In this interview, Segun Ajayi-Kadir, the Director-General of the Manufacturers Association of Nigeria (MAN), discusses the repercussions of unresolved dollar debts on manufacturing firms with Edidiong Ikpoto.
Contrary to the Central Bank of Nigeria’s (CBN) assertion of clearing all valid outstanding forex backlog, MAN reported that many of its members still await unsettled dollar requests. How has this situation impacted the industry?
Manufacturers are grappling with a challenging scenario. Some outstanding forex transactions date back more than two years. Despite concluding these transactions, importing raw materials, manufacturing goods, and closing accounts for the financial year, manufacturers are still burdened with paying interest on both naira and dollar debts. The initial forex deposits were often financed through borrowing, further compounding the financial strain. The CBN’s failure to fully reimburse the dollar exacerbates this issue, hampering operational capacity and hindering manufacturers’ ability to procure fresh raw materials.
The ongoing financial burden has led to significant losses for the manufacturing sector, with companies incurring approximately N1.5 trillion in forex-related transaction losses within the last six months alone. This dire situation adversely affects productivity, loan repayment schedules, employment rates, and the sector’s contribution to the GDP. The disruption in the supply chain and increased costs eventually trickle down to consumers, further impacting economic well-being.
At recent meetings with the Minister of Trade and Industry, manufacturers sought clarification from the CBN and commercial banks on unresolved issues. Despite banks’ claims of addressing queries raised by CBN auditors, the central bank’s response remains pending, leaving manufacturers in limbo. The discrepancy arises from the CBN’s assertion that unattended forex requests were invalid, a claim disputed by manufacturers who assert the completion of transactions and utilization of procured goods in production.
Efforts to resolve the issue continue, with affected manufacturers scheduled to engage with the National Assembly. Their primary demand remains straightforward: repayment. Any suggestion of manufacturers retrieving funds if unable to settle forex forwards is deemed unfair, considering the fluctuating exchange rates and delayed resolution by the CBN.
While legal action against banks and the CBN remains a possibility, stakeholders prioritize amicable resolutions over prolonged judicial processes, mindful of the broader economic implications. The reported N1.5 trillion losses encompass interest payments on dollar debts and additional expenses incurred due to deviations from official forex channels. Urgent intervention is imperative to safeguard the manufacturing sector and prevent further economic downturn.
