The Manufacturers Association of Nigeria (MAN) has once again urged the Nigerian government to allocate a significant proportion of available foreign exchange to the productive sector, particularly manufacturing.
This was disclosed by Segun Ajayi-Kadir, director-general, MAN, at the Commerce and Industry Correspondent Association of Nigeria (CICAN) workshop on Thursday in Lagos themed: “Manufacturing: Despite FX and Energy Crisis”.
He also called for further investments into Nigeria’s electricity production sector to boost economic productivity, citing manufacturing growth output fell from 5.8% in the first quarter of 2022 to 3.0% in the second quarter.
Need to address foreign exchange issues: Segun Ajayi-Kadir said the FG needs to address the foreign exchange and energy issues that contribute to unfavorable movements in manufacturing indicators.
He noted how challenges of inadequate foreign exchange and the energy crisis dipped the manufacturing growth output from 5.8% in the first quarter of 2022 to 3.0% in the second quarter, citing that these negatively affected manufacturers that were already dealing with poor operating conditions caused by COVID-19 and Russia invasion of Ukraine.
He warned that increase in energy costs, due to global inflation, affected the cost of importation across the world, including Nigeria, citing manufacturing indicators such as capacity utilisation, contribution to real Gross Domestic Product (GDP), investment, employment, cost of production, competitiveness among others were also negatively impacted.
MAN warned that due to limits to foreign exchange inflow from crude oil sales, foreign exchange demand pushed over the bounds of supply and contributed to the depreciation in naira value, stating that these issues can be adequately addressed by considering critical measures such as the allocation of a significant proportion of available foreign exchange to the productive sector, particularly manufacturing.
- “Further investment in the electricity value chain must be carried out and the government must commit to adding 10,000 MW to the current electricity distributed in the country.
- “Also, we must embrace and support significant development of renewable energy mix as the country has huge potential for solar and wind,” Ajayi-Kadir said.
How manufacturers survive forex crunch
- Recall Nairametrics investigated that Nigeria’s manufacturers have devised ways to access foreign exchange given the perennial scarcity of forex in the official Central Bank window, otherwise called the Nigerian Autonomous Foreign Exchange Market (NAFEX) or the I&E Window.
- To meet their demand, manufacturers have gotten creative by sourcing from the official window (when available), black market, dollar receipts, import substitutions, related parties, or by reducing imports of raw materials inputs.
- Last Month, the federal government said it would begin steps towards creating a separate and special foreign exchange window for exporting manufacturers. This is in response to a plea by the manufacturers asking the federal government to support the sector by allowing operators to access forex through a special window to be created by the Central Bank of Nigeria.
