The scarcity of forex in the country is a cause of concern and financial losses to many companies who cannot access what they need for production and thus cannot achieve profitable business. However, this is not the case for all businesses. There are some companies that have actually been found to indirectly be profiting from the forex scarcity.
These are local manufacturers of items on the list of items ineligible for official foreign exchange (forex) at the interbank market. The Central Bank of Nigeria had earlier this year, in response to the chronic shortage of forex banned some 41 items from accessing forex for importation at the interbank market.
This policy had forced those who import these items to source for forex at the parallel market, where the exchange rate is much higher. This pushes up costs, makes business quite unattractive and has led to a reduction in the amount of these products imported.
The local manufacturers thus have the opportunity to grab a larger piece of the market, leading to business growth, increased sales and higher profits. And local manufacturers have been grabbing this opportunity with both hands, it seems.
For example, local producers of palm oil like Presco Plc and Okomu Oil Palm Plc have both recorded high increases in year-on-year growth. Presco’s revenue grew year-on-year to N11.94 billion from N8.04 billion; profit before tax and after tax also grew to N9.71billion from N4.73 billion and N6.80 billion from N3.43 billion as reported in its 3rd quarter report, results more impressive than they had predicted.
Although local manufacturers have the challenge of sourcing forex to purchase necessary inputs, this may also be a blessing in disguise to local producers of such inputs. For example, Presco quoted earlier completely offset its year-on-year increase in operating expenses and forex losses combined through its strong sales and actually made higher profits.
Milk is another item on the banned list. FrieslandCampina WAMCO, through the already piloting N3 billion Dairy Development Programme (DDP), has had no choice but to look towards local producers of milk and in some cases actually help these producers boost their production capacity to meet the company’s needs.
These local producers obviously will profit financially and technically from this arrangement, stimulating growth in the dairy production sector. These examples show how indirectly other local producers are benefitting from the forex scarcity. The CBN can thus afford itself a little smile as the effects of its policies, many of which have been criticized, seems to be yielding positive fruit.