Forex shortage: 200 firms risk closure – MAN
More than 200 manufacturing companies in Nigeria may be closing shop in the next two months due to lack of raw materials to continue production, according to the Manufacturers Association of Nigeria [MAN].
Dr. Frank Jacobs, President, Manufacturers Association of Nigeria, told our correspondent that 100 operators in the general goods sector had indicated that they would shut down in April when their remaining stock of raw materials would have been used up.
Similarly in the pharmaceutical sector, 120 operators are down to two months' supply of raw materials after which they may close shop, according to the Chairman, Pharmaceutical Manufacturers Group of MAN, Dr. Okey Akpa.
In the food and beverage sector, only a few of the 80 operators may remain in business by April if the situation does not improve.
The President, Association of Food, Beverage and Tobacco Employers, Mr. Paul Gbededo, told our correspondent that apart from two or three firms, which were able to attain 40 per cent to 50 per cent local sourcing of raw materials, the rest depended on importation and would find it difficult to keep operating beyond April.
'Some people are already going out of business,' he said in an exclusive interview with our correspondent.
It was gathered that a combination of factors, chief among which was the scarcity of dollars and the restriction of forex sales to importers of 41 items (some of them considered as essential raw materials) by the Central Bank of Nigeria, had curtailed the supply of raw materials to the industrial sector, leading to low capacity utilisation and poor output.
Operators said they had been unable to meet both local and foreign financial obligations on account of poor bank credit and lack of access to dollars.
The Chief Executive Officer, Erisco Foods Limited, Chief Eric Umeofia, said the situation had challenged his ability to access bank loans in Nigeria, and had also put a strain on his relationship with his foreign financiers and suppliers.
He said, 'Due to the policy on the importation of tomato concentrates, we do not have enough raw materials to produce, and that has incapacitated us because it means we have not been able to service our bank loan.
'In Nigeria, there is a policy that once you cannot service your loan for three months, you are classified as a bad debtor and not entitled to further loans. The same CBN that banned the sale of dollars to the importers of these items did not advise the commercial banks to give loans to the manufacturers to enable them to produce the items locally.
'Currently, we can't service our bank loans since we cannot import raw materials to produce. I can neither get naira nor dollar from the banks. I don't have the naira to pursue the dollar, and my foreign suppliers that gave me credit are now taking me to court because I have not met up with my financial commitments.
'When I produce, I am not selling because foreign products are everywhere. If I sell the way they are selling, I cannot be able to pay interest on my bank loans.'
For manufacturers whose products are not on the list of 41, they complain of waiting in the queue for forex from CBN for a period ranging from six months to one year.
The Chief Executive of Sonia Industries, Nnamdi Nnodebe, said he had bought machines on credit from Europe and had been waiting for the past 12 months to obtain forex to pay for the machines.
'It is not as if we don't have the money to pay. The naira equivalent is there but they have refused to give us the dollars for one year,' he said.
Each manufacturing firm in the country is said to employ a minimum of 100 Nigerians and it is estimated that more than 20,000 direct jobs will be lost in April if more than 200 firms are shut down. The manufacturing sector contributed over N12.935tn ($65bn) to the nation's Gross Domestic Product in 2015.
The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said the government should engage the manufacturers to identify what the problems were and how they could be solved.
He said, 'The problems will still be there because there are fundamental issues with forex and oil price, but proper engagement will help reshape the economic policies of government. A lot of them import inputs, and if there is no liquidity in the forex market, it will have a lot of effect on them.
'There is a need to review the forex policy; they can't run away from that. Also, if the manufacturers are complaining about the list of 41 prohibited items, that list needs to be reviewed.' Punch