MARKET NEWS

By Yinka Kolawole

The Manufacturers Association of Nigeria (MAN) has expressed deep concerns regarding the unwholesome treatment of its members by some commercial banks regarding unmet foreign exchange (FX) forward obligations.

FX forward obligations are binding contracts to exchange currencies at a predetermined rate on a future date, used to hedge against fluctuating exchange rates. These contracts are typically used by businesses to protect themselves from currency risk when dealing with international transactions. 

Director General of MAN, Segun Ajayi-Kadir, in a statement yesterday, recounted recent trend in the way banks have handled the matter to the detriment of manufacturing industries which are at the receiving end of a problem they didn’t create and shouldn’t suffer.

His words: “As a vital sector of the economy, manufacturers rely heavily on access to FX for the importation of essential raw materials, machinery, and equipment that are not locally available.

“Recently, our members have reported significant unwarranted complexities and undue highhandedness by the banks. Many have faced stringent requirements that are not aligned with the Central Bank of Nigeria’s (CBN) guidelines, resulting in unnecessary bottlenecks and illegal freezing of their corporate and personal bank accounts, with negative impact on production, which could threaten the sustainability of manufacturing operations.”

Ajayi-Kadir cited a particular case of an ongoing FX forward related dispute involving KAM Industries Nigeria Limited, a leading manufacturer in the steel sector in West Africa and one of the commercial banks in Nigeria, noting that there are several others undergoing similar harrowing experiences.

“This should stop in the interest of economic development of Nigeria, job security and business sustainability,” he added. 

Clarifying the position of manufacturers with respect to the subject matter involving commercial banks and CBN, the Man DG said: “As it is the norm, commercial banks receive payments in Naira either through direct remittance from their customers or credit facility for the purpose of securing FX for raw-material importation. Upon receipt of these funds or grant of credit facility, the banks then remit the Naira to CBN on behalf of their customers. And from that point, the funds are deemed to be held by the apex bank, thereby completing the customers’ obligations.

“Given this background, MAN asserts that its members are not liable for delays or complications arising after the remittance of funds to CBN by commercial banks. Our members have played their part, and the commercial banks should play their own part. Our members should not be harassed by the banks.

“To this end, we call on CBN to direct the concerned commercial banks to immediately unfreeze the accounts of innocent manufacturers in relation to the vexed issue of FX forwards. We reiterate our call on CBN to speed up the long overdue redemption of the unsettled FX forward, as a lasting solution to the dilemma.”