Following its inability to access foreign exchange under the old foreign exchange policy regime as well as the gloomy forecast for 2016, DAG Motorcycles Industries Nigeria Limited, also known as Bajaj, has cut back on some of its operations and downsized its workforce.

According to the firm, the move became necessary to forestall challenges with management of rising production costs and gloomy forecast for the 2016 financial year.

Specifically, the firm stated that the lingering inaccessibility to the Central Bank of Nigeria’s foreign exchange window under the just-ended policy regime forced it to disengage the services of its outsourcing contractor for its production line, Ashton Consulting Limited, even though the effect of the reviewed policy is yet to be appraised by the operator.

Reacting to concerns by some of the employees of its contractor, Company Secretary and Legal Services administrator of DAG Motorcycles, Ademuyiwa Abe explained that the company, whose capacity utilisation level enabled it to produce 1000 units of motorcycles monthly, was hit by the forex crisis with its production capacity dropping by over 50 per cent.

He explained that the company was left with no other option than to terminate the appointment of the contractor as cost of importing Complete Knocked Down (CKDs) and subsequent production cost had become unfavourable for the company to compete in the local market.

“We have been around for some few years now assembling motorcycles. The company brings in Complete Knock Down (CKD) to assemble here in Nigeria, but because of the nature of the business of local assembling, what the company has been doing is to outsource its labour force.

“Ashton Consulting Limited which supplies the workforce are also in charge of paying their salaries and other entitlements. The motorcycle company only discusses with the consultant. The consultant is just to supply the labourers that will do the assembling. But in the last few months of last year, there was restriction of foreign exchange by the Central Bank of Nigeria (CBN), so most of the times there were no foreign exchange to bring in the CKD, not just the CKD, but other items required for assembling. Since there was no more foreign exchange, the situation began really bad that we had no choice to tell our contractors to close down for a while and if the situation improves and CBN lifts the ban, we will call on them to recruit new or existing workforce.”

“With this decision, there is bound to be reactions, because we are talking about 250 workers. The contractors understood the situation very well but the workers are the ones creating issues with fallout to the end users of the motorcycles.

“Considering the current economic situation, we cannot continue to work with our consultants and this is the reason we terminated our contract with our consultant. We believe that as things improve, definitely we will be able to get back on track again. There had been issues that we terminated our contracts with our consultant based on the fact that we did not increase salaries, this is not the true position of what transpired. We are all aware about the CBN’s foreign exchange restriction policy. The motorcycles and the tricycles we assemble here were brought in as CKD for us to assemble, but the rate at which these CKDs are coming, we could not afford the exchange rate bearing in mind other factors included in cost of production.

“We notified our contractors based on the contract we had in hand because we do not deal with the workers directly but the contractors who recruited them. We pay the contractors based on the services they rendered to us. At the moment we are not producing and we are hoping that as things improve, we can get back to operation.

“Ashton is an independent contractor and also a limited liability company and independent of us. It is just the contractual partnership we have with them and there is simply no nexus with the company.