FX availability: Game changer for manufacturing sector in 2017

by | January 8, 2018 12:45 am



If there was any game changer for Nigeria’s manufacturing sector in 2017, it was foreign exchange  availability. The sector had emerged from a severe dollar scarcity the previous year, which forced factories to operate intermittently.

The preceding year, 2016, had been a year of the locust, killing 54 firms and putting a lot of others in comatose. Oil price crash meant that there were low dollar inflows into the economy, making it difficult for manufacturers to access greenback to import raw materials, machineries and spare parts.

The Central Bank of Nigeria (CBN) was forced to come up with several measures to stabilise the market.

The CBN had directed in the previous year that 60 percent of foreign exchange available in the market be allotted to manufacturers as a measure to provide more dollars to manufacturers.

This seemed a good initiative but it hurt other sectors, leading to incessant complaints across the country. Mmanufacturers also lamented that the available dollars could not meet 10 percent of their needs.

The CBN in February 2017 reversed the 60 percent FX allocation to the sector and resolved to make dollars available to all sectors of the economy.

The apex bank created the Investors and Exporters windows and made more dollars available for all sectors. The apex bank also floated the SME window to enable small businesses to import eligible finished and semi-finished items not exceeding $20,000 for an enterprise each quarter.

“We are disappointed that the 60 percent preferential FX allocation to the manufacturing sector was withdrawn mid-way,” Frank Jacobs, president of the Manufacturers Association of Nigeria (MAN), said at that time.

“The change was ill timed in view of its impact on manufacturing projections and plans for 2017. Most manufacturers at that time were just beginning to resume production while others were looking inwards for the development of the needed raw-materials locally,” Jacobs said.

But the windows have eventually turned out positive for the economy, bringing back investor confidence, leading to new investments in the manufacturing sector.

A combination of this policy, ceasefire in the Niger Delta and gradual oil price rise enabled the economy to exit recession this year. This brought about new investments in the economy.

In June this year, dairy maker FrieslandCampina WAMCO commissioned a milk collection plant in Saki, Oyo State, with a capacity to hold 12,000 litres of raw milk daily and 4.32 million litres annually.

This is FrieslandCampina WAMCO’s fifth milk collection plant in Oyo and will see over 10,000 small-holder farmers participate in the process and earn good income, said the company.

“Our company has taken a strategic and comprehensive approach to developing the Dairy Development Programme (DDP), focusing on key projects, programme content and enabling facilities,” said Ben Langat, managing director of FrieslandCampina WAMCO.

 

“But these investments must be supported by policies and socio-economic infrastructures to realise a robust dairy farming sector that can serve over 180 million Nigerians,” Langat said.

Also in June, Procter & Gamble, largest American non-oil investor in Nigeria, commissioned a new production line for its Always brand in Agbara, Ogun State, south-west Nigeria.

On August 30, vice president Yemi Osinbajo commissioned a 60,000 metric tonnes per annum Edo State Fertilizer Plant, Auchi, which had already created 500 direct jobs, with a capacity to create more.

On the same day, BUA commissioned its second cement plant located at Obu, Okpella, Edo State. BUA has invested  $2 billion dollars in the Nigerian cement industry with capacities in excess of over 8 million tons per annum within nine years of existence.

“Our investments in the two cement lines in Edo State represent the largest non-oil and gas related investment in the whole of the South-Southern region of Nigeria. Our technology has the latest filtration with capacity of less than 10 milligram per normal cubic meter. We use natural gas, which is a very clean energy for both our kiln as well as the power plant in addition to having a very green environment,” said Abdulsamad Rabiu, chairman of BUA Group, at the commissioning.

Unilever Nigeria, a Fast-Moving Consumer Goods (FMCGs) firm, opened its Blue Band factory at Agbara Industrial Estate, Ogun State, which is the latest addition to investments the company has made in Nigeria.

In late November, FoodPro Limited commissioned its cashew processing factory in Ilorin, Kwara State.

“Through domestic processing of raw cashew nuts, we have created more than 400 direct jobs and several thousand indirect jobs for farmers, vendors, suppliers and artisans who form the heartbeat of FoodPro’s value chain. With 90 percent of FoodPro’s employees being women, we are humbled by the role we play in impacting communities and improving economic and social development conditions in our host community,” Ayo Olajiga, co-founder/CEO of FoodPro Limited, said.

On December 1, Kellogg’s and Tolaram Nigeria Limited commissioned a N6 billion naira factory, which has a capacity to produce 10,000 metric tonnes of cereals per year.

The Manufacturing Purchasing Managers Index (PMI), which weighs the state of the manufacturing sector, was on the rise since April, 2017.

Manufacturing PMI in the month of December stood at 59.3 index points indicating expansion in the manufacturing sector for the ninth consecutive months.

ODINAKA ANUDU