Manufacturers in Nigeria have decried the inability of the Central Bank of Nigeria’s, CBN new flexible foreign exchange policy to improve their access to foreign exchange. Some manufacturers who spoke to Vanguard said they sometimes have to wait for three months after bidding for FOREX before getting a response from the CBN, a situation they say does not favour manufacturing activities in the country
Recall that CBN recently liberalised the forex market by the re-introduction of the flexible exchange rate inter-bank market. President of the Manufacturers Association of Nigeria, MAN, Dr. Frank Jacobs, told Vanguard that the new policy is having serious effect on members’ production.
Jacobs alleged that MAN members who bid for forex from the apex bank have their accounts deducted yet it takes between one to three months to get the forex. He also claimed that some of their members who opened their “Form M” (a requirement for sourcing forex for import) for N197/N199 to a dollar are now made to pay N282/N283 which he described as unfair.
According to him, “People are still bidding for forex, some are getting, others are not getting. The major challenge presently is not sourcing foreign exchange but the foreign exchange is not getting to manufacturers on time. The situation where they debit your account with the foreign exchange you bidded for and CBN decided not to pay until after one month, two months or three months does not augur well for manufacturers. Those are some of the challenges they are facing. The second challenge is the fact that some of these “Form Ms” were opened at 197/199 naira to a dollar but today they are made to pay N282/N283 to a dollar and that seems very unfair.”
The MAN boss said that if the policy continues, the story in the media that importers are abandoning their goods may even get worse. “There was a newspaper article that said some imported goods may be abandoned at the port because of this problem, paying for the duty at the new exchange rate.” On allegations of reduction in quality of products as a result of local substitution of raw materials, he noted, “I don’t think that any MAN member will deliberately want to reduce quality simply because of raw materials. If it is not up to standard it should not be sold in the market and don’t forget most of the products that are sold are subject to the approval of either SON or NAFDAC because of lack of raw materials, that is not done anywhere.
On the way forward, the MAN helmsman explained that they are scheduled to have a meeting with the CBN governor to present the challenges of the association when the governor returns back to the country next week. He however stressed that a press conference will be called to let Nigerians know about these challenges if they are not satisfied with the outcome of the meeting.
Local raw materials sourcing
Investigations by Vanguard revealed that some manufacturers have been forced to look inwards for sourcing of their raw materials due to forex scarcity and restrictions by the CBN. In order to remain in business, manufacturers are confronted with the option to either purchase raw materials at a higher rate which will spike the cost of production or source for their raw materials internally or its close substitute with possibility of lowering quality.
An official of Diageo, the parent company of Guinness, who preferred anonymity, said the firm is targeting 70 per cent local raw materials by 2017, noting that the raw materials for one of the firm’s brands, Orijin Bitters, are 100 per cent locally sourced.
Group Managing Director/Chief Executive Officer, Chemstar Paints Industries, Mr. Emmanuel Awode, said his company is exploring the option of sourcing raw materials locally. “The dollar scarcity is particularly hard on the paint industry because over 70 per cent of our raw materials are imported, but we are looking around for local substitutes.”
Herbert Wigwe, Managing Director, Access Bank Plc noted at a recent forum that manufacturers are unable to buy raw materials due to the scarcity of forex. “We have a lot of manufacturers who have to rely on forex for their raw materials but who are going through tough times. However, I think it is time for us to move towards import-substitution. But I think we need to do things to support the supply side of forex and liberalise the market. Even for those who have to source their raw materials locally, there is a value chain effect. If the entire value chain in a production process is not sorted out, we will have a problem. So, access to foreign currencies for raw materials is important. However, it is important that people start looking at how to use local raw materials to produce,” he said.
Traders, consumers lament high prices
Meanwhile, in the face of rising prices of food, traders are calling on the Federal Government to take measures to tackle the situation before things get out of hand. When Vanguard visited the popular Lagos market at Idumota, in Lagos Island, some of the traders said that they don’t know the reason for the price increase. A provision store owner identified as Hajia, said that the price increase cuts across almost all food products except for a few. She said that Nestle Nigeria Plc products are the worst so far,
lamenting that even infant milk products are on the increase especially NANv manufactured by Nestle. According to her, “Nobody from Nestle, Arla Foods, Saint Louis or any of their agents have come out to tell us the reason for the incessant increase. We only make little profit from these products and now that they keep increasing the price people find it difficult to buy, it is only those who are rich that can buy provision as I speak.
“Actually, we don’t know why companies have decided to be increasing the price of their products, as I speak, none of these companies have called to say this is the reason why they increased the prices of products, if we complain they will tell us things are expensive and sometimes they will tell us it is ‘change’. The most expensive of all is Nestle product; in fact they have increased the price of all their products including baby food. The Milo I use to sell for N1, 200 before, is now N1600.”
A road side provision seller, Rukayat, said that products that sold for N600 before, now sell for N700. “Price of provisions have gone up, it is not just going up but the rate of the increase is what is baffling me because customers are complaining. Sachet of Dano milk that we used to sell for N30 is now N40. We want our government that promised us change to look inward because when you go to the market and you ask why they have increased price of provision, they will tell you, it is change, I cannot understand what change has to with the increase in the price of products especially that of Nestle.
“Every week they keep adding prices to provision, sugar that we were buying for N220 and sell at 250 is now N250 so how much are we going to sell, definitely some will sell at N300 and some N350, that is the market for you.” Honeywell Flour and Flour Mills Nigeria Plc, producers of whole wheat meal, Semolina, Semovita, among others are not left out of the price increase.
Traders said that 10kg of semovita and semolina now sell for N2400 compared to the N1800 initial price. “Before 1kg was N150, later they started selling it for N200, now wheat is N300 and Semo is N400.” According to Amaka Uchenna, “no matter the price increase, people will still eat Leventis product, that is, Valubread, which rose from N200 to N220, then to N250 and now is N300. The economy is biting everybody, if I want to eat bread I can finish almost a loaf so how many loaf is a family of seven or eight going to buy?”
A local manufacturer of hair creams and ointment for body rashes, Mr. Okeleme added that the chemicals for production are not available and even when you get them to buy, it is always expensive. “It is what I buy that will determine the price I will sell and the quantity in a park. Chemicals that sell for N8,000 before, now sell at N45,000, the ones we buy at about N90,000 is now sold for N220,000.