Manufacturers ration supplies to meet purchasing orders, lose 11bn to FX scarcity

The foreign exchange scarcity prevented a number of manufacturers from buying raw materials in 2015, thereby hurting the production targets of many firms.

Consequently, manufacturers rationed supplies to meet the purchasing orders of customers particularly in the second half of 2015, latest Manufacturers Association of Nigeria (MAN)’s Economic Review, seen by Real Sector Watch, said.

Manufacturers also lost N11.39 billion to foreign exchange chaos in 2015, as they suffered production loss worthN6.06 billion in the second half of 2015 (H2 2015) as against the estimate of N5.33 billion in the first half (H1 2015).

“The loss in production in the sector is due to the difficulty associated with foreign exchange sourcing for the importation of raw-materials,” the July to December 2015 data compiled by MAN said.

The foreign exchange crisis has since worsened, making it difficult for a number of manufacturers to meet their production and sales targets so far in 2016, manufacturers say.

The Central Bank of Nigeria (CBN), in a bid to assuage the hardship facing manufacturers, recently directed that 60 percent of foreign exchange be allocated to them for the importation of raw materials and machinery.

Frank Jacobs, president, MAN, commended this move, saying this was a step in the right direction. Jacobs said this could save a number of firms from collapse.

However, he told Real Sector Watch on the phone recently that one key hurdle yet to be resolved was the suspension of importers of 41 items from accessing FX from the Nigerian market.

He said some of the commodities were inputs that could not be locally manufactured at the moment, owing to lack of capacity.

The MAN president said the policy of excluding 41 items from exchange rate market had shut down 54 industries, adding that there might be pressure from manufacturers using these items as inputs on the foreign exchange market, especially with the 60 percent FX allocation.

Nigeria is hard hit by the oil price drop, which has already plunged the economy into recession as growth contracted -2.06 percent. Inflation rate has hit an all-time high of 17.1 percent, while unemployment and underemployment are unhealthily high.

Companies have sacked thousands of workers, while many have shut down, including 222 SMEs. The situation has exposed that Nigeria, though diversified, is yet to make use of its enormous non-oil potential.

Tunde Oyelola, chairman, MAN Export Group, said the non-oil export sector could be a game changer if the Federal Government was indeed desirous of solving the FX crisis.

“All they need to do is to support non-oil exporters. Resuscitate the grant that was suspended. There are data proving that the grant boosted export by over six folds,” Oyelola said.

ODINAKA ANUDU