Despite assurances of availability of foreign by the Central Bank of Nigeria (CBN) business owners, including importers of essentials goods in the country have been their inability to access foreign exchange to import raw materials for their factories.
The Manufacturers Association of Nigeria (MAN) which confirmed that scarcity of forex is effecting its members, disclosed that manufacturers in the country were finding it very difficult to access U.S dollars for their business transactions. “It was pretty difficult to source forex from all the available windows. Members have had problems accessing foreign currencies for five weeks due to lack of Central Bank’s interventions,” MAN said.
This was corroborated by investment banking firm, FBNQuest in a recent note, when it said, “There is an estimated $1 billion backlog of unmet dollar demand.” Nigeria depends on crude oil exports for most of its revenue and more than 90 per cent of its foreign exchange earnings. Despite a recent rally in oil prices, Nigeria’s forex situation remains bleak as businesses find it difficult to access forex.
“The scarcity of foreign-dominated currencies is hampering the ability of local manufacturers to import raw materials, machines, and spares that are available in Nigeria,” MAN said.
This came as the Managing Director of Wemy’s Products, Paul Odunaiya has lamented that he could no longer find forex to import raw materials. “We’re pleading with our suppliers to wait a bit longer so that we can source dollars and pay them,” Odunaiya said.
The Director General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf said that, like Odunaiya, the dollar shortage is hitting most of its 2,000 members hard.
“If the situation persists it will lead to lay-offs,” he said. “If you are not producing, there will be a shortage of goods in the market, prices will go up.” Inflation has risen for 10 straight months, hitting a two-year high of 12.55 per cent in June, piling on greater economic hardship for the population.
Added to that, there have been two devaluations of the naira’s official rate this year. With the oil market depressed by a producer price war and the pandemicinduced global recession, Central Bank reserves have fallen 20 per cent in the past year to $36.1 billion, around five months of import cover.
The bank initially sought to stem the decline by suspending dollar auctions in March and continues to severely ration their supply.
“It’s been excruciating,” said Fred Ameobi, Executive Director of Coscharis Group, a conglomerate whose businesses include automobile assembly.
The government says the economy could shrink by up to 8.9 per cent in 2020, while many of the local banks that Nigerian companies rely on have seen their dollar credit lines halted by international lenders who fear they won’t be paid back. Many firms have resorted to the black market, where the naira trades at around 20 per cent below the official rate, making dollar purchases even more expensive.