BREAKING NEWS, Business
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The Manufacturers Association of Nigeria is asking the Central Bank of Nigeria to sell dollar to them directly bypassing banks to enable get enough funds to import raw materials for production
| By Anayo Ezugwu | Mar 21, 2016 @ 01:00 GMT |
WITH the scarcity of dollar in the country, the Manufacturers Association of Nigeria, MAN, is lobbying the Central Bank of Nigeria, CBN, to sell the currency directly to its members. It stated that bypassing commercial lenders to sell the foreign currency directly to manufacturers will help them overcome the shortage that is making it difficult for them to import raw materials for production which threatens thousands of jobs in the country.
According to Ali Madugu, vice president, MAN, the body which has more than 2,700 members, proposed weekly auctions of dollars to manufacturing businesses at a meeting with Godwin Emefiele, governor, CBN, in Abuja. “We’re calling for the Central Bank to start giving to us directly, hand-to-hand, rather than through the banks. Some of our member companies will run out of raw materials next month. Without restocking, what will happen? Thousands of jobs are on the line,” he said.
Madugu, in an interview with Bloomberg, an international news vendor, said under the current system, the central bank sells foreign exchange to commercial lenders who then distribute it to their customers. That’s left manufacturers short since the banks often prioritise other businesses and individuals. He said the MAN hopes to receive a response from the central bank soon. “The banks have everybody as their customers. They even have people buying dollars for medical bills and school fees. If the Central Bank believes the economy must be diversified and manufacturing boosted, they should allocate directly to us.”
Nigeria, which derives about two-thirds of government revenue from oil, has rationed dollars and brought interbank foreign-exchange trading to a halt since February last year in a bid to prevent the naira falling. The measures have officially pegged the currency at N197 per dollar. As dollars have become scarce, the black-market exchange rate plummeted to N310, with the hope the naira will fall to N291 per dollar later in year.
With the vagaries of the naira, the International Monetary Fund estimated the economy grew 3 percent in 2015, the slowest pace since 1999. Manufacturing is in recession, having declined during the first three quarters of the year. President Muhammadu Buhari and Emefiele have said that boosting employment in the manufacturing sector is crucial to reviving Nigeria’s growth.
The CBN on Monday, January 11, announced it was stopping the direct sale of dollars to bureaux de change to protect the under-pressure naira and conserve depleted foreign reserves.
Emefiele said in Abuja, that operators in this segment of the market would now need to source their foreign exchange from an autonomous source. He added that commercial banks would be allowed to accept cash deposits of foreign exchange from their customers.
Nigeria, Africa’s biggest economy, number one oil producer and most populous country has been battered by the global fall in crude prices since mid-2014. Oil sales contribute some 90 percent of the country’s foreign exchange earnings. But as the cost is about $40 a barrel this month, forex earnings have fallen to as low as $1 billion a month. At the same time, forex demand in Nigeria’s import-heavy economy has risen, which combined with rising inflation and slowing GDP growth has led to the depletion of foreign reserves.
This is why restrictions on the forex market was introduced to conserve reserves including reducing the amount the CBN sells to each bureau de change operators each week from $60,000 to $10,000. But Emefiele said the bank noted with grave concern that some operators were flouting limits on them providing $5,000 or less to clients. Instead, some of them have become wholesale dealers illegally handling millions of dollars per transaction. “Operators in this segment have not reciprocated the Bank’s gesture to help maintain stability in the market.”
He accused the bureau de change of being greedy for selling at higher rates, adding that demand for operating licences sky-rocketed to nearly 150 per month as individuals seek to cash in, leading to the gradual dollarisation of the Nigerian economy.
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