Industries Groan Under Naira Devaluation

Companies in the manufacturing sector of the economy that source foreign exchange to imported raw materials and products have been hit hard by the devaluation of the naira and the suspension of Retail Dutch Auction System (RDAS) by the Central Bank of Nigeria (CBN).

At the interbank foreign exchange market, the exchange rate of the naira to a dollar is N196.9 while in the black market it hovers between N210 to N214 to a dollar. Similarly, British Pound Sterling exchanges between N303 to N304 to the Naira, while thed Euro exchanges for N222.

Investigations, show that the high exchange rate occasioned by the suspension of RDAS policy, has wiped smiles off the faces of operators in the sector since it was implemented by the apex bank in February to tighten control on the foreign exchange market, in a bid to protect the nation’s external reserves and save the Naira from further slide in value.

Dr. Frank Udemba Jacobs, President of Manufacturers Association of Nigeria, MAN, noted that the impact is enormous on all manufacturers, especially those that depend on imported raw materials. According to him, the Federal Government’s plan to create three million jobs annually will be a mirage if the current exchange rate is not addressed quickly.

He urged Federal Government through the CBN to create a special foreign exchange window for manufacturers. In addition, he requested the CBN to examine manufacturers’ forex demand trends to ascertain the actual need of each company for the importation of machines, spare parts and raw materials. He assured that MAN will validate beneficiaries to ensure that only bonafide manufacturers have access to such special foreign exchange window.

In a chat with the Street Journal on Monday, an Executive member of the Nigerian Association of Chamber of Commerce, Industries, Mines and Agriculture (NACCIMA) Ibadan Zone, Chief Olawale Makanjuola, lamented the huge cost implication of consistent devaluation of the naira on the productive sector of the economy. He noted with dismay that industry operators now find it difficult to procure raw materials from abroad to manufacture products that are competitive in the market.

He noted that the low value of the naira has made it pretty difficult for manufacturing companies to run at full capacity, leading to many companies retrenching their staff in order to remain afloat. He added that the poor state of infrastructure in the country had further exacerbated the predicaments of the real sector. He noted that the worse hit are the small and medium scale enterprises whom he described as the engine of the nation’s economy.

”When you have to provide your own electricity, water, access roads, security amongst others, and imported raw material at high cost due to the devaluation of the naira, how do you sell whatever you produce in the market to break even”, he asked rhetorically.

He added that the preponderance of imported goods from Asia has made matter worse for the local manufacturers. According to the NACCIMA chief, Chinese products find their way into the country unabated, competing with locally made goods of similar standard. He pointed out that most of the products made in Nigeria in most cases are of higher quality than those imported from China.

He however, implored the present administration to ensure that all efforts are geared towards firming up the value of the naira given the fact that Nigerian economy is import dominated.

Makanjuola noted that the current situation coupled with the huge salary arrears being owed workers in 18 states of the federation has further impoverished the average Nigerian whom he said now find it difficult to eat three square meal a day.