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Managing Director of May & Baker Plc, Mr. Nnamdi Okafor has revealed that due to the fact that effort of the Central Bank of Nigeria (CBN) in managing foreign exchange access by manufacturers is not producing the needed impact, more manufacturing companies may close shop before the end of first quarter next year.
In an interview in Lagos, Okafor feared that unemployment rate may jump next year as more companies may close shop due to their inability to source foreign exchange (forex) for raw material importation.
He decried that the forex situation has gone out of hand as manufacturing outfits are being buffeted with myriad of challenges triggered by the forex drought.
Apart from forex scarcity driven by dropping value of naira, he listed other challenges to include inability to source credit, lack of forex to import the much-needed raw materials and foreign exchange loss.
“The forex situation has gone beyond what we can wiggle. And by the first quarter of next year, most factories that are still standing will begin to shut down because the situation with forex has actually gone worse in the last six months,” he said.
Reviewing the situation between this year and 2015, he said “it was a bit better in the first half of the year because you might get, maybe, 20 or 30 per cent of your forex requirement”.
“But in the past six months, we have not got anything. So what that means is that, as I speak to you, we have not been able to order materials that normally by now, it should be sailing into Nigeria. We have not ordered them for next year.”
“The implication of this is that we have lost credit from our suppliers. Nobody outside Nigeria is willing and ready to give us credit. It is also having some impacts on cost of input materials because you have to borrow money; you have to pay cash before you get supplies. And to pay cash, you have to borrow. Banks are not willing to even lend.
“And when they do, it is at very high rates. So this has had a very huge impact on the cost of our products.
“Another major impact is the exchange rate loss. We are going to lose a lot of money from the LCs that we established, and goods supplied to us, that we converted and sold. And at the time we were about to pay for those materials, we have to buy forex at much higher rates. This will have some significant impacts on our bottomline.”
Looking at the recent Central Bank of Nigeria’s (CBN) release of $1.53 billion to 9,134 companies through special intervention scheme, the manufacturer said the effort was not sustainable enough to effect the needed stability in the manufacturing sector.
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