Editorial
For a sector known to be notoriously anaemic, there is no gainsaying that the COVID-19 pandemic has – in addition to exacerbating the crisis facing the manufacturing sector – brought in its wake, fresh and overwhelming challenges. Last week, this newspaper reported the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, as bemoaning “the liquidity crisis in the foreign exchange (forex) market” which he claimed “is becoming increasingly unbearable as many businesses face challenges with importation of raw materials, equipment, spare parts and other inputs”.
The development, he said, has created “a new dimension to the supply chain problems, which many manufacturers had suffered from in the peak of the lockdown”, adding that the situation has brought “enormous pressure on the parallel market, resulting in a sharp depreciation in the exchange rate in that segment of the market”.
“Across practically all sectors, we are experiencing cost escalation, loss of credit lines enjoyed from foreign creditors, forex remittance challenges and many more. We need an urgent response from the CBN to calm the situation and restore confidence in our foreign exchange management framework”, he was quoted to have said.
First, we agree that these are extraordinary times. With the local economy thrown into turmoil as a result of COVID-19 pandemic, the dimensions of the disruption caused by the pandemic to the global supply chain vis-a-viz the local business are only now beginning to emerge. Across the global landscape, daily reports are of restiveness and uncertainty as employers consider what to do to keep businesses going. As if to highlight the shape of things to come, two leading operators in the aviation sector, Air Peace and Bristow Helicopters have, within the past fortnight, separately laid off 100 and 69 pilots, respectively.
Second, is to admit that tough times still lie ahead. Indeed, by the World Bank forecast, we know that the Nigerian economy is expected to contract by 3.2% which means a shrink by five percentage points below the pre-COVID-19 forecast of 2.1% growth. Considering that the projected dip is at least twice as deep as the recession of 2015-2016 and represents the deepest contraction since the 1980s, Nigerians can only then begin to appreciate how difficult the journey ahead is.
No doubt, our manufacturing sector, with its inherent external dependence, has come under intense battering, particularly now with our currency, the naira, hitting N470 to the United States in the parallel market, and this amidst lingering uncertainties in the global supply chain. Clearly, the LCCI as indeed other important stakeholders have good reasons to be apprehensive about the future, of soaring costs of doing business, the instability in the forex market as indeed other volatilities in the macro-economic environment. Where we differ is the idea that the CBN possesses some kind of magic wand to solve all the problems, hence the penchant to play up forex issues when, as it is very well known that such issues, which are routinely canvassed, are mere symptoms of a more fundamental problem – which is the legendary dependence by the players on imports, whether of raw materials or industrial spares.
Now that the rest of the world have come to accept that the old ways of doing things may have been gone for good, our manufacturers, it would seem, are yet to accept the reality of fast-changing global economic landscape, in which individual nations put their interests first. Yes, the government has a huge role to play not only in resetting the economy but to ensure that it redounds to the benefit of everyone. Our expectation is that the Organised Private Sector will partner with the government to ensure that the quest for backward integration blooms given that this will not only translate into more jobs but also less dependency on imports in whatever form in the long run.
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