Manufacturer foresees better industry margin as naira strengthens

A paint maker, Ibrahim Usman, says manufacturers in Nigeria will most likely have improved revenues and profits at the end of the 2017 financial year, owing to lower production costs necessitated by momentum gained by naira against the dollar.

Naira has strengthened against the dollar, reaching N360/$ at the CBN intervention market. The CBN recently introduced a new forex policy narrowing the gap between the inter-bank and the parallel markets.

A position paper sent to Real Sector Watch by the Manufacturers Association of Nigeria (MAN) says that the reduction in forward foreign exchange sales tenure has improved access to dollars and engenders stability of flow for manufacturers that have applied before the new policy.

MAN says that most of its large companies now enjoy improved access to dollars, especially those with unconfirmed letters of credit (LCs).

The association, however, adds that the majority of manufacturers operating within the small and medium cadre, who are in the majority, are now not having access to FX as a result of the new policy.

“With the dollar coming down, cost of inputs will also fall. Our margins will likely be better,” Usman, who is the chairman of MAN’s Power Development Company and vice chairman of North-West zone, says.

“But we don’t know how sustainable this will be,” he says.

According to him, the paint industry is totally import-dependent owing to the absence of functional petrochemical industries in the country, stating that apart from calcium carbonate, talc and water, other inputs in the sub-sector are imported.

ODINAKA ANUDU