Manufacturers warn: CBN forex policy reversal threatens industry survival

The Vice Chairman of the Basic Metal sector of the Manufacturers Association of Nigeria (MAN), Mr. Lekan Adewoye, has expressed serious concerns over the recent Central Bank of Nigeria (CBN) directive that removed the restrictions on access to 43 items for imports. He believes that this decision could have devastating consequences for the already struggling manufacturing industry in Nigeria.

Speaking during an interview with TVC Business, Mr. Lekan Adewoye shared the perspective of manufacturers on the latest policy implemented by the new leadership of the CBN. He emphasized that it is crucial to encourage the production of items that can be manufactured within Nigeria. He further warned that the CBN’s directive might exacerbate the challenges faced by the manufacturing sector.

Mr. Lekan Adewoye expressed his concerns, saying, “This directive will further jeopardize the manufacturing industry, which is already grappling to survive. Some of our members who have made significant investments in backward integration may now regret their decisions, as many individuals who can access foreign exchange will claim to be importers. This will force genuine manufacturers to shut down their operations, leading to increased unemployment.”

He acknowledged that there might be a few items on the list of 43 that are of national importance. However, he emphasized that it does not mean that all 43 items should be allowed into the country. He questioned the fate of those who had already invested in local production, asking, “What are they going to do with their investments?” Mr. Lekan Adewoye made it clear that the manufacturing sector needs the government to take appropriate actions, as the potential consequence of this policy change is the shutdown of numerous manufacturing companies and a subsequent increase in job losses.

One of the core issues highlighted by Mr. Lekan Adewoye is the lack of competitive advantage for Nigerian manufacturers compared to their counterparts in other countries, both in West Africa and around the world. He argued that imported products are often more affordable because Nigerian manufacturers face challenges in terms of competitiveness. Even within West Africa, Nigerian manufacturers struggle to compete effectively and do not enjoy any significant competitive advantage. Furthermore, he noted that any existing incentives provided by the government have been removed, exacerbating the industry’s challenges.

Background:

The recent decision by the CBN to lift the ban on accessing foreign exchange for imports of 43 items comes as a significant policy change. This restriction was initially imposed during the tenure of former CBN Governor, Godwin Emefiele. The primary objective behind this move is to enhance liquidity in the Nigerian foreign exchange market. The CBN has also stated that it will intervene periodically in cases of forex scarcity in the market.

Mr. Lekan Adewoye’s concerns reflect the apprehension among manufacturers in Nigeria regarding the potential impact of this policy reversal. They fear that it could undermine their investments, lead to increased job losses, and further weaken an already struggling manufacturing industry. In light of these concerns, it remains to be seen how the government and the CBN will address these issues and support local manufacturing in Nigeria.