Exactly one month after the Central Bank of Nigeria (CBN) halted sales of foreign exchange (forex) to Bureau De Change (BDC) operators, there are indications that some local manufacturing firms have begun cutting down on raw material import over inability to cope with the rising exchange rates. New Telegraph reliably gathered from some members of the Manufacturers Association of Nigeria (MAN) that the country’s dire forex situation was not improving despite the action taken so far to control the situation. Investigations within the manufacturing segment indicated that firms had been seeing increasing costs in overheads over rise in exchange rate, as it has hovered above N500. It was gathered that many of them were yet to get dollar supply for imports from the banks despite submissions of requested documents for raw material orders from foreign partners.
Indeed, New Telegraph gathered that the FX pressure had made some of them to start reviewing their offshore business operating strategies by putting a halt on production lines meant for foreign raw material imports. Apparently, many of them pointed out that they were still waiting for liquid banks in the country to meet their dollar requests or cut down importation of raw materials and concentrate on local sourcing of raw materials. An official in a blue chip company, who spoke to New Telegraph under the condition of anonymity, explained that importing raw materials for production had been hell and out of this world, considering the high rate some banks are quoting to purchase dollar at over N517.
He said this had resulted in them considering not only cutting down on raw material imports, but also closing down some production lines. In particular, the increasing costs for some companies are forcing them to review their offshore business activities.
For instance, this correspondent reliably gathered that companies, such as, BUA Cement Plc, FMN Plc, Unilever Plc and some others are cutting down imports and concentrating on local sourcing of raw materials. At an investor forum, the Managing Director of Unilever Plc, Carl Cruz, was quoted as saying Unilever had not seen an increase in dollar supply since the recent policy took effect.
The company’s boss explained that the firm needed foreign exchange to import raw material for many of its products. In order to cushion the impact of forex shortage on operations, Unilever is increasing local sourcing of raw materials to enable it be “forex neutral in the very near future,” Cruz said. Unilever Plc Finance Director, Adesola Sotande-Peters, said: “We are still waiting to see how liquid banks will be to meet a lot of customers’ demand.” The company plans to transfer its tea business to a newly incorporated firm in October as part of a global strategy to maximise value for shareholders.
Sotande-Peters said: “We will realize cash from the transaction.” MAN Director-General, Segun Ajayi-Kadir, told this newspaper that the association was aware that many of its members are under pressure from getting forex from the banks, thereby calling on the CBN to come to the rescue of the country’s productive sector of the economy to cushion what is being experienced by manufacturers.