By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to set an exchange rate trading band for them to help staunch rising manufacturing costs worsened by illiquidity in the foreign exchange (FX) market, which has weakened industrial production since President Bola Tinubu carried out reforms in June.
In a statement on Wednesday, the body said, “Despite the recent reform to unify all forex windows, the exorbitant premium that persists between the official and parallel exchange rates have further stalled manufacturing operation.”
Speaking on ways to improve this, it said, “The short-term remedy will require managing the floating exchange rate system.”
In June, the apex bank liberalised the foreign exchange market, and this weakened the Naira by more than 40 per cent to around N775/$1 it trades currently. The plan was to ensure that the rates converge, but due to forex supply issues, the disparity has widened.
“No central bank’s forex intervention will be effective without boosting the level of liquidity and transparency,” according to the statement, per a report by Bloomberg.
This will likely worsen the input of the manufacturing sector to the Nigerian economy, which witnessed contraction according to the latest gross domestic product (GDP) released by the National Bureau of Statistics (NBS).
According to the NBS, the nation’s economy grew by 2.51 per cent in Q2 2023 compared to 2.31 per cent in the preceding quarter, in what was the 11th consecutive quarter of economic growth.
However, the growth was lower than the 3.54 per cent recorded in Q2 2022, an effect of headwinds faced by the country, including a dwindling oil sector and FX issues.
The NBS also reported that the real GDP for Q2 stood at N17.72 trillion, a 0.17 per cent decrease from N17.75 trillion in Q1.
It was a hit for the manufacturing sector’s contribution to real GDP in percentage terms as it fell to 8.40 per cent from 10.13 per cent in Q1.
Meanwhile, the real GDP growth in the manufacturing sector in the second quarter of 2023 was 2.20 per cent, 0.81 percentage points higher than its growth level in the preceding quarter at 1.61 per cent.
