By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has expressed optimism that the foreign exchange market crisis should moderate in the future with the decision of the Central Bank of Nigeria (CBN) to float the Naira.
However, the Nigerian manufacturers warned that the policy, which led to the further devaluation of the Naira in the currency market, would cause the costs of importing raw materials into the country and reduce import flows.
In a statement signed by its Director-General, Mr Segun Ajayi-Kadir, the association noted that floatation could lead to exchange rate volatility, pointing out that this would lead to difficulty in predicting future exchange rate movements, making planning challenging for businesses.
But MAN maintained that floating the Naira remains an important step towards resolving the foreign exchange market crisis, given the fact that the official exchange rate was almost at par with the market-determined rate.
According to the association, the policy will increase market efficiency and help return investors’ confidence in the economy.
MAN said, “We would like to stress that foreign exchange scarcity has hindered the manufacturing sector. While getting the forex at the official rate has been quite difficult, members who struggle to get it through alternative means do so at an exorbitant and uncompetitive rate.
“Given a floating system, we are optimistic that the official and parallel market rates will eventually converge and will create headroom for investors to have access to forex at a competitive rate seamlessly.”
MAN noted that despite whatever positives may happen, erratic power supply and the high cost of alternative energy sources were seriously draining the sector.
“For example, the price of diesel persistently remains high, raising operational costs for manufacturers. Low patronage of made-in-Nigeria products and inconsistent government policies are also problematic for manufacturers.
“Also, poor infrastructure, multiple taxes, high logistics costs, and high cost of borrowing are not helping the situation. MAN is anxious to see the new administration effectively addressing these challenges to make the operating environment more conducive for the sector to be competitive,” it said.
