NACCIMA claims ports’ inefficiencies worsen inflation, spike cost of goods

The Director-General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Sola Obadimu, has decried the inefficiencies at Nigerian ports, revealing that they add up to 50 per cent to the cost of goods and worsen inflation in the country.

Also lamenting the unstable exchange rate for imports, which he said is negatively impacting businesses, especially in the manufacturing sector, he said this is reducing the competitiveness of manufacturing companies, locally and regionally.

He regretted that politicians, using state resources, are mopping up available FX, irrespective of rates, to the detriment and survival of manufacturers.

Calling for a stable, competitive exchange rate, supported by coherent monetary and trade policies, he said this is essential to foster business growth and economic stability.

“As of August 2024, the official exchange rate hovers around N1,565/$1, while the parallel market rate exceeds N1615/$1. This is inflating the cost of raw materials and finished goods. A manufacturer importing raw materials worth $100,000 at the parallel rate of N1615 per dollar would spend N161.5 million, compared to N156.5 million if they could access FX at the official rate. This squeezes profit margins and forces companies to pass on costs to consumers, leading to inflation,” he stated.

Obadimu added that these high production costs are making locally produced goods more expensive compared to imports from countries with stable exchange rates. “FX unavailability causes delays in cargo clearance, disrupting supply chains and production downtimes, capital flight and loss of government revenue.”

Urging a stable rate, he said it would allow businesses to plan and budget more effectively. “Any rate beyond N1, 000/$ is unreasonable and bad for business. We must implement supportive fiscal and monetary policies that enhance FX availability through increased exports, foreign direct investment (FDI) and remittances, which could all help stabilise the rate. The Central Bank of Nigeria (CBN) should consider a more flexible exchange rate regime that reflects market realities while maintaining some level of control to avoid excessive volatility. They could also intervene strategically to defend the naira, when necessary, without depleting reserves too rapidly,” the NACCIMA boss added.

According to him, incentives for local production, such as tax breaks for manufacturers using local raw materials or producing for export, would reduce dependency on imports.

“Promoting export diversification could also generate more FX and ease pressure on the naira. Improving port infrastructure and reducing bottlenecks in cargo clearance would lower transaction costs, making businesses more resilient. Inefficiencies at the ports further compound the challenges posed by FX.

“The manufacturing sector contributed 9.98 per cent to GDP in Q1 2024, lower than the 10.13 per cent recorded in Q1 2023 and higher than the 8.23 per cent recorded in Q4 2023. This has remained unstable due to high operational costs linked to FX instability. These factors underscore the need for a comprehensive approach to managing exchange rates and trade policies to support the manufacturing sector and broader economic growth,” Obadimu noted.