The Manufacturers Association of Nigeria (MAN) has expressed its support for the recent move by the Central Bank of Nigeria (CBN) to unify the official exchange rate and called on the apex bank to put a measure in place to minimise the pain on the manufacturing sector.
The association said that the central bank should consider the “outstanding obligations of manufacturers from the second quarter 2019 till date given at N345 to a dollar prior to unification and allow such to be settled at between N330 and N360 per dollar to enable banks to redeem these obligations to foreign suppliers of the manufacturers. Otherwise, many manufacturing factories may close and CBN stimulus packages to the manufacturing sector will suffer a huge setback as cash flow crunch becomes the order of the day.”
It said that the unification of the exchange rate came at the right time, particularly now that the economic outlook is gloomy in light of the impact of the ravaging COVID-19 pandemic that has culminated in uninspiring macroeconomic situations.
MAN added that the apex bank should “develop appropriate implementation strategy that will engender a successful transition from the current multiple windows to a single efficient one.
A statement issued yesterday by the President of MAN, Mr. Mansur Ahmed, said that the CBN should ensure that the strategy would limit the short-term pains by responding swiftly with an inward oriented rescue guideline and also sought to boost the pace at which such efficiency gains would materialised.
Ahmed urged the CBN to ensure that the implementation of the critical aspect of the unification process is done as fast as possible, to enable Nigeria garner a sizable portion of the meager foreign capital available in the global economy.
He said that the central bank should apply gradual submission of all instruments of exchange rate determination to the unseen forces of demand and supply as a matter of necessity “and completely avoid the temptation of interference in order to fully harvest all the benefits that foreign exchange unification can offer.”
The MAN also recalled that it has been advocating for a unified exchange rate in the country to promote a market friendly rate that can facilitate stable production planning and engender sustainable economic growth.
“The current foreign exchange rate unification agenda will entrench convergence, enhance exchange rate stability, boost investors’ confidence, control rising inflation and promote transparency. It will also entrench better exchange rate management, eradicate distortions to the barest minimum, eliminate the notorious socially destructive rent seeking activities, halt the incidence of round tripping, ensure better allocation of resources, facilitates income expansion and stimulate the inflow of foreign investment into the economy.
“You would recall that the CBN had at two different occasions ‘adjusted’ (devalued) the value of Naira amid lower oil prices, first from N306 to N360 and now followed it up by another adjustment of July 7, 2020, which moved the rate at the Special Secondary Market Intervention Sales (SMIS) to N381 per dollar. Obviously, the adjustment was motivated by the intention of the apex bank to merge the exchange rate around Investors & Exporters (I & E) window where the Naira is weaker,” he said.