The Manufacturers Association of Nigeria has said that the protracted foreign exchange crisis in the economy may trigger factory shutdowns if the situation continues to worsen.
The Director-General of the Association, Segun Ajayi-Kadir stated this in a recent interview with AIT.
According to him, manufacturers are unable to source up to 20 per cent of their forex needs at the official market, leaving them at the mercy of the parallel market.
With the rapid depreciation of the naira in recent weeks, the MAN D-G said manufacturers have continued to grapple with high production costs which has led to decreased capacity utilisation.
He said, “There are reports that across the board, many warehouses and plants of many manufacturing firms are stockpiled with unsold goods manufactured last year.
“The development is as a result of the devastating effects of the exchange rate crisis, inflation, fake and sub-standard goods, smuggling and other macro-economic challenges.”
Speaking further, Ajayi-Kadir said that manufacturers might be forced to halt production or downsize their workforce if improvements in sales are not recorded.
Ajayi-Kadir further hinted that based on current calculations, the first quarter of 2024 is likely going to come with more job losses than what was recorded in 2023.
He added, “These had put many manufacturers in a great dilemma in the current year as they are applying brakes on production by watching keenly events in the country to know if there would be an improvement in sales in order to create space for fresh production for the year.”
“The continued naira depreciation against the dollar and the general forex volatility are forcing manufacturers to have a rethink. No genuine manufacturer could operate successfully and make a profit under the current scenario, whereby the naira has been falling sharply more than expected in the country.”
Ajayi-Kadir also called on the government to scrap the price verification portal which was introduced last year by the Central Bank of Nigeria as it was causing companies to shut down due to the inability to import raw materials.
“The government should also open new windows for us to source our credit at rates that are not lower and that are not higher than five per cent. These are very quick wins that the government can do that can lower the pressure that is upon the manufacturing sector,” he said.
He said that some members of the association who had paid for forex at the futures market have already been asked to provide their bank details for a refund due to the unavailability of forex.
On the frequent increase in the exchange rate for cargo clearance, Ajayi-Kadir said the development would lead to an increase in the price of products due to the toll it is taking on manufacturers.
The Director-General’s comments came amid a rapid depreciation that has seen the naira fall to N1,665.50/$1 as of last week Friday.
The development has had a huge bearing on manufacturers who depend on foreign exchange to import input for their production activities.
