The Manufacturers Association of Nigeria (MAN) has expressed concerns about the prolonged foreign exchange crisis in the economy, warning that it may lead to factory shutdowns if the situation persists.
In a recent interview with AIT, the Director-General of MAN, Segun Ajayi-Kadir, highlighted the challenges faced by manufacturers in sourcing foreign exchange, with up to 20% of their forex needs remaining unmet at the official market, forcing them to resort to the parallel market.
Ajayi-Kadir noted that the rapid depreciation of the naira in recent weeks has resulted in high production costs, leading to decreased capacity utilization among manufacturers. He pointed out that many warehouses and plants are now filled with unsold goods due to the adverse effects of the exchange rate crisis, inflation, and other macroeconomic challenges.
The MAN D-G warned of potential production halts or workforce downsizing if improvements in sales are not realized. He anticipated that the first quarter of 2024 could witness more job losses compared to 2023 if the current trend persists.
Calling for urgent government intervention, Ajayi-Kadir urged the scrapping of the price verification portal introduced by the Central Bank of Nigeria (CBN) last year, hindering companies’ ability to import raw materials. He also appealed for new credit windows with favourable interest rates to alleviate pressure on the manufacturing sector.
Furthermore, he highlighted the plight of manufacturers who had paid for forex at the futures market but could not access it, resulting in refund requests. Ajayi-Kadir also expressed concern about the frequent increase in exchange rates for cargo clearance, warning that it would further escalate product prices and exacerbate the challenges faced by manufacturers.
The remarks by the MAN Director-General come amidst the naira’s continued depreciation, with the exchange rate reaching N1,665.50/$1 as of last Friday. This depreciation has significantly impacted manufacturers’ reliance on foreign exchange for importing inputs for their production activities.
