The Vice Chairman of Basic metal sector of the Manufacturers Association of Nigeria (MAN), Mr. Lekan Adewoye has said the new CBN directive removing the restriction on access to 43 items for imports will kill the manufacturing industry that is barely struggling to survive.
Mr. Lekan stated this during an interview on TVC Business where he bared the minds of manufacturers regarding the latest policy from the new apex bank’s management.
In his words,
- “For items that can be produced in Nigeria, such manufacturers ought to be encouraged. This directive will further kill the manufacturing industry that is already struggling to survive”
- “Some of our members who have outrightly invested in backward integration will now start to regret this move, because everyone who can assess forex will claim to be an importer, forcing sincere manufacturers to close shop and increasing the numbers of jobless persons.”
- “Maybe we have one or two items on that list that are of national importance, I don’t know but not saying that all the 43 items should be allowed to come into the country. Because those who have invested, what are they going to do with their investment?”
- “We as manufacturers want the government to do what is necessary because at the end of the day, a lot of manufacturing companies will shut down and when they do, the aftermath effect will be job losses”
Nigerian manufacturers cannot compete with their peers abroad
He further noted that Nigerian manufacturers do not have the competitive advantage to compete with their counterparts across West Africa and other continents in the world.
He said,
- “We know that imported products are relatively cheaper because manufacturers do not competitive advantage over those in other developed countries. Even when you come closer to West Africa, we don’t have any competitive advantage, at best what we have is competitive parity”
- “And the little incentive government has provided has been removed”
Backstory
Last week, the CBN lifted the ban on access to Forex for imports of 43 items imposed under the era of former CBN Governor, Godwin Emefiele.
The apex bank noted that the policy aims to boost liquidity in the Nigeria Foreign Exchange market. It also noted that it will intervene from “time to time” when there is a scarcity of forex in the market.
I totally disagree
While this brief seems logical, it may not be advisable to continue the use monetary policies to curb imports and protect local industries.
Fiscal policy tools need to come into play. Rather than banning products to access FX, let access to FX be free for all products but use fiscal tools e.g. import tax or outright ban in extreme circumstances to reduce consumption of imports in favour of local alternative products.
Also, fiscal tools will be more effective in the long run as a tool to modify taste and aggregate demand towards policy goals.
B.
The question is whether there is enough dollar at official rates for most importers whether local manufacturers or sole importers. Most would still likely continue to patronize the parallel market if they don’t want to disrupt their supply chain. The announcement granting official fx access for the 43 items seems like a mere formality to me, at least for the time being.
This is Nigeria. You will find that they take precedence over school fees, BTA etc
Forex for manufacturing should take precedence over school fees and BTA!
I think that this is a disastrous policy probably suggested by IMF/World bank economists.
Effects:
It will put more pressure on the beleaguered Naira.
It may kill many local industries.
This will lead to a loss of not only manufacturing jobs but supply chain jobs.
Nigeria will not be sufficient in many critical areas eg rice farming, poultry production.
It will open us up to poisonous and substandard foods.
It would have been nice to put a link to the article about the new CBN Policy that shows the 43 items.
You forgot to tell us how the restrictions of these 43 items brought untold hardships to Nigerians while the manufacturers couldn’t fill up the gap needed for these items. Making them expensive and scarce.
The government should find a way to compensate manufacturers who will be affected by the reversal like tax breaks to keep them afloat. This will give the country a bad reputation among investors.
i believe a combination of fiscal and monetary policy may be helpful. For economies like that of Nigeria, the manufacturing sector is very vital. Local manufacturers need to be encouraged for job creation. In the long run, however, fiscal and trade policy may be more effective in keeping our manufacturing industries alive and growing.
I am in support of the unbanning of the 43 items. How much of the backward integration investment by local rice producer will meet our consumption ? The capacity can’t be attained.
The ban on rice and denial of its importers access to FX have only increased the smuggling and the price of the product and acute hunger in the land
The local monopoly on cement have proven to be unfavourable and killing. The product is being priced out of reach.with its attendant damages