Manufacturers Return To Black Market For Forex

The scarcity of foreign exchange from the official window has compelled some manufacturers to source funds from the black market in order to keep their business going.

In the coming months, affected manufacturing firms say consumers may have to pay about 100 per cent more than what they currently pay for locally manufactured products.

Some manufacturers say they have been on queue to access forex for a period ranging from six months to one year without making any progress.

“While you wait endlessly like this, your production suffers and you do not have products to sell to your customers,” the Managing Director of Mojec Metering, Chantel Abdul, said.

When In June, the Central Bank of Nigeria dropped its fixed exchange rate strategy and adopted a flexible exchange rate, the move was seen as one that would bring enough supply of forex.

Although the new official rate was put at N280, the President, Manufacturers Association of Nigeria, Dr. Frank Jacobs, agreed that though it was high but that there should be more dollars in circulation than in the previous months.

The Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said of the policy, “The Chamber believes that this policy choice offers an improvement in the efficiency of foreign exchange allocation in the economy, improvement of liquidity in the foreign exchange market, reduction in the current trade arrears, reduction in the arrears of remittances.”

Contrary to all expectations, however, the foreign exchange market has become very illiquid and all efforts made to redeem the situation by the apex bank have yielded no respite to the manufacturing sector.

It was gathered that the CBN’s directive that 60 per cent of the forex supply in the system should go to the manufacturing sector had failed as manufacturers are unable to benefit from the policy months after the apex bank initiated it.

A reliable source in one of the commercial banks told our correspondent that banks were under a lot of pressure because of high forex demand from customers.

“There is very limited supply of forex and a lot of people are coming for the supply. The banks do not even have the forex not to talk of giving 60 per cent to a particular sector,” the source said.

An analyst and professor of Economics, Leo Ukpong, explained that the situation could not be helped, adding that the dollar was a foreign currency that Nigeria had no control over and so could not determine its supply or rate.

Already prices of some household items that are manufactured locally have been rising almost every day following the increase in the cost of production.

For instance, a tablet of toilet soap, which sold for between N25 and N30 a few months ago, was offered on Friday for N100; while the price of 1kg of Omo sachet had gone up to N600 from N350 two months ago.

A major household products manufacturer, PZ Cussons, said sometimes in April that it was producing with dollars sourced at the parallel market rate of N320, at a time when the Federal Government pegged the official exchange rate of the dollar at N197. The dollar currently exchanges for N450 to N470 at the parallel market.