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Falling Naira: Manufacturers cut production by 50%

Some manufacturers have cut production by more than 50 per cent as the sector grapples with the current economic realities of continued drop in naira value and escalating production costs.

The President of the Lagos Chamber of Commerce and Industry, Mr. Remi Bello, confirmed this to our correspondent in an exclusive interview on Friday.

“Most industries have cut production by 50 per cent,” he said, adding that some companies were shutting down while those still in production were operating skeletal services.

The LCCI president blamed the current situation on the recent decision by the Central Bank of Nigeria to exclude 41 items from accessing foreign exchange through the interbank forex market.

The CBN had prevented importers of 41 items including rice, consumables and household items from accessing forex through the interbank market.

According to the central bank, the action is meant to encourage local production of the banned items.

Bello insisted that the ban had triggered off the panic that led to the increase in value of the dollar against the naira.

The President of the Manufacturers Association of Nigeria, Mr. Frank Jacobs, also told our correspondent in an email interview that production in the sector in the past one year had been greatly undermined.

The manufacturing sector, according to a recent CBN data, recorded a 15.41 percentage point decline in the first quarter of 2015, growing in real term by -0.7 per cent as against 16.11 per cent recorded in the corresponding period of 2014.

Jacobs said the sector was going through a very difficult period characterised by high interest rate, unfavourable operating business environment and fall in the value of the naira complicated by the restriction of 41 items from the interbank forex market.

The MAN president attributed the dismal performance of the sector to both the forex situation and the increase in the Monetary Policy Rate from 12 to 13 per cent, which in turn led to an increase in the prime and maximum lending rates.

Manufacturers had during their annual general meeting recently complained of the high cost of raw materials arising from the fact that they had been sourcing forex from the parallel market at a price above N200 to a dollar.

The Chairman of the Food, Beverages and Tobacco Group of MAN, Mr. Paul Gbededo, said that manufacturers had lost millions of dollars as a result of the fall in naira value.

He said companies’ operations had continued to shrink while manufacturers were unable to pass on the huge costs incurred to consumers because of their low purchasing power.

The situation had reflected in the financial position of firms, showing huge losses in the second half of 2015.

A manufacturer of household product and Executive Director, Gongoni Nigeria Limited, Mr. Kingsley Onwukwe, is however hopeful that the situation will improve in a short while.

According to him, it is a temporary phase Nigeria must pass through to achieve economic independence.

Also, a foreign policy analyst and former Vice Chancellor of University of Ado- Ekiti, Professor Akin Oyebode, while presenting a paper at a recent international trade and foreign policy dialogue session organised by the LCCI, noted that there was a need for the country to suffer a period of separation from import dependency.

He noted that ever since independence, the country seemed to be at home playing the subordinate, inferior role of supplier of primary commodities and a market for manufactured goods.

He said, “If we continue to depend on others for necessary inputs to transform our existence, it will seem quite obvious that our maneuverability and nuisance value on global economic stage will be so much circumscribed.”

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