Manufacturers and industrialists on Wednesday appealed to the Federal Government and the Central Bank of Nigeria for a review of the available foreign exchange (FX) policies in the country.
They said this would support the import of unavailable local inputs for manufacturing.
Mansur Ahmed, president, Manufacturers Association of Nigeria (MAN), said that the review was pertinent, owing to the nation’s efforts to steer the economy to recovery.
He said the acute shortage of FX resulting in the erosion in naira parity had been a major operational nightmare to manufacturers in the country.
Mr Ahmed said that traditionally, foreign exchange rate played an important role in investment determination via its relationship with inflation and interest rates.
He said the variability and large depreciation in exchange rates value was an obstruction to economic activities, leaving manufacturing production without insulation.
According to him, the association has consistently observed that foreign exchange crisis in which naira value depreciates among convertible currencies strangulates and reduces the size of manufacturing in the country.
Mr Ahmed said depreciation in naira value caused manufacturing raw-materials and machinery imports to be more expensive.
“The high cost import bill for the productive inputs decreases manufacturing working capital and feeds into manufacturing commodities prices, thereby making the sector less competitive.
“In addition, COVID-19 rode on the wings of the low international commodity prices, particularly crude oil prices, to trigger the prevailing FX crisis.
“The acute shortage of FX resulting in the erosion in naira parity has been a major operational nightmare to manufacturers in the country.
“In the current survey (Q4 2020 MCCI), most manufacturers reported not being able to adequately source FX for importation of productive raw-materials and machinery that are not available locally.
“Most worrisome is the inability of manufacturers to meet transactional obligations with oversea suppliers as required.
“Moreover, because sourcing FX in the official market has become extremely difficult, operators are daily approaching the Bureau De Change (BDC) segment notwithstanding the high cost implication.
“A favourable exchange, a case of appreciation of the naira, no doubt, would present good omen and improves manufacturing production,” he said.
The MAN president said issues of exclusion of items from the official FX window, concessional FX allocation to critical manufacturing sectors and the introduction of Wholesale Dutch Auction System (WDAS) be thoroughly considered.
Mr Ahmed also advocated the fast-rack of the unification of all FX windows in the country.
This, he said, would serve to engender a productive FX management in the country.
Also, Toki Mabogunje, president, LCCI called for the review of the foreign exchange management framework to expand the scope of market mechanism in the determination of the exchange rate.
Mrs Mabogunje said that the unification of the exchange rates should be prioritised for expediting recovery and bolstering investor confidence.
“While the Lagos Chamber appreciates efforts of the Central Bank of Nigeria (CBN) in preserving the scarce foreign exchange resources at a time the country is faced with relatively lower oil price and production, we reiterate our position that a disproportionate reliance on demand management strategies is not a sustainable solution to the recurring foreign exchange crisis.
“In year 2021, we urge the CBN to de-emphasise demand management policies and intensify efforts in improving the supply side of the foreign exchange market.
“We welcome the CBN’s recent policy stating that beneficiaries of Diaspora Remittances should be paid in foreign exchange.
“The policy is a step in the right direction in resolving the liquidity issue in the currency market by ensuring availability of foreign exchange, especially at the retail segment.
“This should be replicated for other sources of inflows such as export proceeds, Foreign Direct Investment [FDIs], and Foreign Portfolio Investments [FPIs].
“Robust remittance inflow is expected to moderate FX pressure and narrow the wide parallel market premium as economic agents would have access to a harmonised rate,” she said.