High exchange rate is killing Nigerian industries, says NISPO boss

Ukatu-at-CICAN awrds


By Valentine Amanze

The manufacturing and steel industry will soon collapse in Nigeria if the federal government fails to find solution to the high exchange rate, which is affecting the procurement of raw materials and spare parts.

The Managing Director of NISPO, Sir Afam Mallinson Ukatu, raised the alarm at the Commerce and Industry Correspondents Association of Nigeria’s (CICAN) end of year workshop /media awards in Lagos on Thursday December 16, 2021, titled, “Impact of Forex Crisis on the Real Sector and MSMEs.”

Ukatu pointed out that the manufacturing and steel industry was facing lots of problems, regarding accessibility to foreign exchange to buy raw materials and also the spare parts.

He appealed to the government to reverse the trend by floating a proper policy that would enhance manufacturing positively.

He accused the Central Bank of Nigeria (CBN) of not doing enough to protect the real sector.

His words: “The CBN hasn’t done much in this area. Manufacturers Association of Nigeria (MAN) has been advocating that the CBN should create a window that can help genuine manufacturers access forex with ease but to no avail.

“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 much 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.

“Moreover, If you have a loan running with the commercial banks, and Bank of Industry (BoI) for example, there is no way you will allow your factory to shutdown, because you must service the loan facility, so you have to find a way or the other to get your spare parts and raw materials. But when you are not getting forex from CBN windows, definitely, you have increased your cost of production by 25% – 30%. So, if it is a business that has a small margin, all your projections you have done for the year would be gone. We are still pleading and asking government to do something to help finance raw materials and spare parts.”

Ukatu also advocated for the unification of gas prices, in terms of paying in local currency, or pegging it at a fixed rate for manufacturers.

“Anytime manufacturers are getting gas at a fixed rate of ₦400 per dollar for instance, we can plan with it. But as at today, the devaluation of naira and with dollar continuously going up, the rate of gas has increased and the manufacturers are at the receiving end,” he said.

He appealed to the government to make it possible for manufacturers to pay for gas consumption in Naira at fixed price and not by conversion to CBN official exchange rates.

He pointed out that not all the gas concessioners were getting it at the same rate.

“Some are getting it cheaper based on the arrangement they have made over time.

“We the manufacturers are trying to see how we can get a cheaper source of gas and a cheaper means of production,” he said.

He called on the government to end multiple taxation, which he said was affecting manufacturers.

“I have been fighting the issue of double taxation, but yet to yield the required result. Unfortunately, the government failed to understand that the size of factor does not determine the size of tax you pay. The government agencies and revenue generators will see the size of the factory that is about to close down, and slam it with the amount of tax that you cannot afford.

“If our businesses will remain, we have to revisit our policies; we need to understand what is going on in South Africa, the support they are giving to manufacturers.

Competition is good when there is a level playing ground, if this is not done, that means manufacturing may be a thing of the past in Nigeria. We are praying that now that there is open door policy to export and to buy where you can, so we have to do some other things that others are doing in their own country to support manufacturing to be able to compete in AfCFTA,” he said.




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