Manufacturers Groan, Shut Down Production Lines - DAILY INDEPENDENT
- Worried dollar may exchange for N700 by December
Manufacturers are lamenting over the scarcity of dollars in the country with which to import raw materials with some saying they have already shut down some of their production lines to remain in business.
They also told Daily Independent at the weekend that if urgent steps were not taken, dollar may sell between N700 and N1,000 before the end of the year.
The naira has been experiencing sharp drop almost on daily basis at the parallel market in recent times after the Central Bank of Nigeria (CBN) stopped selling foreign exchange to bureau de change (BDC) operators in the country.
Within four days last week, the dollar declined by N17 or 3.1 percent.
As against N545 for which it sold Saturday penultimate week, the value of the naira depreciated to N562 to the dollar as at Thursday morning while it later went up to N570.
Analysts noted that this was due to the increasing demand for the greenback, activities of speculators as well as the insufficient supply of forex.
When asked if the government was not worried about the development, a source in the Central Bank of Nigeria (CBN) told Daily Independent that the apex bank does not have control over the black market.
An executive director of one of the leading breweries in the country, who does not want his name in print, said the company has stopped production of some of its products due to inability to access forex.
He said, “We have concluded to let some of our major products rest for now because we can’t get enough dollars to import raw materials. Banks are not helping matters. If you request for like $100,000 this month, you will only get $10,000 if you are lucky by December and what will that do for us?
“Companies are looking at forex from sources outside the ones approved by the government and the implication is that the rate is determined by the seller and in most cases, the rates are very high and it will be worse as the year winds down.
“We are not getting dollars at the rates people are used to but at very high rates. If you ask me what I see will happen very soon in the market, I will tell you dollars will be sold for close to N700 before December.”
Former Director-General of Lagos Chambers of Commerce and Industry (LCCI), Dr. Muda Yusuf, decried the current situation especially as it affects manufacturers, who hitherto have been struggling to operate competitively.
He said, “The impact of the naira exchange rate depreciation and forex liquidity challenges on manufacturers have been very devastating. Production and operating costs have skyrocketed, profit margins have been eroded, sales have declined sharply and business sustainability is at risk.
“The exchange rate volatility has created profound uncertainty and unpredictability in the investment environment. Investorconfidencehasbeencorrespondinglynegativelyaffected. The forex situation has become a major driver of inflation.”
A businessman and a shareholder activist, Mr. Adebayo Adeleke, said, “Things are getting very hard for manufacturers. Dollarisnotreadilyavailable to manufacturers. Dollar comes in trickles and insignificant quantities through the banks.
“The current currency value is having a very negative impact and pushing the cost of input through the roofs. This trend will slow down production as prices may not be absorbed by the market. This may slow down production, cause job losses, higherpoverty, andincreased insecurity, among others.”
A forex dealer, Johnson Abanta, said there were strong indications that the naira may continue to experience decline against the dollar until when the CBN pumps more forex into the market.
He said, “Since the CBN stopped the sale of dollars to bureaux de change operators we have seen a downward trend in the value of the naira. The CBN must pump more into the market to ensure calm and ensure that importers, especially manufacturingcompanieshave unfettered access to forex.”
Stephen Iloba, a Lagos-based economist, said, “The atmosphere in the market is not friendly to the manufacturing sector. Dollars at N570 as at Friday is 20.8 percent higher than the official rate of N410/$.”
However, the CBN attributed the high rate of foreign exchange in the FX market to the illegal activities of individuals who have vowed to create artificial scarcity and heat up the economy.
CBNgovernor, Godwin Emefiele, said the bank was compiling names of people who are making the FX market unbearable to others.
The apex bank, he said, has resolved to come on the heels of the activities of some Nigerians who approach the banks to purchase forex under legitimate guises, only to turn around to selltheforexattheblackmarket.
Emefiele warned such bank customers involved in the fraudulent and unethical practices to desist from it, as they would be found out and forced to return the currency.
Hesaid,“Wehavenoticedthe activities of Nigerians who buy forex for personal travel purposes and later cancel such trips. The plan of the apex bank, with the support of the commercial banks, is to find the buyers and force them to return currencies bought under such disguise.”
“We will continue to restrict the activities of illegal forex dealers”, the CBN governor said, even as he advised forex seekers to explore the Investors and Export (I and E) window to ensure transparency and stability in the market, advising banks to adhere strictly to CBN guidelines on forex sales.
He explained that the owner of Aboki FX, Olumide Oniwinde, is one of the individuals heating up the polity.
CBN governor said, “We’ve been investigating Aboki FX for two and a half years. He lives in the UK but has a Nigerian address. We have detected that he is an economic saboteur. Mr. OlumideOniwinde, wewillfind you.
“Our preliminary investigations show a lot about him. Those who want to sabotage the country and sabotage the efforts of this administration would be dealt with.
“Aboki FX was registered in the UK in 2015. He doesn’t want to name those behind him. He has 25 accounts, shows illicit activities.
“His website is used for manipulation by changing the rate over a given period. We will pursue and get them.”
Reacting to CBN governor’s accusation of Aboki FX, an economist said it is misleading for Emefiele to point accusing fingers at the website.
According to him, the exchange rate is determined by demand and supply.
“The country’s debt is N35 trillion. Ways and means is N15 trillion. Making a total debt of N50 trillion. If we have enough supply of forex would the rate go up? He is talking of Aboki FX when supply is not enough”, he said.