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Experts enlist local content drive as panacea for forex crisis

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Capital market experts have stressed the need for management of listed companies to streamline their business operations by seeking viable local content opportunities and indigenous production of commodities to hedge against foreign exchange volatilities and other inflationary pressures.

Besides, the stakeholders, who spoke in an interview with The Guardian, also linked part of the lull in the nation’s capital market to the failure on the part of companies’ board to initiating good policies that would trigger share price appreciation and attract more investors into the company.

The stakeholders believed that local production would improve the performance of these listed companies and reflect on their share prices on the Nigerian Stock Exchange

According to them, if listed companies engage in local businesses and source their materials locally, it would develop smallholder farmers in the business chain and benefit poor subsistence ones and other rural traders in the long term.

Furthermore, it would reduce, to the barest minimum, exchange rate volatility and depreciation, which hurt economic performance by contracting output growth and inflation.

Therefore, they suggested that listed firms must adopt 100 per cent locally sourcing of raw materials, noting that over dependence on foreign raw materials and exposure to foreign exchange has unfortunately, subjected firms to the vicissitudes of the Nigerian economy, a situation which has arisen because in the absence of local production capacity, importation of the foreign based raw materials became inevitable.

They maintained that some board of directors have continued to invest on failing businesses that would never yield any dividend

For instance, the President, Independent Shareholders Association of Nigeria, Adeniyi Adebisi submitted that if companies remain low performing or moribund for a number of years on end, the question needs to be asked what the directors and management of such companies are doing to turn the fortunes of their companies around.

“What has been observed is that many of those in authority of these companies seem complacent, and satisfied with enjoying the benefits of their offices not minding the fact that shareholders who are not within their circle are not receiving anything.

“Most of these companies are having problems because of over dependence on foreign exchange either for their raw materials or technology and because there is shortage of foreign exchange, that is affecting them negatively,.

“Since we are not sure when the resolution of that shortage will be, we are saying let them start looking inwards and a number of companies have started looking inwards they are now beginning to source their material locally and produce locally.

“Personnel in this category should realise that the main purpose of their enterprises is to manage the resources put under their care to make profit and declare dividends to their shareholders.

“Any board of directors and its management that cannot achieve this over a period of time should be removed.


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