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Stakeholders decry impact of forex crisis on raw materials

By Femi Adekoya
22 December 2021   |   4:04 am
The Chief Executive Officer, Centre for the Promotion of Private Enterprises, Muda Yusuf, has highlighted steps for economic managers to follow to mitigate the current crisis the impact of foreign exchange is having on real sector operators.

The Chief Executive Officer, Centre for the Promotion of Private Enterprises, Muda Yusuf, has highlighted steps for economic managers to follow to mitigate the current crisis the impact of foreign exchange is having on real sector operators.

Yusuf at the 2021 workshop and awards ceremony of the Chamber of Commerce and Industry Correspondents Association of Nigeria (CICAN), advised that an adoption of a flexible exchange rate regime would improve liquidity in the forex market, while also reducing uncertainty and enhancing investors’ confidence.

He also highlighted the need to deepen the autonomous foreign exchange market through the liberalisation of inflows from export proceeds, diaspora remittances, multinational companies, donor agencies, diplomatic missions, adding that market rates should be allowed to prevail in the autonomous window.

According to him, the Nigerian economy has the capacity to weather the current turmoil if the policy contexts are right.

“We have the market, the people and natural resources. The opportunities that the present situation offers would only be realised if policy obstructions to resource flows are removed,” he added.

He said the cost of production is high because the sector is import-dependent for raw materials, stressing that low sales and turnover are also being affected by increase in price which has an effect on demand.

He noted that despite the numerous policies and measures that have been articulated by successive governments, manufacturing contribution to GDP remains less than 10 per cent on average over this period.

“The sector has remained largely import dependent which has made it very vulnerable to external shocks. This feature is also a factor of the weak competitiveness of the sector. Many manufacturing firms have low local value addition, weak backward integration, inadequate forward integration, and low job creation potentials. All of these weakened the impact of the sector on the economy and the development process.

“My proposition is that we should adopt a flexible exchange rate policy regime. Let me clarify that this is not a devaluation proposition. Rather it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market. It is a model that is sustainable, predictable and transparent.

“It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It is a policy framework that would minimise discretion and arbitrage in the foreign exchange allocation mechanism.”

Also speaking, the Managing Director, NIPSO, Afam Ukatu, said the manufacturing and steel industry is facing lots of problems, regarding accessibility to foreign exchange to buy raw materials and also the spare parts.

“We are appealing to the government to make an investment friendly monetary policy to prevent the total collapse of industries. It is becoming so obvious that it has affected so many industries, basically because of the high exchange rates of which some have to go out of the way to buy from the parallel market to continue in production,” he said.

He said the African Continental Free Trade Area (AfCFTA) will be an eye opener to MAN, NACCIMA and other members of the Organised Private Sector (OPS) to see what other countries are doing and come up with blueprint to be facilitators to the government to work in line with what is obtainable in other competitive markets.