Nigeria Economy | |
Nigeria Economy | |
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Monday, December 14, 2020 / 11:17 AM / by CSL Research / Header Image Credit: PorscheClassy Media
A This Day
report says the Manufacturers Association of Nigeria (MAN) has warned
that many of its members could close shop by January 2021, unless the Federal
Government takes urgent steps to address challenges in the sector. The Acting
Director General of the association noted that many of its members that have
been able to access the CBN's N1trn intervention fund still could not buy
machines for their production due to the foreign exchange scarcity. He also
noted that most of the sub-sectors are operating at less than 10% capacity
utilisation because of the impact of covid-19 and sustained infrastructural
challenges. The association appealed to the CBN to prioritise
allocation of foreign exchange to the manufacturing sector.
The
outbreak of the coronavirus has significantly impacted manufacturing activities
within the country. Vast majority of Nigerian manufacturers rely on several raw
materials and machines from China and Europe. Apart from the fact that the
ability to get supplies was significantly disrupted by the pandemic, the
scarcity of FX remains a big problem for many manufacturers. The CBN earlier
this year noted that the country's available foreign exchange will be devoted
to to strategic imports or to service obligations that are a priority but from
media reports, it appears many manufacturers' dollar demands are not met or
only partially met.
Foreign
currency constraints, devaluation, and shrinking disposable incomes are all
factors that significantly strain the performance of the manufacturing sector.
A prolonged constraint in the ability of manufacturers to conduct businesses
seamlessly leads to a crisis in the sector and loss of loans extended to
manufacturers by the banks. The scarcity of foreign exchange from the official
window compels manufacturers to source funds from the black market, which
trades at a significant premium to the I&E window, in order to sustain
their business operations.
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