How CBN forex policy revives local industries
The interesting growth story of Hong Kong, Singapore, South Korea, and Taiwan, known today as Asian Tigers, shows thatno economy can make any headway when it consumes what it does not produce and produces what it does not consume.
According to economic history, the four Asian Tigers began their journey to economic advancement by chasing export-orientated industrialisation and putting a number of measures in place to prevent influx of products, which could be locally produced, into the country.
Malaysia, which is today called a Tiger Cub economy for following the export-driven model of economic development of Asian Tigers, was once an import-dependent economy like Nigeria.
Having seen the ‘Asian Miracle’ of the Tigers, policy makers of the country embarked on some restrictive measures, which eventually helped local manufacturers. Some proactive measures were taken with a view to moving the country away from over dependence on primary products such as rubber and tin.
Today Malaysia is a strong economy country with a multi-sector economy based mainly on manufacturing.
Malaysia is currently one of the world’s largest exporters of semi-conductor components and devices, electrical goods, solar panels, and ICT products.
Despite criticisms associated with the Central Bank of Nigeria (CBN)’s restriction of on importers of certain items from accessing foreign exchange from Nigerian markets, evidence has shown that every cloud has a silver lining.
From what is currently happening in the economy, major manufacturers say the policy is a blessing in disguise as it has the capacity to catapult Nigeria into a class of industrialised economies, if well managed.
What this step taken by the apex bank has done is to stimulate patronage of local manufacturers who were once ignored by consumers that preferred cheap, imported products.
With this step, the capacity utilisation and revenues of many local manufacturers have been raised, while a number of them are currently employing new workers retrenched by import-dependent firms. Similarly, a number of them are expanding aggressively and mulling exporting their products to other countries to repatriate forex into the economy.
However, one key complaint of these manufacturers is that the CBN should enable them to have access to forex with which to import inputs that cannot be manufactured locally.
The manufacturers themselves acknowledge that the CBN policy on forex has, since its inception, more than doubled their productive capacities, with attendant benefits in terms of expansion to meet increasingly higher demands for their products and services.
Nassos Sidirofagis, deputy managing director, Tempo Paper Pulp & Packaging Ltd, said since the CBN foreign exchange policy came into existence, Tempo has been able to increase its production capacity from 50 percent to 70 percent. This, he said, has impacted their expansion positively as they raise export volumes to repatriate foreign exchange into the economy.
Sidirofagis said the policy has helped the manufacturers to realise the urgent need to expand because of increasing demands for their products, adding that his company is mulling an expansion project due to increasing demands between 2016 and 2017.
“We can now smile a little bit. With this,we can keep expanding,” he said.
“We have since developed capacity to also attract foreign investors, who we believe are exploring investment opportunities in our organisation. Therefore on all sides this is a win-win situation for Nigeria and local manufacturers,” he said.
He added that his firm is building a paper factory that will produce 420 tons per day when completed.
On mitigating challenges facing local manufacturers’ capacity to expand, he noted that government should focus more on the manufacturing sector so that Nigeria will not have the Greece experience. He advised that the policy must be in place for a minimum of two years, to facilitate full development of local capacity to attract investors.
Oluwasesan Taiwo-Tijani, group operation manager, SREN Chemicals Limited, said his organisation has enormously benefitted from the CBN foreign exchange policy.
Taiwo-Tijani explained that the CBN forex policy has forced several companies that are import-driven to patronise SREN Chemicals, stressing that this has raised the company’s sales and productive capacity has increased by 30 per cent.
He appealed to the Federal Government to retain the policy with a view to sustaining local content development and to turn Nigeria into an export dependent country, while asking the CBN to help reduce the interest rate to help local investors.
ODINAKA ANUDU