By Adedapo Adesanya
Scarcity of foreign exchange is taking a toll on the Nigerian manufacturing industry as the global oil price crisis is hindering the importation of raw materials.
The industry’s difficulties are the latest signs of strain in Nigeria’s foreign exchange regime which was devalued in March following crash in the oil market.
According to a Bloomberg report on Tuesday, members of the Manufacturers Association of Nigeria (MAN) have been unable to access hard currency for the past five weeks.
There also seems to be an estimated $1 billion backlog of unmet dollar demand in the country, according to investment bank, FBNQuest, and this is telling on businesses that rely on imports such as pharmaceuticals, electrical products and automobile businesses.
According to the President of MAN, Mr Mansur Ahmed, on Monday, “Everybody is trying to remain afloat.
“Certain sectors will suffer more than others, notably those companies that are heavily dependent on imports.”
The Central Bank of Nigeria (CBN) recently assured foreign investors looking to repatriate their funds to be patient as it will be done in an orderly manner, in line with the apex bank’s procedure.
With the depreciation facing the Naira across the various markets, manufacturers are now turning to domestic suppliers for raw materials, machinery and spare parts which are very expensive.
The association called on the CBN to review rules hindering the ability of lenders to extend credit. This includes “policy contradictions” that require banks to lend 65 percent of their deposits – a measure aimed at stimulating credit – while keeping 27.5 percent of their capital with regulators, which makes a “lesser quantum of money available for lending,” the group said in the statement.
Manufacturers are also seeking lower interest rates and bigger loans, the size of which “has shrunken greatly” as increased borrowing by the government crowds out companies.
On Monday, Business Post reported that the Naira traded at N445 per Dollar at the black market; N386 per Dollar at the Investors segment; and N361 per Dollar at the internship rate.
Meanwhile, the 12-month Naira forwards were trading at N514 per Dollar on Monday, suggesting investors see the currency falling to around that level in a year.
