CBN’s ban on cold rolled coils deals blow on steel firms

The Central Bank of Nigeria’s exclusion of cold rolled steel coils importers from accessing foreign exchange from Nigerian markets is a big blow on the downstream players in the iron and steel sector, local manufacturers have said.

The downstream segment of the iron, steel and fabricated metals sector are companies which use cold rolled coils in the manufacture of home appliances, roofing sheets, metal furniture and filling cabinets, tables and chairs, among others.

The CBN had, last Tuesday, excluded importers of cold rolled steel sheets, galvanized steel sheets and roofing sheets, among many others, from the forex markets to, according to the bank, encourage local industries, create jobs and cut down the undue pressure on the country’s almost depleted foreign reserves.

But this will likely ramp up the production costs of steel firms as they begin a struggle to obtain forex at exorbitant rates. Steel firms import cold rolled coils owing to insufficient local production capacity, industry players say.

The effect of this policy is an increase in the production costs of steel firms, particularly those in the downstream segment, that depend largely on cold rolled coils for industrial production.

This could negatively affect their capacity to create jobs in an economy where one out of every four persons is unemployed.

“We are surprised that certain items like cold rolled steel are excluded,” Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), told Real Sector Watch, in a telephone chat weekend.

“Such exclusion is not in the interest of members because we do not have enough capacity at the moment. I feel they would have allowed for some time to enable us have enough capacity,” Jacobs said.

“Though we are yet to get to our members, I believe we do not have enough capacity. Our members who use cold rolled coils say the local producers (also members) do not yet have enough capacity to satisfy them. That is why we would have wanted to have been carried along,” he added.

Western Metal Products Company (WEMPCO), Midland and Kam Wire are three major producers of cold rolled in Nigeria. Investigations show their capacity is 440,000 metric tons, even though the gap between demand and supply is well above one million metric tons.

The upstream producers and the downstream end users have, for some time, engaged in a tussle over waivers granted by the immediate past government of Goodluck Jonathan.

The Federal Government had granted waivers to the upstream players with a view to ensuring that they imported the demand-supply gap to satisfy the downstream end users.  

But the downstream players claim that the upstream players only produce for themselves and do not supply them. According to the former, the Federal Government should scrap waivers granted to the latter and force them to pay 20 percent duty, since they are not living up to the purpose for which the waiver was given. They say the government should enforce the duty immediately since they (the upstream producers) import like them.

But some upstream players have come up to deny receiving waivers from the Federal Government.

A source from Midland Roling Mill Limited said the firm has so far produced over 300,000 tons of cold rolled coils since inception and has never had any waiver under which they have imported cold rolled coils.

 

ODINAKA ANUDU

 

You might also like