MAN Seeks Preferential Forex Allocation
The Manufacturers Association of Nigeria (MAN) has called on the Federal Government to ensure that adequate foreign exchange (forex) is allocated to the manufacturing sector through a preferential arrangement to enable the sector import raw materials and machinery that are not produced in the county.
The association said the difficulty in sourcing forex for importation of raw materials and machines that are not locally available had been a critical challenge to manufacturing, noting that since the onset of COVID-19 pandemic in the first quarter of last year, the severity of forex challenge had intensified, particularly as the value of the naira deteriorated.
MAN lamented that even with the gradual return to normalcy of business activities and the recovery of forex earning as crude oil prices improved, acute shortage of forex persisted.
In addition, the Central Bank of Nigeria (CBN) has consistently intervened in the forex market (official and BDC windows), but the result has been negligible, particularly in the second quarter of 2021.
“It is therefore critically important that government reviews its foreign exchange management procedures to ensure that all available forex are productively deployed into the economy, MAN said, in its ‘Manufacturers CEOs Confidence Index (MCCI)’ for second quarter 2021, released during the week.
MAN uses the MCCI as barometer to garner the perceptions of CEOs of manufacturing companies on changes in the economy. The imperative diffusion factors considered in the MCCI processes include the current business condition, business condition for the next three months, current employment condition (rate of employment), employment condition for the next three months and production level for the next three months.
MCCI also gauges changes in key macroeconomic indicators including sector specific factors that represent government activities and policy measures in the economy. Consequently, the effects of movements in forex, lending rate, credit to the manufacturing sector and capital expenditure of the government were also measured.
In addition, it gauges the outcome of changes in business operating environment factors which include over-regulation, multiple taxes/levies, access to seaports, local raw-material sourcing, government patronage of manufactured goods and inventory of unsold manufactured products.
MAN said in the second quarter of the year, based on the MCCI, the normalcy and tranquility seen in the economy in the first quarter of the year were sustained, as business activities increasingly rebounded from the hangover of COVID-19 pandemic.
“This is corroborated by the increase in MCCI scores for the second quarter of the year to 52.9 points, from 49.1 points recorded in the first quarter. The index score of 52.9 points in the quarter under review was the first it stayed above the 50 neutral point since the first quarter of 2020,” the report said.
However, MAN said 52 per cent of manufacturers interviewed during the fieldwork for the second quarter MCCI disagreed that the rate at which forex was sourced improved. While 30 per cent of them were not sure, only 18 per cent agreed that the rate improved.
“On this account therefore, it is critically important for the CBN to speed up the ongoing review of forex management procedures to ensure that available forex in the country is productively utilized,” MAN said.
The association also said in view of the new CBN policy that stopped allocation of forex to the BDC segment of the forex market for operational incongruities, it had, therefore, become imperative to encourage banks to build more capacities.
MAN said thus could be done through designated desks for handling the streaming applications and Form M to ensure seamless and timely processing of forex applications by manufacturers.
It also recommended granting concessional forex allocation at the official forex market to manufactures for importation of productive inputs that are not locally available, as well as unification of the various forex windows in the country.