CHISOM METU
The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to speed up the ongoing review of forex management procedures to ensure that available forex in the country is productively utilized.
In its second-quarter 2021 CEOs Manufacturers Confidence Index (MCCI) MAN said 52per cent of manufacturers interviewed during the fieldwork for the second quarter MCCI, disagreed that the rate at which forex was sourced improved.
According to the report, while 30per cent of manufactures interviewed were not sure, only 18percent agreed that the rate has improved as depicted.
The MCCI is an index created by MAN to gauge the change in quarterly pulsation of manufacturing activities to changes in the macroeconomic ambience and government policies. It is therefore a barometer used by MAN to garner the perceptions of CEOs of manufacturing companies on changes in the economy.
The imperative diffusion factors considered in the MCCI processes include the current business condition, business condition for the next three months, current employment condition, employment condition for the next three months and production level for the next three months.
In the second-quarter report, MAN, however, maintained that, 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, even with a gradual return to normalcy of business activities and the increasing recovery of forex earning as crude oil prices improved, acute shortage of forex persisted. The CBN has consistently intervened in the forex market (official and BDC windows) but the result has been negligible, particularly in the second quarter of 2021,” the report said.
On the lending rate, the association said it is therefore expedient for CBN to take-up a rigorous monetary management measures that would encourage a reduction in lending rates on loans offered to the productive sector by the commercial banks.
With the Monetary Policy Rate (MPR) standing currently at 11.5per cent, MAN said, “there may not be the credible reason the average lending rate to manufacturers by the banks is still as high 22per cent as revealed by MAN survey of the sector.
“Cost of funds in Nigeria, which is usually at double-digit, has always been one of the core challenges of the manufacturing sector. This is because it tells directly about the cost of production and the competitiveness of the sector.
“Majority (76per cent) of manufacturers enumerated in the the fieldwork of this report disagreed that the rate at which commercial banks lend to manufacturers encourages productivity in the manufacturing sector.
“Only 13per cent of those sampled agreed that the current lending rate encourages productivity in the sector while the remaining 11per cent was not sure.
