The Manufacturers Association of Nigeria has made a strong demand to the Central Bank of Nigeria, CBN, for the abolition of foreign currency allocation to Bureau de-Change operators as part of measures to strengthen the Naira.
The association also wants direct foreign exchange support to the manufacturing sector to promote the growth of the country’s real sector of the economy.
Direct allocation of foreign exchange to the manufacturing sector, the association explained, would enhance the capacity to import essential inputs and machinery not locally available in the country.
MAN also asked the CBN to channel the supply of foreign exchange to the social welfare segment of the country’s economy, especially hospitals and schools, among others.
The demands, which were contained in the association’s position paper on the current state of the Naira and made available to PREMIUM TIMES, described the current weekly currency allocation to BDCs’ as a policy aberration that was more an impediment to growth than effective management of the country’s financial challenges.
In the paper presented by its president, Frank Jacobs, MAN queried why the CBN would choose to allocate foreign currency to BDCs for them to sell for profits, saying the rationale behind the policy was difficult to understand in view of the peculiar economic challenges the country is facing at the moment.
Mr. Jacobs accused the CBN of spoon-feeding the BDCs’, saying the “feeding bottle mentality” was making it impossible for the operators to serve themselves as independent alternative foreign exchange funding windows for the country’s economy.
“It is difficult to understand the real functions of the BDCs with the kind of arrangement CBN has in place. They act as mere distributive conduit pipes by simply getting FOREX allocation from the CBN and selling to very few Nigerians and making huge profits without much value addition to the system,” he said.
As part of their suggestions toward the effective management of the current pressure on the Naira, MAN also called for “a guided deregulation of the Naira, such that the Naira would be left to flow freely within a bracket to be determined by the CBN.”
MAN president argued that the country’s level of development made CBN’s intervention an imperative to the effective currency management from time to time.
He expressed confidence that the guided deregulation policy would allow the exchange rate of the Naira against other currencies to be determined by market forces, with some investor friendly moderation approach.
Guided deregulation, he pointed out, would also assist in checking the ugly trend under the then structural adjustment programme, SAP, where the Naira was devalued and more than 60 per cent of small and medium scale industries closed shop following their inability to sustain operations.
Mr. Jacobs called for the lifting of restriction on dollar inflow and urged the CBN not to abdicate its responsibility of always investigating the sources of such foreign currency incomes.
The Association also identified the on-going subsidy on imported petroleum products as a major source of wastage of the scarce foreign exchange in the economy.
As a crude oil producing nation, MAN argued that the current reliance on imported petroleum products to meet the country’s energy needs was based on a wrong and dangerous economic premise.
The manufacturers urged the government to overhaul and privatise the country’s downstream petroleum industry, adding that foreign exchange savings from subsidy would assist in the development other areas of the economy.
To avoid perceived abuse of foreign exchange allocation and save the Naira, the MAN President urged the CBN to monitor the utilisation of FOREX by remitting funds directly to the beneficiary company overseas.
“Direct remittance of foreign exchange to business partners and companies abroad would assist in the elimination of the FOREX abuses or non-supply of items,” Mr. Jacobs said.
“MAN is also emphasizing the need for more commitment to the export of locally manufactured products as part of measures to earn more foreign exchange to bridge the national budget deficit and shore up the value of the Naira.
To rebuild foreign investors’ confidence in the Nigerian economy, the group said incentives should be given to exporters through “counter purchase strategies” for repatriated funds.
With the sustained slide in the price of crude oil in the international oil Market, MAN commended government on the way it was managing the Naira and the foreign exchange situation so far and pledged to support efforts to overcome the current economic, social and security challenges.