Following the massive drop in global oil prices and the outbreak of novel Coronavirus, which translated to reduction in foreign exchange (forex) inflow into the country, chief executive officers (CEOs) of manufacturing concerns have confirmed that it was difficult to source forex from all the available windows in the country.
Manufacturers Association of Nigeria (MAN) in its MAN CEOs Confidence Index (MCCI) first quarter 2020 survey explained that manufacturers are dismayed over the “refusal of Central Bank of Nigeria (CBN) to make forex available for over five weeks during the lockdown period as against the usual interventions.”
MAN, however, pointed out that the drop in global oil prices and the outbreak of novel Coronavirus were what compelled the apex bank to adjust the exchange rate upward in the quarter under review, saying that the move has had negative effects on the country’s manufacturing sector as CEOs and local manufacturers jostle for forex (dollar) to remain in production.
The association added that the unavailability of forex negatively impacted manufacturing performance as manufacturers could not access forex required to import vital raw materials, machines and spares that are not available locally. All of these in turn hindered their ability to produce efficiently at full capacity.
MAN, in the report made available to reporters, noted that in the survey carried out among 400 CEOs of manufacturing companies in Nigeria, it was discovered that 48 per cent of respondents disagreed that foreign exchange (forex) sourcing has improved from 39 per cent recorded in the preceding quarter, 18 percent were not sure that forex has improved, while 34 per cent agreed that the rate at which the sector sources foreign exchange has improved slightly.
Basically, MAN said that the survey response confirmed the instability in the Nigerian foreign exchange market caused by the radical drop in the price of crude oil and the outbreak of Covid-19, which has significantly impacted on all facets of the World’s economy.
The MAN survey stated: “The condition of the macroeconomic operating environment in the first quarter of the year 2020 was unprecedented, on account of the novel Coronavirus that is currently ravaging the World.
First, it was the drop in global oil prices, which translated to reduction in forex inflow into the country; a development that compelled the central bank to adjust the exchange rate upward in the quarter under review.
“CEOs confirmed that it was pretty difficult to source forex from all the available windows. In addition, manufacturers noted with dismay the intentional refusal of Central Bank of Nigeria to make forex available for over five weeks as against the usual interventions.
It continued: “The unavailability of forex negatively impacted manufacturing performance, as manufacturers could not access forex required to import vital raw materials, machines and spares that are not available locally. All of these in turn hindered the ability of operators to produce efficiently at full capacity.
“There is therefore the need for the monetary authority to prioritize improved access to forex for operators in the real sector of the economy for the purchase of machines,raw-materials and other manufacturing inputs that are currently not available in the country to speed up the economic recovery process in the country.”
MCCI is a quarterly survey instrument used to gauge the level of confidence of manufacturers in the economy based on their perceptions of current business condition, business condition for the next three months, current employment condition, rate of employment and employment condition for the next three months and production level for the next three months.