum which our country depends upon,” Ado said.

“To make what I am saying clear, I will buttress what I mean with recent happening. I approached my bank for a foreign exchange transaction in respect of our raw material and the rate given to me in respect of the transaction was N346 to a dollar, and to my surprise in about a week later, I was told that I will only be able to get less than what we needed at a new rate of N470 to the dollar. This means that I am going to get less amount of dollar for the transaction and be paying more naira for it. This to me is a very serious problem.

“A serious problem in the sense that the raw material that we are paying for is a key component of our manufacturing process, without it, we cannot remain in operation. This is a company that is providing direct employment for over 2,000 people and paying a salary bill of over N100 million monthly,” he said.

He appealed to the Federal Government to re-tool the nation’s microeconomic policy in a way that will give priority to manufacturing companies in the allocation of foreign currency so as to prevent loss of jobs, which could escalate the insecurity being experienced in the country.