Manufacturers Warn: CBN Forex Policy Endangers Industry

The recent directive by the Central Bank of Nigeria (CBN) to remove restrictions on access to 43 import items has sparked concerns among stakeholders, especially in the manufacturing sector. Mr. Lekan Adewoye, the Vice Chairman of the Basic Metal Sector of the Manufacturers Association of Nigeria (MAN), has expressed his apprehension about the potential impact of this directive on the already struggling manufacturing industry.

In an exclusive interview with Infostride News, Mr. Lekan Adewoye shed light on the perspective of the manufacturing community regarding this recent policy shift initiated by the apex bank. His insights paint a vivid picture of the challenges and apprehensions that Nigerian manufacturers are currently facing.

“For items that can be produced in Nigeria, such manufacturers ought to be encouraged,” Mr. Lekan emphasized. He voiced concerns that this directive could have a detrimental effect on an already vulnerable manufacturing industry, which is grappling with survival. The removal of restrictions might lead to a surge in imports, further squeezing the space for local production.

Some manufacturers have made significant investments in backward integration, a strategy that aligns with the government’s emphasis on promoting local production. However, the removal of restrictions on these 43 items could create an environment where anyone with access to foreign exchange can claim to be an importer. This, in turn, could lead to sincere manufacturers being pushed out of business and an increase in unemployment rates.

Mr. Lekan Adewoye acknowledges that there might be a few items on the list of 43 that hold national importance. Nevertheless, he believes that a blanket removal of restrictions is not the solution. The investments made by manufacturers in adhering to government policies and promoting local production may go to waste if such a policy change is not well-considered.

The manufacturing sector, which is a critical pillar of any nation’s economy, is vital for job creation and economic growth. Mr. Lekan Adewoye emphasized the importance of government intervention to support the industry. He warned that if the government fails to address these concerns adequately, many manufacturing companies could be forced to shut down, leading to a cascade of job losses.

Furthermore, Mr. Adewoye highlighted the challenges faced by Nigerian manufacturers when it comes to competing on a global scale. Nigerian products often struggle to compete with their counterparts from other regions in terms of price and quality. He pointed out that imported products tend to be relatively cheaper due to the lack of competitive advantages in local manufacturing.

Even within the West African region, Nigerian manufacturers are often at a disadvantage. Mr. Adewoye lamented that, at best, they have competitive parity, meaning they are on equal footing with manufacturers from neighboring countries. This is a significant obstacle to the growth and sustainability of the Nigerian manufacturing industry.

The removal of certain incentives that the government had previously provided to support local manufacturing has compounded the challenges faced by the sector. As a result, Nigerian manufacturers are struggling to compete in a globalized market where cost-efficiency and quality are paramount.

The backstory to this recent development lies in the CBN’s decision to lift the ban on access to foreign exchange for the importation of 43 items. This ban had been put in place during the tenure of former CBN Governor, Godwin Emefiele. The central bank cited the objective of enhancing liquidity in the Nigerian Foreign Exchange market as the primary reason behind this policy shift. Additionally, the CBN indicated that it would intervene in the forex market from time to time, especially in situations where there is a scarcity of foreign exchange.

The implications of these changes are profound. While the policy aims to address forex liquidity issues, it may inadvertently undermine the local manufacturing sector, which is in dire need of support and incentives to compete effectively in a globalized market.

In conclusion, the concerns raised by Mr. Lekan Adewoye and the Manufacturers Association of Nigeria reflect the delicate balance that policymakers must strike between ensuring foreign exchange liquidity and supporting domestic industries. It is essential for the government to consider the long-term impact of its policies on the manufacturing sector, employment, and the overall health of the Nigerian economy. As the policy landscape continues to evolve, it is crucial to engage in a constructive dialogue that takes into account the diverse perspectives of stakeholders, including manufacturers, to chart a path that promotes economic growth and sustainability.