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‘Forex interventions impacting backward integration negatively’ 

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The Manufacturers Association of Nigeria (MAN) has stated that the average performance of local raw-materials utilization among operators in the country is due principally to poor access to credit and adequate economic infrastructure needed for inward development of local inputs.
 
By restricting access to foreign exchange for the importation of a couple of items, the Central Bank of Nigeria (CBN) had hoped to encourage local sourcing of raw materials for production.
  
However, some manufacturers had requested for the HS Codes of many of the products in order to cater to products whose raw materials cannot be accessed locally.

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Though local sourcing of raw materials in the manufacturing sector increased marginally to 57.0 percent in the first half of 2019 from 56.87 percent recorded in the corresponding half of 2018, representing 0.13 percentage point increase over the period, the growth has been described as poor compared to previous performances.
 
MAN in its half-year report for 2019, made available to The Guardian, noted that local raw-materials utilization in the manufacturing sector has maintained downward trends since the first half of 2017 when the Central Bank of Nigeria commenced policy intervention in the official forex market.
  
The operators stated that the relatively more available forex resulting from the intervention may have been rubbing off negatively on backward integration agenda as firms are preferring to import raw-materials as against inward-looking.     
 
Contrastingly, the Chief Executive Officers of manufacturing companies in the Manufacturers’ CEOs Confidence Index for the third quarter of 2019, indicated that 70 per cent of them disagreed that the rate at which the sector sourced foreign exchange had improved.
  
While 15 per cent agreed that the sector’s foreign exchange sourcing had improved, the other 15 per cent were not sure that forex had improved.
  
The report said the majority of the manufacturers resorted to the parallel market to source forex to purchase machines and raw materials among other inputs needed for production.
  
It stated: “The response further confirmed that much has not changed in the supply of forex to the industry for purchase of machines, raw materials and other manufacturing input that are currently not available in the country.
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“At the moment, most manufacturers source forex only at the parallel market at unfavourable exchange rate, making manufacturing import bills for raw materials and machinery that are not locally available unnecessarily high.”
  
It added that this had been a major reason the sector had not competed favourably in the community market, “particularly as it is awash with cheap and substandard foreign substitutes.”
  
Analysis based on sectoral groups showed that local sourcing of raw-materials appreciated in some sector, while it declined in some others.  
  
In the Food, Beverage and Tobacco group, local raw-materials utilization stood at 62.9 percent in the first half of 2019, representing 0.95 percentage point increase from 61.95 percent recorded in the same half in 2018. It, however, fell by 5.6 percentage points when compared with 68.5 percent recorded in the preceding half.
 
Similarly, utilization of local raw materials in the Domestic and Industrial Plastic, Rubber & Foam sector stood at 58.3 percent in the first half of 2019, representing a 2.81 percentage point increase from 55.49 percent recorded in the same half in 2018. It, however, fell by 5.9 percentage point when compared with 64.2 percent recorded in the preceding half.
  
In the Chemical and Pharmaceutical sector, raw materials utilisation stood at 58.3 percent in the first half of 2019, representing a 2.81 percentage point increase from 55.49 percent recorded in the same half of 2018. It, however, fell by 5.9 percentage point when compared with 64.2 percent recorded in the preceding half.
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Contrary to expectation, utilization of local raw materials in the Textile, Wearing Apparel, Carpet, Leather & Leather Footwear sector stood at 54.6 percent in the first half of 2019, representing 8.09 and 3.0 percentage point decline from 62.69 percent and 57.6 percent recorded in the same half of 2018 and the preceding half respectively. 
  
In the first half of 2019, local sourcing of raw materials declined across industrial zones with the exception of Ikeja, Apapa and Abuja Zones.
  
In Kano Bompai Zone, local sourcing of raw-materials stood at 62.33 percent from 73 percent recorded in the corresponding half of 2018 and the 72.69 percent of the preceding half; thus representing 10.67 and 10.36 percentage points decline over the period respectively.
   
Local sourcing of raw-materials in Ogun zone stood at 56.98 percent in the first half of 2019, indicating 0.32 and 14.24 percentage points decline from 57.3 percent and 71.22 percent recorded in the same half of 2018 and the preceding half of
respectively.
  
In Rivers/Bayelsa Zone, local sourcing of raw-materials stood at 52.33 percent from 65.9 percent recorded in the corresponding half of 2018 and 59.69 percent of the preceding half; thus representing 13.57 and 7.36 percentage points decline over the period respectively.   
   
However, In the Ikeja zone, local sourcing of raw-materials increased to 58.6 percent in the first half of 2019 from 52.2 percent recorded in the corresponding half of 2018; thereby indicating 6.4 percentage point increase over the period. It, however, decreased by 4.74 percentage point when compared with 63.34 percent recorded in the preceding half. 

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