Manufacturers’ expectations high over forex allocation
The new oil sector deregulation regime may have heightened hopes among manufacturers that the new price modulation template of the Federal Government may bring relief to the real sector, as access to foreign exchange at the official rate may become easier for the operators as oil marketers seek alternative sources of forex sourcing.
Though the Federal Government has been grappling with shortage of foreign exchange due to unstable global oil prices, real sector operators however believe that the new move to make oil marketers source foreign exchange autonomously would improve manufacturers’ access to the official market hitherto enjoyed by oil marketers.
However, stakeholders have expressed a downside to the optimism, noting that the parallel market remains too shallow to accommodate the pressure put on it through demand from oil and commodity importers as Naira continues to depreciate against the dollar.
Specifically, the stakeholders noted that while the pressure on foreign reserves has intensified as crude oil prices continue to plunge, thus resulting in an impact on the naira exchange rate with varying degrees of impact on all sectors of the economy, the macroeconomic outlook is a cause for concern.
According to them, the discriminatory policy of government on foreign exchange is hurting the stability of the naira against other international currencies with the local currency depreciating to as low as N360 at the weekend.
With the nation’s inflation rate hitting 12.8 per cent at the end of March, the stakeholders added that the consumer price index might rise further by the end of first half of the year, due to further increase in transportation costs, low purchasing power and income, the planting season and pressures from the foreign exchange market.
The 12.8 per cent index for March, which is the highest in almost four years, is an increase of 1.4 percentage points from what was recorded in February, according to the National Bureau of Statistics.
They advocated the need for the Federal Government to adopt a flexible exchange rate regime, noting that the quality of monetary and fiscal policy responses could have a considerable moderating effect on the impact of the new price modulation template being adopted by government on the masses.
“The CBN needs to ensure a more transparent process in the allocation of foreign exchange to petroleum products marketers. The fact that the Nigerian National Petroleum Corporation (NNPC) will still continue importation of fuel remains a concern on the transparency of the price modulation agenda. The CBN needs to come up with a realistic exchange rate band to address forex challenges”, Lagos Chamber of Commerce and Industry (LCCI), Director-General, Muda Yusuf said.
Immediate past Commissioner for Economic Planning and Budget in Lagos State and Special Adviser to the President on National Planning, Ben Akabueze noted that the government’s decision is to prioritise forex allocation to the real sector, thereby saving jobs and reducing prices of some basic goods.
“Note that the biggest fuel cost for manufacturers is diesel (since deregulated) for their generators. In other words, instead of having manufacturers source their dollars at about N285 to a dollar, let the fuel importers do so especially since most of the PMS sold in the country was above N86.50, despite allocating 40 per cent of our forex to fuel imports. ‘’
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