The Manufacturers Association of Nigeria (MAN) has asked the Central Bank of Nigeria (CBN) to resolve the unsettled $2.4 billion forex forward claims by manufacturers in the country.
Mr. Segun Ajayi-Kadir, the Director-General of MAN, urged in a statement on Thursday in Lagos that addressing the outstanding foreign exchange obligations would reduce their impact on the manufacturing sector.
He explained that the apex bank attributed its inability to honour the contracts to an ongoing investigation by the Economic and Financial Crimes Commission (EFCC) into certain foreign exchange transactions.
The MAN Director-General noted that many businesses had borrowed money from banks as working capital to open clean lines of credit based on forward contracts allocated by the CBN.
He pointed out that the $2.4 billion in forward contracts, from a backlog of $7 billion, had sparked a severe crisis for both the manufacturing sector and the Nigerian economy.
He added that businesses with significant foreign exchange liabilities were facing serious credit and liquidity risks due to their inability to settle these forward contracts.
The statement reads, “Worse still, the commercial banks have continued to charge dollar accounts along with other Naira bank charges such as 35 per cent interest rate on the facilities that these companies have with their banks.”
“This rather worrisome breach of contract has further exacerbated currency risk for businesses, leading to substantial financial losses and operational disruptions.”
“The resulting financial strain on manufacturing businesses has led to widespread closures, job losses, and economic turmoil,”
Ajayi-Kadir urged the CBN to prioritize the sanctity of contracts and expedite efforts to protect the interests of businesses that have acted in good faith.
According to him, reneging on these legally binding contracts could potentially undermine the CBN’s credibility and harm investor confidence.
He mentioned that MAN urged collaboration between the CBN, the Federal Ministry of Finance, and the private sector to create a sustainable framework for resolving outstanding forward contracts and improving foreign exchange inflows to prevent further damage.
He emphasized that by prioritizing the survival of the manufacturing sector, the government could mitigate the negative impacts of the crisis and support economic recovery.
Backstory
- Early into his administration as CBN Governor, Mr. Yemi Cardoso stated that a forensic investigation by Deloitte Management Consultant into the $7 billion forex forwards claims by Nigerian businesses were invalid and would not be paid.
- The audit uncovered various infractions, such as non-existent entities and unauthorized FX allocations, rendering these liabilities invalid.
- He noted that the apex Bank had written to authorised dealers to explain the causes of the infractions but has not gotten any satisfactory explanation.
