Manufacturers advocate creation of less volatile exchange rate window
Owing to daily challenges encountered while accessing foreign exchange from the inter-bank market, local manufacturers in Nigeria have urged the Federal Government to create a less volatile window that will have positive impact on the economy.
The Central Bank of Nigeria (CBN) recently closed the official forex market owing to what it described as abuse of the window. But this move has negatively affected local manufacturers who used to obtain forex at the official window, as they have now moved to the inter-bank market where rates are costlier and volatile. Nigerian manufacturers need forex to purchase raw materials from abroad.
Frank S. Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), said such a less volatile window should be created to enable manufacturers access foreign exchange until the economy was diversified to a level where it can provide the needed industrial raw materials.
“We note with dismay the erosion of the naira purchasing power parity, high cost of foreign exchange and its attendant cost on imports, as well as the resultant un-competitiveness of locally manufactured products,” Jacobs said, during an interactive session with commerce and industry journalists in Lagos last Friday.
According to him, there is also the need for manufacturers and the government to dialogue over the outstanding Deferred Letters of Credit, with a view to identifying the companies and amount involved as well as creating a medium through which the instruments will be paid back at the exchange rate as they were drawn.
He further said government, particularly the incoming administration, should ensure establishment of the already inaugurated Development Bank of Nigeria to, among other needs, cater for the financial demands of manufacturers.
“It is unfortunate that many funds are with the CBN, but the conditions for accessing them are often not right,” he observed.
“We maintain that there is no way we can develop the manufacturing sector, especially SMEs in the sector, if funds are not made available for them. We have asked the CBN to reduce the Monetary Policy Rate to 2 or 3 percent. This will help to reduce interest rates to single-digit. In other climes, industrial loans are even below 6 and 7 percent,” he said.
On electricity, Jacobs said MAN will continue to pay electricity charges based on the Nigerian Electricity Regulatory Commission’s MYTO 2.0, stressing that any other arrangement will further overburden manufacturers.
He urged the incoming administration to retain the National Industrial Revolution Plan of the outgoing administration, saying that it was a good roadmap for Nigeria’s industrialisation.
On his part, Remi Ogunmefun, director-general, MAN, urged the government to honour all outstanding obligations on the Export Expansion Grant (EEG) to rekindle the impetus for export-oriented industrialisation and review the scheme in a way that will further promote exports.
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