MAN prescribes bailout options over forex deficit
To address the shortfall in the country’s foreign exchange earnings, the Manufacturers Association of Nigeria (MAN) has urged the Federal Government to introduce counter-purchase strategies for locally manufactured goods as well as incentives for non-oil exporters.
Indeed, counter-purchase strategy is being increasingly viewed by firms and nations as an excellent mechanism to gain entry into new markets by creating parallel business transactions that link a sales contract with an agreement to purchase goods or services as a means of reducing the flow of convertible currency.
According to MAN, government should explore such strategy to ensure that conditions for foreign exchange generation are assessed before investors are given certain sizes of dollar-denominated contracts, adding that emphasis should be laid on the need to fund the productive sectors of the economy so that the tempo of industrialisation attained by the country can be sustained.
Besides, the association also urged the Central Bank of Nigeria to stop funding the Bureau de Change (BDC) market as part of measures to salvage forex earnings in the country.
MAN, in its position on the current state of the Naira, noted that the Bureau de Change should provide alternative funding window to the economy by sourcing their forex independently from other sources and supply to the forex market.
MAN added that export of manufactured products and other finished products should be encouraged in order to make up for the deficit in the forex market, while exporters should be encouraged to repatriate accrued funds.
MAN’s position, which was made available by its President, Dr. Frank Jacobs, expressed concerns over the funding of the BDC market by the CBN noting that the BDC market, under the present arrangement, act as mere distributive conduit pipes by simply getting forex allocation from the CBN and selling to very few Nigerians for profit without much value addition.
Jacobs said: “Foreign exchange allocated to the Bureau de Change as well as from other sources should be channelled to the productive sectors of the economy, especially manufacturing, for the importation of essential inputs and machinery that are locally available as well as to the social welfare segment of the society like hospitals, schools among others.
“MAN would like to advocate the use of guided deregulation such that the Naira would be left to flow freely within a bracket which the CBN would determine. MAN believes that this arrangement will allow the exchange rate to be determined by the market but with some moderation and also leave room for investors to be attracted to invest in the country. This will also assist in checking the ugly situation that took place during the SAP era where, as a result of devaluation, over 60% of small and medium scale industries closed down because of their inability to sustain their operations. Restriction on dollar inflow should be lifted but this should not preclude CBN’s duty of investigating sources of such incomes.