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Forex restrictions: Massive job cuts loom in manufacturing sector

By on October 15, 2015

The federal government’s drive to create jobs for millions of unemployed Nigerians may suffer setback owing to the Central Bank of Nigeria’s (CBN’s) foreign exchange (forex) restrictions, business analysts have warned. The policy, which took effect in June, had excluded some essential raw materials from the list of items valid for forex in the Nigerian foreign exchange markets.

Some analysts, who spoke to THISDAY on Monday, expressed worries that some manufacturing companies may shut down their operations in Nigeria due to their inability to access foreign exchange for raw materials. This, according to them, could result in massive job losses as an estimated 40, 000 Nigerians who in the manufacturing sector may be laid off.

President of the Lagos Chamber of Commerce and Industry (LCCI), Remi Bello, who also spoke on the issue, warned that most manufacturers might be forced to shut down and move their operations to neighbouring countries due to their inability to access foreign exchange for raw materials and other critical inputs.

The CBN recently excluded some essential raw materials from the list of items valid for forex.

The policy, the apex bank explained, was intended to sustain the stability of the foreign exchange market, “resuscitate local manufacturing” of these items and change the structure of the economy.

But Bello said: “There is pressure on manufacturers to lay off their workforce before the end of the year. Most manufacturers affected have been unable to produce lately due to lack of foreign exchange, delays in the processing of Form ‘M’ to import raw materials in order to meet demands and this has adversely led to loss of market share. With this continuing, massive job loss is anticipated in no time from now.

“Also, the manufacturing sector using crude palm oil as raw material in their daily production of goods like biscuits, noodles, cosmetics etc., will be affected as the locally produced and supplied raw material cannot meet the required demand for production.”

The LCCI president expressed the regret that for an economy that is largely driven by the private investors, the government should source for alternative means rather than resorting to a total exclusion of certain items from the foreign exchange market.

He however urged the FG to prevail on the CBN to review the policy in the interest of the impending danger to the workforce, the private sector and the economy at large.

Among the 41 items marked as ‘Not Fit for Forex’ also include: rice, cement, margarine, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, eggs, turkey, private airplanes/jets, indian incense, tinned fish in sauce(Geisha)/sardines, cold rolled steel sheets, galvanised steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes and containers, enamelware, steel drums, steel pipes, wire rods(deformed and not deformed), Iron rods and reinforcing bar, wire mesh and steel nails, wood particle boards and panels, wood fibre boards and panels, plywood boards and panels, wooden doors, toothpicks, glass and glassware, kitchen utensils, tableware, tiles-vitrified and ceramic, textiles, woven fabrics, clothes, plastic and rubber products, polypropylene granules , cellophane wrappers, Security  and razor wine, Soap and cosmetics, tomatoes/tomato pastes and eurobond/foreign currency bond/ share purchases.

The resultant effect of this is an outrageous increase in the cost of these items locally for consumers and ultimately inflation, which is largely due to inability to access foreign exchange.

Meanwhile, a report by Index Mundi, a data portal showed that the domestic palm oil produced total led 930,000 metric tonnes (MT) in 2014 while the consumption of palm oil in Nigeria amounts to 2.0 million MT per annum in exclusion of the manufacturing sector.

“An official figure shows that the shortage in oil palm industry is estimated to be around 1,070,000 MT annually. This poses a very precarious situation for the manufacturing sector that depends largely on CPO as a major source of raw material. If this shortage is not filled with importation of high quality food grade palm oil, the economy will lose further investment in the manufacturing sector as companies would shot down and staff be laid off, “the report revealed.

 

[ThisDay]