2021 Q2 Report of poor access to forex by MAN
The Manufacturers Confidence Index (MCCI) is an index created by the Manufacturers Association of Nigeria (MAN) to gauge the change in quarterly pulsation of manufacturing activities to changes in the macroeconomic ambience and Government policies. According to the report, MAN used the MCCI report as the perceptions of Members CEOs of manufacturing companies to measure any changes in the economy.
The report stated that though the performance of the economy in the second quarter of 2021 consolidated on the achievement made in the first quarter after a very difficult period accessioned by the onslaught of COVID-19 pandemic and the quarter under review, businesses activities appeared to have further stabilized.
Nevertheless, there are still difficulty in sourcing forex for importation of raw-materials and machines that are not locally available has been a critical challenge to the manufacturing in Nigeria. Since the onset of COVID-19 pandemic in the early quarter of 2020, the severity of forex challenge has intensified, particularly as the value of the Naira deteriorated.
Unfortunately, the report noted that even with gradual return to normalcy of business activities and the increasing recovery of forex earning as crude oil prices improved, acute shortage of forex persisted. In addition, the Central Bank of Nigeria has consistently intervened in the forex market (official and BDC windows) but the result has been negligible, particularly in the second quarter of 2021.
Consequently, MAN disclosed that 52% of manufacturers interviewed during the fieldwork for the second quarter MCCI, disagreed that the rate at which forex was sourced improved. 30% all manufactures interviewed were not sure while only 18% agreed that the rate has improved as depicted in Figure ‘i’. 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.
Therefore, Association noted that this report provided critical recommendations that addressed the various challenges of the manufacturing sector as identified by manufacturers in the quarter under review.
We believe that with the ardent implementation of the recommendations, there would be significant positive change in the business operating environment in the country, it was added
The report stressed that in view of the new CBN policy that stopped allocation of forex to the BDC segment of the foreign exchange market for operational incongruities further increased the responsibilities of Commercials Bank in handling forex sales and applications in the economy.
“It is therefore important to encourage the Banks to build more capacities through designate desks for handling the streaming applications and Form M to ensure seamless and timely processing of forex application by manufacturers. Granting concessional forex allocation at the official forex market to manufactures for importation of productive inputs that are not locally available; Unify the various forex windows in the country; Allocate all available forex productively.”