With the Central Bank of Nigeria (CBN) adjusting the foreign exchange rates in a move to have a uniform rate for the Naira, local manufacturers have warned that many factories may shut down if outstanding obligations of over one year to foreign suppliers are not met.
According to the Manufacturers Association of Nigeria (MAN), while the move is gratifying, the apex bank should urgently put a measure in place to minimize the intensity of the pain by considering outstanding obligations of manufacturers from the second quarter 2019 till date.
To them, the outstanding obligations given at N345/$ prior to unification should be given the privilege to be settled at between N330 and N360 per dollar to enable banks to redeem these obligations to foreign suppliers of manufacturers.
If not done, MAN warned that many factories may close shop, and CBN stimulus packages to the manufacturing sector will suffer a huge setback, as cash flow crunch becomes the order of the day.
MAN, in its position on the matter noted that it is important to recognize the existence of the unavoidable pains that naturally come with the transition from a multiple exchange regime to the domain of a single exchange rate, particularly the burden of dollar denominated loans, and offsetting existing credit commitments to foreign suppliers of raw materials.
To address the concerns, the local producers urged the CBN to develop appropriate implementation strategy that will engender a successful transition from the current multiple windows to a single efficient one; and also ensure that the strategy pursues two fundamental objectives.
The first objective, according to MAN, is to limit the short-term pains until efficiency gains materialize by responding swiftly with an inward oriented rescue guideline, while the second should seek to boost the pace at which such efficiency gains materialize.
MAN also urged the apex bank to submit all the instruments of exchange rate determination gradually to the unseen forces of demand and supply as a matter of necessity, and completely avoid the temptation of interference to fully harvest all the benefits that foreign exchange unification can offer.
“It is the earnest belief of our Association that the CBN also needs to ensure that the implementation of the critical aspect of the unification process is done as fast as possible, to enable Nigeria take her portion from the meagre capital currently available in the global economy.
“This is not unconnected with the fact that the intensity of the prevailing aggressive competition for resources occasioned by the backlashes of COVID-19 may deny some countries from accessing the much-needed capital inflow, as investors holding scarce resources by default rationally settle for destinations where investment is safe and earnings can be easily repatriated,” MAN President, Mansur Ahmed, added.
– The Guardian.