FOREX LOSSES: MANUFACTURERS' CALLS FOR ACTION ARE BECOMING MORE VOCAL

Many businesses have either had financial difficulties in the last year or have completely stopped operating. Among other things, shortages and several forex-related losses have been the main reasons of these occurrences. Many manufacturing companys losses up to trillions of Naira as a result of the currency's depreciation.

Government intervention is demanded by operators, investors, and other stakeholders to save the manufacturing sector. The Manufacturers Association of Nigeria (MAN) reports that the industry's many problems caused 335 manufacturing businesses to confront difficulties in 2023 and 767 manufacturing companies to close their doors.

Putting Nigeria's manufacturing industry in context, a National Bureau of Statistics (NBS) the country's manufacturing export value dropped by 166 percent to N778.44 billion in 2023 from N2.07 trillion in 2019. the decrease in demand for Nigerian goods worldwide.

In fact, South Africa's manufacturing export value in 2022 was $46 billion, about 15 times larger than Nigeria's $3 billion, according to figures from the World Trade Organization.

ONE MORE ALBATROSS

The binding restrictions that the industry has been facing, MAN views the losses associated with forex as unnecessary burdens.

MAN claims that in the previous six months, forex-related transactions cost its members over N1.5 trillion in losses.

The Central Bank of Nigeria's (CBN) tardiness forward made for import duty assessment, and the depreciation of the Naira are the main causes of the manufacturers' forex-related losses, according to Director-General of MAN Segun Ajayi-Kadir.

He bemoaned the fact that the loss has devastated the manufacturing industry and that, if the issue is not handled, other firms might close.

Our enterprises have lost at least N1.5 trillion in forex-related transaction losses during the past six months.

This will be evident in terms of the performance of companies by the time our results for the first quarter of 2024 are out, according to Ajayi-Kadir.

International industrial enterprises listed on the Nigerian Exchange Limited (NGX) reported a combined FX loss of more than N792 billion in 2023.

Cadbury Nigeria is worth N18.299 billion, International Breweries is worth N57.599 billion, Nestle Nigeria is worth N173.92 billion, Nigerian Breweries is worth N153.33 billion, NASCON Allied is worth N8.54 billion, BUA Cement is worth N69.95 billion, Lafarge Africa is worth N21 billion, Guinness Nigeria is worth N49.1 billion, Dangote Cement is worth N164.07 billion, and BUA Foods is worth N73.56 billion. These are some of the companies and forex losses incurred.

The remaining ones are: Vitafoam Nigeria, N103 million; Dangote Sugar, N148.33 billion; Okomu Oil, N210 million; Unilever, N6.94 billion; and Notore Chemical, N5.59 billion. Several businesses experienced significant losses even if their sales and prices increased.

ARGUMENT IN FAVOR OF INTERVENTION

Dr. Muda Yusuf, CEO of the Center for the Promotion of Private Enterprise (CPPE), argued in favor of government action, saying that in order to preserve the industries, the government must move quickly to support businesses. It is impossible to overstate the closure of numerous impacted enterprises, according to Yusuf.

Many are heavily exposed to FX since they import their raw materials. That they are the most popular is therefore not unexpected. It is also important to emphasize that a large number of individuals lack the purchasing power to afford the products being produced. The government must take action if we are to prevent our industry from collapsing completely.

Meshioye declared: It hasn't been resolved. We are aware that forward contracts often involve a number of unpaid FX. It was agreed that payment would be made at a later time, however that time has since past. They're behind schedule. The manufacturers are concerned about this because it shows a lack of integrity for both the manufacturers and the nation at large.

Speaking on the subject, MAN DG suggests reevaluating the demands in order to counter the manufacturers' legal threats, which could worsen the already dire circumstances.

It's a difficult position for producers. As you could expect, several of these forwards are older than two years old, he said.

The federal government must intervene, according to the Nigerian Exchange Group, to assist the country's manufacturing sector in overcoming its challenges.

Dr. Umaru Kwairanga, Chairman of the NGX Group, said during the visit of Dr. Doris Uzoka-Anite, Minister of Industry, Trade and Investment, at the NGX Head Office in Lagos: “It is crucial that the government involve stakeholders in the process.”

The CEO of Dangote Sugar Refinery, Ravindra Singhvi, lamented in his address that their foreign exchange loans lacked a hedging mechanism and that the high interest rate needed to drop in order to support manufacturers' operations.

“We lack hedging mechanisms, which exposes us to fluctuations in the currency market,” he said.

“I think the economy is trying to recalibrate,” stated Engr. Abioye Musibau Ayodele, Managing Director of BUA Foods. The manufacturing sectors were adversely affected by the forex situation.

FG PROMISES ASSISTANCE

Concurrently, the manufacturers have received assurances from the federal government that suitable measures are being implemented to guarantee not just the industry's survival but also its expansion.

The guarantee was provided by Minister of Industry, Trade, and Investment Uzoka-Anite during a recent meeting with stakeholders in Lagos.

She restated the determination of the federal government to assist the business community in order to facilitate the success of their enterprises.

“The government will help companies get through these economic hard times and build an atmosphere where industries can prosper going forward,” she said.

Uzoka-Anite reaffirmed the government's support for business and manufacturing, citing programs like the Consumer Credit Scheme to increase consumer spending power, industry-specific production cost-cutting measures in the power and agricultural sectors, and continuous financial reporting discussions with the Financial Reporting Council.