MAN canvasses increased dollar access for small-scale manufacturers

…says CBN’s 60% FX allocation has raised capacity

The Manufacturers Association of Nigeria (MAN) wants commercial banks to make more dollars available for real sector players in the small- and medium-scale category (SMEs).

In an e-mailed position paper sent to Real Sector Watch by MAN, the association says that the recently introduced CBN foreign exchange policy has made dollars available for large enterprises. However, the association adds that players in the SME category are struggling to access dollars needed to import inputs.

“Most of our large companies now enjoy improved access to foreign exchange, especially those with unconfirmed Letters of Credit (LCs). But the majority of manufacturers operating within the small and medium cadre, who incidentally are in the majority, are now not having access to FX as a result of the new policy,” MAN says, in the position paper signed by Frank Udemba Jacobs, president of the association.

The CBN in February announced a new policy targeted at making more dollars available to commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers.

The CBN directed banks to open FX retail outlets at major airports and reduced the tenor of its forward sales from the maximum cycle of 180 days to no more than 60 days from the date of transaction.

MAN says the reduction in forward FX sales tenure has improved access to FX and engenders stability of FX flow only for manufacturers that have applied before the new policy.

The association, however, states that manufacturers with confirmed LCs are facing great challenge accessing FX as banks are unable to process and meet their dollar requirements.

“Manufacturers in need of essential raw materials not available locally that are currently on the CBN list of 41 item not valid for FX have continued to source FX at exorbitant rates,” MAN reiterates, adding that the provisions of the new FX policy appears more outward looking at a time that inward looking oriented FX management and conservation is plausible.

“The policy contextually appears not to have addressed the issues of improving domestic productivity, especially in the manufacturing sector that has the capacity to increase non-oil export and inflow of FX,” notes MAN.

The association recommends restoration of sectoral FX allocations to the manufacturing sector and extension of same to agriculture and solid minerals sectors, in line with the provisions of the Nigerian Economic Recovery and Growth Plan (ERGP).

“CBN should immediately convene a policy dialogue session with operators in the manufacturing sector to present official guidelines on how it intends to make FX flow to the sector a strong priority. The CBN should state in concrete terms how the FX market will relate with the manufacturing sector under the new dispensation,” the association states.

MAN acknowledges that the 60 percent allocation to the manufacturing sector has yielded a positive result, saying that this positives would have been overwhelming but for the average level of compliance of commercial banks with the preferential FX policy.

The association says manufacturers’ the FX has been a mixed grill, stressing that there is still a huge gap between their FX requirements and supply.

ODINAKA ANUDU