The Nation Newspaper

Tag: Forex restriction

  • Forex restriction: Food businesses count losses

    The new policy regime placing restrictions on forex for food import has remained hotly debated with concerned stakeholders arguing very strongly that the policy should be reversed considering the unintended, albeit dire consequences its implementation may bring about. Ibrahim Apekhade Yusuf, Charles Okonji and Medinat Kanabe in this report examine the issues

    To say the federal government is no longer at ease with food import is clearly stating the obvious. As to be expected President Muhammadu Buhari had last week in clear terms expressly instructed the country’s central bank to stop providing foreign currency for food imports.

    Justifying the move, presidential spokesman Garba Shehu said it was aimed at improving Nigeria’s agricultural production and attaining more food security.

    “The president … said the foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food imports bills,” reads the statement.

    Shehu also quoted President Buhari as saying, “Don’t give a cent to anybody to import food into the country.”

    The restriction on foreign exchange means businessman and businesswoman in Nigeria who depended on the banks for foreign currency to import food items into the country would have to source from alternative dealers which tends to be more expensive.

    Groundswell of support for forex policy

    At the last meeting of its monetary policy committee, Godwin Emefiele, the CBN governor, announced the bank’s plans to restrict forex for milk importation.

    “We believe that milk is one of those products that can be produced in Nigeria. Milk importation has been going on in Nigeria for over 60 years. If you Google West African Milk or Friesland Campina today, they say that they have been importing milk and that they have been in Nigeria for over 60 years,” he said.

    “Today, the import of milk annually stands at $1.2-$1.5 billion. That is a very high import product into the country. Given that it is a product that we are convinced that it is a product that can be produced in Nigeria.”

    Lending his voice to the argument in an interview with The Nation, the CBN’s Director of Corporate Affairs, Mr. Isaac Okoroafor said the government took that drastic measure in the interest of the national economic growth and development.

    “The implementation started since 2015. We started by excluding 41 items; subsequently we included others, now we have eliminated all sorts of food import which we know that can easily be produced in Nigeria. The country cannot be food sufficient if we continue like this,” he recalled, adding, “There will never be an amendment because the issue is this, why should we be exporting jobs to other countries? Today we are complaining that there is a high rate of unemployment, leading to some extent of insecurity in the country, why should we allow people to import food that can be produced in the country?”

    Pressed further, the CBN’s spokesman said, “We need to improve wealth in our rural communities and I am saying we will not change course, we will even be more aggressive on this programme. The move is an attempt to stop the importation of items that Nigeria has the capacity to produce, stressing that the country’s foreign reserves should not be wasted on importing food items.

    “If you recall, we started with about 41 items (food and non-food items), because we believe that those items can be produced in the country. As we stand today, there are about 43 items on that list and I will say substantially most of them are food items.”

    “The president said some states like Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano had already taken advantage of the federal government’s policy on agriculture with huge returns in rice farming, urging more states to plug into the ongoing revolution to feed the nation. We have achieved food security, and for physical security, we are not doing badly.

    “Buhari said he was delighted that young Nigerians, including graduates, have started exploring agriculture-business and entrepreneurship, with many posting testimonies of good returns on their investments. But the order has attracted several reactions from farmers, industrialists, economists and financial pundits.”

    Chain reactions over new policy regime on food import

    As to be expected, since the presidential directive, the announcement has sparked controversy from different quarters with majority of the stakeholders crying blue murder, over a policy they described as anti-people, noting that Nigeria’s food sufficiency, as touted by Buhari, is wildly exaggerated.

    Critics also said the president has no constitutional right to direct the policies of the CBN, an independent institution.

    Firing the first salvo, the Director General of Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadiri warned that such policy may be counterproductive if implemented by fiat, without ensuring necessary alignment with the fiscal policy and other economic policy initiatives of the administration.

    In his reaction, he said, “Clearly the objective of Mr. President is noble. The directive, we understand, is aimed at consolidating the progress made towards food sufficiency, conserving our foreign exchange and encouraging consumption of locally produced food. The implication of this is that importers of food items will not get forex with which to import from the official foreign exchange. They will have to buy from the parallel market.”

    Ajayi-Kadiri however stated the organised private sector need to know what type of food, finished/ready to eat or as input for further processing, “In the case of the latter (in particular) you need to know the local capacity available to meet national demand and if not adequate, creditably determine what time and resources are needed to ramp up capacity and production. There is need to pre-determine these as part of the implementation strategy. This is so that the local producers that are being incentivized are not overwhelmed by smuggling and we are able to sustain the self-sufficiency.”

    However, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf complained that the current forex policy conceptualisation and management is adversely impacting investment.

    “If policy and regulatory risks continue to escalate as we are currently experiencing, the chances of stimulating investment, whether domestic or foreign, would remain dim. Over the last couple of years, food inflation had been a source of worry.  It has consistently been ahead of core inflation.  This is reflection of the productivity challenges in the agricultural sector which has lately been complicated by security challenges across the country and attacks on farming communities,” Yusuf said.

    According to him, the sector is still largely dependent on smallholder farmers, and with little mechanisation and application of technology, the sector would be enhanced.

    “Transportation is another key impediment to food security in the country.  These are fundamental issues that need to be addressed, and urgently too,” the LCCI boss stressed.

    Kingsley Mogahalu, former CBN deputy governor, said the directive is against the independence of the CBN.

    Writing on his twitter handle, @MoghaluKingsley, Moghalu said, “The issue here isn’t whether or not CBN should allow access to forex for food imports. It is about whether such an economic policy of a central bank should be imposed by a political authority. A major reason for our poverty, instability and weak economy is weak institutions. Our marketplace should be regulated and guided in a rational manner that creates a level playing field. Our economy will not be saved by Ad hoc political decisions like this, handed down by the very institutions that should be shielded from the whim and caprice of politicians.”

    Echoing similar views, Ayo Oyoze Baje, a public affairs commentator said it is scandalous that a country that is supposed to be Africa’s largest economy still imports red palm oil, with which it once controlled 40 % of the global market in the 60s but has since drastically dropped to 1.8% in the New Millennium!

    According to him, the emerging economic scenario of the ban on forex for food import, laudable as it is therefore, throws up some fundamental questions.

    Raising some posers, he said, “How would this policy directive work effectively against the dark backdrop of epileptic power supply needed to enhance the capacity of food processing and preservation by the  small and medium scale enterprises down to the rural areas, where the farm produce come in large amounts? How would it assist the value chain of food processing, preservation and marketing?  What with over 1,000 porous borders, inadequate personnel of the customs service to check the expected upsurge in smuggling? How would the policy mitigate the scourge of poverty, pitched against waves of insurgency, banditry and the killing spree of innocent farmers by fully armed Fulani herdsmen?  That such mindless killings affect largely agrarian states in the North-East, and the Middle Belt that has since snowballed to the North-West states should be worrisome indeed.”

    Policies, he insisted, should emanate from the stakeholders’ input and backed by law instead of command- and- obey structure. Besides, he should be mindful of the impact of such policies on the people, take actions to ensure security and regular power supply instead of putting the cart before the horse!”

    Amaka Anku, Africa director for the Eurasia Group, said that whether the policy was implemented or not it sent a troubling message for an economy suffering from high unemployment, low foreign direct investment and sluggish growth.

    “Most actors, especially the central bank, should know that a total ban of food imports is not practical and I doubt that will be the policy,” she said. “But his comments will continue to drive home the sense that Buhari has no idea how to manage an economy and will raise uncertainty about what other [foreign exchange] restrictions are coming, and contribute to already low business confidence.”

    Ironically, the Chairman, Lagos State Branch of Nigerian Association of Small and Medium Enterprises (NASME), Mr. Solomon Aderoju supports the federal government’s decision, expressed that the step was in the right direction as it is favourable to the association and manufacturers in the country at large.

    The NASME boss stated that his members did not only applaud the pronouncement, but could not wait to hear the full implementation of outright ban on imported food items.

    Unintended consequences of new policy

    Speaking to a cross-section of experts, they argued matter-of-factly that the policy if implemented as it is would result in dire consequences including job losses, skyrocketing cost leading to cost inflation to mention just a few.

    In the view of Lanre Alabi (not real name), the decision to restrict forex was in bad fate to say the least.

    In a chat with our correspondent over the weekend, he disclosed that his firm is involved in the importation of food supplements and other allied products and was already hurting from the policy.

    Specifically, he said, his company had opened some letters of credit with some banks to import some of the food supplements on behalf of some major manufacturers in the next six months and was therefore at a quandary when the federal government announced the decision to stop such gestures to importers of food items.

    “The decision is completely uncalled for. The decision that has been crossing our minds since the policy directive is why on earth government should adopt such a policy with wide-reaching implication without making some allowances for businesses operating in the sector?”

    According to Yusuf, it is worrisome to note that the implications of policy pronouncements for investors’ confidence and the general sentiments of investors are very dire.

    “Unemployment levels in the country has reached a disturbing level of over 23%, and rising. Youth unemployment is even much more.  Yet the panacea for dealing with the scourge of unemployment and poverty is investment.  If policy and regulatory risks continue to escalate as we are currently experiencing, the chances of stimulating investment, whether domestic or foreign, would remain dim,” he noted.

    Rather than apply knee jerk approach to issues, the LCCI’s leading light said, “Rigorous impact study should precede major policy changes, supported by empirical data.  This is necessary to minimise shocks and dislocations in the investment environment.  This is also imperative to stem the increasing cases of job losses.

    Timeline of forex restriction

    In 2015, the CBN announced that it had banned forex for the importation of 41 items saying the move would conserve scarce forex and encourage local production.

    The items banned at the time were rice, cement, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, eggs, turkey, private aeroplanes/jets, Indian incense, tinned fish in sauce(Geisha)/sardines, cold rolled steel sheets, galvanized steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes and containers, enamelware, steel drums, steel pipes, wire rods(deformed and not deformed), iron rods and reinforcing bard, wire mesh, steel nails, security and razor wine, wood particleboards and panels, wood , fibre boards and panels, plywood boards and panels, wooden doors, toothpicks, glass and glassware, kitchen utensils, tableware, tiles-vitrified and ceramic, textiles, woven fabrics, clothes, plastic and rubber products, polypropylene granules, cellophane wrappers, soap and cosmetics, tomatoes/tomato pastes, Eurobond/foreign currency bond/ share purchases.

    In December 2018, fertiliser was added to the list bringing the total banned items to 42. In March, the apex bank announced that commercial banks and bureaux de change operators in the country should stop the sale of forex to importers of clothing materials.

    Although the apex bank has assured that the directive will be implemented in phases so that the impact on food prices and inflation can be managed, a lot of people hold the view and very strongly too that the harm has already been done.

  • Forex restriction on 41 items lifting eonomy, says Emefiele

    The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, has said its policy restricting  foreign exchange access on 41 items that can be produced locally has lifted the economy.

    Speaking in Lagos at the 53rd annual Bankers dinner held in Lagos, he said  CBN’s policy restricting forex access to 41 items has helped to move the economy out of recession. He said there are new calls on the apex bank to increase the  list of 41 items  to cover more goods that can be produced locally.“As I have always emphasised, it is our collective duty to ensure that the potentials and prospects of the Nigerian economy is optimally realised. The ongoing economic recovery requires the joint efforts and wise counsel of everyone, if we must make giant strides forward. The CBN is more determined now than ever to remain at the forefront of the effort to ensure that the rebound is not overturned,” he said.

    He said that Nigeria’s political-economy experienced significant challenges over the last few years revealing its structural deficiencies particularly with regards to its dependence on crude oil, as a major source of its revenue and foreign exchange, as well as over dependence of our people on imported items even when these goods could be produced locally. The 60 percent decline in crude oil prices between 2015 and 2016 helped shape the trajectory of our economy, ultimately triggering the economic recession in first quarter of 2016.

    He said that with improved availability of foreign exchange, the exchange rate at the Investors & Exporters forex window has remained stable over the past 12 months and the parallel market exchange rate premium has narrowed significantly. At the bureaux de change segment, there was a significant appreciation of the Naira from over N525/$ in February 2017 to about N361/$ at present. Rates at the I&E window also appreciated from nearly N382/$ in May 2017 to just over N360/$.

    The measures taken by the CBN also had an impact on inflation. “Following a period of rising inflationary pressure which peaked at 18.7 percent in January 2017, the Nigerian economy witnessed eighteen straight months of disinflation, as inflation dropped to 11.1 percent in July 2018. A slight uptick to 11.25 percent was, however, recorded in October 2018 due to rising food prices,” he said.

    He said: “There has been considerable discourse particularly on whether the restriction on access to foreign exchange for 41 items is driving local production, with some nay-sayers stating that it has constrained productivity and growth in the economy. Based on our internal research conducted at the Central Bank of Nigeria, there is strong support that the recovery of our economy from the recession may have been much weaker or even negative, without the implementation of the restriction on 41 items.

    “Our research supports the conclusion that the combination of the restriction on 41 items along with other measures imposed by the fiscal and monetary authorities has helped to promote the recovery. Any attempt to reverse the course of this actions may have untold consequences on the growth trajectory of our economy particularly in our push to diversify and restructure our economy. In fact, recommendations are being made to the CBN that the list of 41 items be expanded to include other additional items that can be locally produced.”

    Emefiele said many entrepreneurs are taking advantage of this policy to venture into the domestic production of the restricted items with remarkable successes and great positive impact on employment. “The dramatic decline in our import bill and the increase in domestic production of these items attest to the efficacy of this policy. Noticeable declines were steadily recorded in our monthly food import bill from $665.4 million in January 2015 to $160.4 million as at October 2018; a cumulative fall of 75.9 percent and an implied savings of over $21 billion on food imports alone over that period. Most evident were the 97.3 per cent cumulative reduction in monthly rice import bills, 99.6 percent in fish, 81.3 percent in milk, 63.7 percent in sugar, and 60.5 per cent in wheat,” he said.

    On risk-based supervision, he said recent weakening of the Naira, following the shift to a more flexible foreign exchange mechanism, impacted somewhat on the balance sheets of domestic banks.  To guarantee financial stability as Nigeria continues with flexible exchange rate system, the CBN took a number of steps, including monitoring compliance of supervised institutions with the foreign exchange management framework issued in June 2016 through our risk-based supervision methodology, which also involved reviewing international trade and foreign exchange operations of local banks;

  • Forex restriction on 41 items good for economy, says CBN

    Forex restriction on 41 items good for economy, says CBN

    The Central Bank of Nigeria (CBN) has said that restriction of access to foreign exchange (forex) on the 41 items has had a positive impact on the economy.

    CBN Acting Director, Corporate Communications Department, Isaac Okorafor stated this on at the CBN Fair, a sensitisation programme, held at the Cultural Centre in Calabar, Cross-River State at the weekend.

    He said the implementation of the policy has created employment and helped to conserve the hitherto depleting nation’s foreign reserve, and that has led to positive impact on the economy.

    Okorafor, who was represented by Chukwudum Nzelu said the restriction of access to foreign exchange placed on the 41 items made Nigerians to start looking inward for the production of goods and products that the country has comparative advantage to be produced locally.

    The CBN spokesman said the successful implementation of the 41 items policy gave birth to the other initiatives such as the Anchor Borrowers’ Programme (ABP) which has led to a revolution in the production of rice across the country.

    Continuing, he said the production of rice under the ABP was not only to ensure food security, but to create jobs along the value chain of rice production.  He added that with improved seedlings and farming techniques under the Anchor Borrowers’ Programme, rice production which stood at 3.5 tonnes per hectares has jumped to seven tonnes per hectare.

    Okorafor urged the participants to also key-in into the Accelerated Agricultural Development Scheme (AADS) which was targeted at youths between the ages of 18 to 35 years. The AADS when fully operational, is expected to employ at least 10 thousand jobs per state, across the 36 states of the federation including the FCT. The essence of this initiative, according to him, was to reduce drastically youth unemployment.

    Branch Controller, CBN Calabar Branch, Graham Kalio said the CBN fair was an interactive forum aimed at bridging the information gap that might exist concerning the policies, programmes and activities of the apex bank.

    The fair was attended by farmers, Small and Medium Enterprises (SMEs), persons from Government Ministries, Departments and Agencies (MDAs) and others who were genuinely interested in taking advantage of the CBN policies and programmes.

  • Forex restriction on 41 items boosts local production

    Forex restriction on 41 items boosts local production

    Restriction of 41 items from the official foreign exchange window is one of the toughest decisions taken by the Central Bank of Nigeria (CBN) to ensure that local industries are protected from importation of goods and services that can be produced locally. The policy, which is part of the CBN’s plans to find a solution to the forex crisis, has boosted local production of many items, writes COLLINS NWEZE.

    Taking bold decisions demands courage and foresight.
    The Central Bank of Nigeria’s (CBN’s) restriction of 41 items from accessing foreign exchange (forex) from official windows was one of such policies.

    More than two years after the policy shift, its objectives such as encouraging local production of the affected items and boosting local industries suffocated by the importation of competing products are being realised.

    The policy implementation was part of the home-grown solutions introduced by CBN Governor Godwin Emefiele to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segments of the economy.

    The policy implies that those who import these items can no longer buy foreign currency from the official window to pay overseas’ suppliers. Rather, they will have to source forex from the parallel market or Bureaux De Change (BDCs) to pay for their imports.

    Emefiele said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.

    For instance, over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, Small and Medium Enterprises (SMEs) and other manufacturers in the agriculture value-chain. The regulator said the apex bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the Federal Government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.

    Speaking on the 41 items, Emefiele said: “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country? “When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share.

    “So, there is the need for us to say at this time when there is a scarcity of forex, it should be set aside for the import of items we cannot produce in this country.”

    The CBN boss’ logic is that when items, such as palm oil, are imported, the local producers are made poorer. “When we import rice, we impoverish the rice producers in Abakaliki, Kebbi, Sokoto, Katsina and other parts of the country. We need to look at that very seriously because God has blessed this country, with good climate, good weather, which should be taken advantage of. Since we can produce these things, let’s use them to feed our people so that we can save foreign exchange for the country,” he said

    Emefiele said he was satisfied with the outcome of the policy, adding that more time was needed to evaluate its success. The CBN governor said the policy could be reviewed when it was concluded that local manufacturers of the restricted items had become very competitive. Emefiele clarified further: “My view would be that if you have forex, you should devote it for the import of items that are important and can’t be produced in the country. “If you have excess forex, save it or create reserves. My view, which is the view of government, is that there are certain items that we can produce locally.

    “But by importing some of these items, you impoverish the people. How can we create jobs for our people by living like that! Donald Trump is the president of the largest economy in the world. When he was campaigning, he said everything must be about America and he takes the interest of Americans first into consideration and by doing that, you create wealth for your people.

    “I got engaged with some of these people where Nigeria imports from and I said to them: You want us to import fish from you, please tell me, what can you import from Nigeria, and he said nothing. I feel that is not a good answer from a colleague in the financial sector. So, that is the reason why you have to be smart to tell yourself that I can produce it and because I can produce it, I have to produce it and use it to feed my people and save the country foreign exchange.”

    The CBN boss disclosed that government policy on support for local production was gaining ground and attracting the interest of multinational companies who were already investing in rice production.

    “We have seen multinationals coming to say they want to join in palm oil production. For instance, go to Cross River State, PZ Wilmar has been cultivating 58,000 hectares of palm plantation; Presco, Okomu are all doing something. So, if a PZ Wilmar needs foreign exchange because there is a little gap, I will not mind giving them because I have seen the interest they have shown cultivating more land.

    “We have seen people like Coscharis who hitherto had been in automobile imports, has acquired thousands of hectares of land in Anambra trying to grow rice. We were there last year and this year we would be there again to see what they have done.

    President, Association of Bureau De Change of Nigeria (ABCON), Aminu Gwadabe said some of the steps taken by the CBN has helped the market witness the absence of spurious demand and illegitimate forex transactions.

    Sub-Saharan Africa Economist at Renaissance Capital and co-Author of the Fastest Billion Yvonne Mhango said the CBN has shown absolute commitment to dealing with dwindling fortune of the naira.

    “While Nigeria cannot do much to influence the oil price, the combination of measures sends a powerful signal to all stakeholders on the CBN’s intent to do what it can to preserve macroeconomic stability,” she said.

    The CBN said part of its mandate would continue to act as financial catalyst in targeted sectors of the economy with humongous potential for creating jobs, reducing the country’s import bills in a very significant manner.

    It said monetary policy alone cannot fully achieve the objective of macro-economic development through real sector financing.

  • ‘Forex restriction is affecting manufacturers’

    ‘Forex restriction is affecting manufacturers’

    Mr. Taiwo Adeniyi, Group Managing Director/Chief Executive, Vitafoam Nigeria Plc, in this interview with Ibrahim Apekhade Yusuf, speaks on the downsides of the CBN policy regime restricting foreign exchange to businesses. Excerpts:

    How is the new policy on forex restrictions affecting your company?

    For us in Vitafoam, I can tell you 80 per cent of the materials that we use are not in this environment again because they are byproducts of petrochemicals. We do not have then being refined here yet neither are they being produced here yet. So they are being imported into this country. But what has happened today is that the government policy on forex is having a toll on us because now, forex is not available. And yet we need to establish LCs (Letters of Credit). As such, we have to source forex outside of the CBN platform. And when you’re going to source forex outside of the CBN platform that means you just have to source it in the parallel market. But again, the parallel market is also being controlled. So, for you to be able to have access, it is tough. In fact, the latest one that is causing us serious challenge is the fact that before you can service an LC, 48 hours before the bank can go and bid, the cash must be made available in the bank. The reverse used to be the case before now. Before now, the bank goes to make a bid on your behalf based on document evidence and the CBN gives its authorisation, that is approval and the bank makes the funds available once your bid is successful.

    But right now, the CBN is saying 48 hours before you bid, the funds must be made available and even when that is done, it would not guarantee that you will get what you have ask for. So, it’s a tough one. But again, as it is with every policy, it might be rough initially but as we go on, it sure will get better.

    As a member of the manufacturing sector have you made entreaties to the government to give you more allowance as it were?

    Of course, representation is being made by the Manufacturers Association of Nigeria (MAN) to the CBN to say that you can’t shut out industries because the kind of forex that we require is not the kind you can get from one bureau de change and you think it would be sufficient. Agreed the policy has been made and they need to see it run. But we expect people to come up with better options because if we don’t try you won’t know whether it will work.

  • Forex restriction takes toll on economy

    Forex restriction takes toll on economy

    Continued from yesterday

    Operators and stakeholders in the media industry, particularly those in the print segment are losing sleep over likely closure and subsequent loss of jobs. And they have reasons to be so afraid. For one, the crippling effects of the policy are coming at a time the cost of newsprint has skyrocketed, forcing many newspaper publishing outfits to adopt cost-cutting measures, including a reduction in both print run and paginations.

    Traditionally, there are two streams of income for newspaper houses – the number of copies sold or advert patronage. Unfortunately, advert revenues have dropped sharply in recent time, a trend which observers blame on the dwindling economy.

    According to a media specialist, the rising cost of production caused by lack of basic infrastructure, especially electricity remains a common threat to operators. The specialist told The Nation that the print media faces peculiar challenges, which, if not addressed, would lead to closure of many media houses and subsequent staff lay.

    He listed some of the challenges to include poor reading culture, drop in copy sales and declining print run, adding that even if copy sales goes up, most newspaper houses would still be unable break even unless the adverts roll in.

    He also said this might be difficult considering the current situation where many advertising agencies place adverts in newspapers, collect money from their clients and refuse to credit the accounts of the newspapers.

    As if this is not enough heartache for print media owners, the expert said because of rising cost of production, most newspapers are cutting down their number of pages, thus inadvertently making themselves vulnerable to threat of competition from digital media.

    Incidentally, digital media, he noted, have also been affecting advertising revenue to the traditional media. Besides, readers now have options of switching to online or digital media to get the same news the traditional media offer. Worse still, newspaper owners are reducing the number of pages despite retaining the same price.

    The specialist, whose experience spanned several African countries, said the CBN policy has succeeded in adding to the woes of operators in the print industry, whose fortunes have been dwindling lately. He said the country may have to brace for possible closure of more media houses and massive job losses.

    Noting that the bleak future of the media industry, he said the CBN would have to review its policy to avert the impending doom, adding that such a review could be outright cancellation, or the introduction of some soft-landing measures to cushion the effect on the media industry, considering its critical role.

    Call for special intervention

    Former Abia State Governor and publisher of The Sun newspaper titles, Dr. Orji Uzor Kalu, said the media industry deserved a special intervention fund from government at a reduced interest rate among other palliatives if it must carry on with the business of publishing.

    He called on the President Muhammadu Buhari administration to come to the aid of print media owners to avoid job loss due to increasing production cost.

    Kalu said the print media industry was getting closer to the edge of the precipice as the industry runs at a loss due to rising operational cost. He, therefore, appealed to the President to urgently intervene to prevent job cuts by media owners and for them to stay afloat.

    “The operational cost media houses have to contend with is huge and keeps rising daily. We are dying from the burden. Our businesses are suffering,” he lamented.

    Kalu, who spoke in Lagos, recently, said media owners are reeling under the weight of rising cost of newsprint, ink, blankets and plates and other consumables in the print media.

    Using The Sun Publishing Ltd. As a case study, he said the company uses 2, 800 tons of newsprint every month and when added to the cost of freighting, the dwindling fortunes of the naira and power challenges, it becomes obvious that newspaper publishing business is facing more difficulties by the day.

    His words: “The Federal Government needs to come to our aid. If this bad tide is not stemmed, media owners may resort to downsizing to save cost and that will further worsen the nation’s already bad unemployment figures.”

    Kalu informed that all media houses have producing every copy of the newspapers at a loss.

    “The average cost of printing a copy of a newspaper is N500 and we sell for N150 or N200. That means, media owners are subsidizing every copy our readers get with N300. How long can we go on like that and stay in business? The government has to intervene to ensure journalists keep their jobs and we stay afloat,” he said.

    Oil and gas industry no longer at ease

    The policy has also raised the blood pressure of operators and workers in the oil & gas industry. Some of them who spoke with The Nation expressed concern over the heavy toll the forex policy is taking on their operations, warning that the situation may compel employers to lay off workers.

    Major Oil Marketers Association of Nigeria (MOMAN) Secretary Olufemi Olawore blamed the rising petrol and diesel prices on the high exchange rate. He said the directive issued by the Federal Government to reduce the level of exposure of oil companies to forex market instability contributed to the current fuel scarcity.

  • Forex restriction takes toll on economy

    Forex restriction takes toll on economy

    •Manufacturers,  importers, publishers, others  groan

    Operators in key sectors of the economy have been gasping for breath, following the introduction of Foreign Exchange (forex) restriction on some items classified as finished products by the Central Bank of Nigeria (CBN). The print media  is part of the casualty of the policy. Most newspaper publishing outfits cannot replenish their stock because newsprint is classified as a finished product, requiring high duty. Besides, banks are not opening letters of credit for them to import materials. The development has heightened fears of possible closure of newspaper houses and job losses.  CHIKODI OKEREOCHA, OKWY IROEGBU-CHIKEZIE, COLLINS NWEZE, AKINOLA AJIBADE and ADEDEJI ADEMIGBUJI report that stakeholders are calling for special intervention to avert the looming catastrophe.

    CBN defends policy

    DESPITE complaints by manufacturers and others operators that the Foreign Exchange (forex) policy introduced by the Central Bank of Nigeria (CBN) was making the business climate inclement for investment, the apex bank has defended its stand.

    The bank has insisteted that it has no plans to roll back the policy soon, saying that the good intention behind the introduction of the policy was incontrovertible.

    It explained that it removed the 41 products from access to its forex window they could easily be sourced and produced locally.

    According to the bank, it makes no economic sense to spend the country’s reserves on importing materials that could be sourced in the country, insisting that the policy was aimed at boosting local production.

    The affected items include: rice, cement, clothes, textiles, toothpick, poultry products, meat and processed meat, margarine, palm kernel/palm oil and vegetable oils, private airplanes/jets, tinned fish, incense and wooden doors.

    Also on the prohibition list are: soaps and cosmetics, tomato/tomato paste, woven fabrics, table ware, kitchen utensils, furniture, plywood boards and panels, wood particle boards and panels and glassware. Cold rolled steel sheets, galvanised steel sheets, wire mesh and steel nails.

    Largely because of the import-dependent nature of the economy, the slide in oil prices in the international market, which started mid-last year, caused an unprecedented fall in the value of the naira. The development necessitated the need for a policy intervention to defend the naira value and protect the nation’s foreign reserves in the midst of dwindling oil revenue.

    The CBN has a responsibility to use foreign reserves to defend the naira, but the reserves have been depleted as a result of the sharp fall in oil revenue. Industry watchers have faulted the CBN policy of defending the naira. They spoke of the need for the apex bank to allow market forces to determine the real value of the naira.

    However, CBN’s decision to devalue the naira in October 2014 through March 2015 unleashed serious and unintended negative consequences on operators in various sectors.

    The wish of real sector operators is a review or outright cancellation of the policy, but CBN Governor, Godwin Emefiele, has said now of the options is on the card.

    At the International Monetary Fund (IMF)/World Bank Group meeting in Lima Peru, Emefiele, sealed manufacturers’ hopes when he said CBN would continue to deny importers access to forex to bring in goods which can be produced locally.

    He explained that contrary to insinuations, the finance sector regulator has not banned any goods from being imported.

    He said: “We have not banned any items. What we just did was to exclude them from accessing foreign exchange; items that can be produced in the country.

    “We think that because of the problems we’ve had, the drop in commodity prices and revenue accruing to the nation and because we know that these items have been produced in large quantities in this country in the past that provision still stands. The CBN is not reconsidering the ban, the exclusion still stands.”

    The CBN chief added that since the policy came into force, he has been prompted from various quarters to even elongate the ‘excluding items’ list, but that the CBN would confine itself to the items presently in the restriction basket.

    However, with the negative impacts of the policy now creeping into several sectors, the consensus of not a few industry operators is that there is urgent need for a review by the regulator.

    Real sector operators, especially manufacturers were among the first to scream blue murder being at receiving end of crippling effects of the Foreign Exchange (forex) policy introduced by the Central Bank of Nigeria (CBN) to encourage consumption of local materials. They have been contending with the trend since mid last year  when oil prices tumbled at the global market, forcing a sharp drop in accruals to the foreign exchange reserves. The devel devaluation of the naira was the apex bank’s bank’s immediate response.

    The continued slide of the naira against the dollar and other major currencies has thrown manufacturers into confusion. Manufacturers, who buy their inputs or raw materials from abroad are hurting. No thanks to the exchange rate. They now pay more naira for each unit of imported raw materials, including machineries, spare parts and other import-dependent procurements.

    Besides, manufacturers, who rely on loans from banks to import raw materials, have been doing so at higher interest rates. The rates hover between 25 and 30 per cent. The Nation learnt that many operators are finding it difficult to fund their import bills. Those who manage to do so, have to contend with shrinking profit margins. Operators in the Small and Medium Enterprises (SMEs) sector are the worst hit. The manufacturers’ grouse is that some of them, who use products on the restricted items’ list as raw materials, are adversely affected since they no longer have access to forex. Impliedly, manufacturers, who require any of the 41 restricted items, either as inputs or raw materials, may soon could close shops as the apex bank is not in a hurry to relax the policy.

    The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, highlighted some of the crippling impacts of the policy on real sector operators. He said the restriction on the use of export proceeds by exporters has made settlement of bills difficult for importers. It has also caused a decline in bank’s revenue due to loss of transactions as operators approach alternative market, though at higher rate. This, he said, has been eroding the already shrunk profit margins.

    According to him, the fortunes of operators are on the decline since they spend more patronising the alternative market. They could no longer meet their obligations to foreign suppliers.

    In a paper where the LCCI listed the impacts of CBN’s various policies on businesses and the economy, Yusuf said apart from reduction in  trade volume, the forex restriction has caused a negative risk perception for the country by foreign banks because of the restriction on foreign credit lines.

    The LCCI chief added that the restriction has caused loss of customers to the parallel markets since banks have been unable to meet their customers’ forex demands  for tbusiness transactions. He said the lack of forex to import raw materials and the delay in processing form ‘M’ to import and meet demands has led to loss of market share.

    President of Manufacturers’ Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, said the impacts of the policies on his members can be gleaned from National Bureau of Statistics (NBS) figures, which showed that the sector performed abysmally low in the second quarter of the year in terms of output and contribution to the Gross Domestic product (GDP).

    Relying on the NBS figures, Dr. Jacobs said real output in the manufacturing sector grew by 3.82 per cent in the second quarter from 14.01 per cent in the prededing year. This, according to him, showed a 17.83 percentage point decline over the period.

    Also, the manufacturing sector’s contribution to nominal GDP in the second quarter fell to 9.29 per cent as against 9.77 per cent recorded last year, indicating 0.48 percentage point decline. He lamented the crash of all manufacturing indices, noting that capacity utilisation, production value and manufacturing investment, have been on the decline.

     

    Banks hit as customers turn to neighboring countries

     

    Local banks are losing customers, who turn to neighbouring West African countries of Ghana, Benin Republic and Cotonou, where the import procedures and forex policy are friendlier.  The Nation learnt that the local banks could no longer meet their customers’ forex needs, forcing them to go outside the shores of the land to exchange and transfer funds for transactions.

    Yusuf confirmed that many rich Nigerians in the Diaspora have been  operating parallel foreign exchange market by accepting to settle transaction cost for friends and associates, who in turn, pay in naira into their local bank accounts at above the rate in parallel forex market.

    The LCCI chief, who hinged his claim on a research conducted by the Chamber on the impact of the CBN policies on the real sector, said: “Under the transfer arrangement, there is about 10 to 15 per cent increase in the cost of transfer, excluding the security-related issues.”

    He alleged that the policy, especially, the one on domiciliary account, has eroded investors’ confidence in making Nigeria as their destination of choice.

    Investigations by The Nation has also shown that the rejection of dollar deposits by banks has created a business boom for forex speculators.

    Edu Abdulkareem is one of those taking advantage of the policy to fatten his bank account. The policy, which made it impossible for importers to fund their domiciliary accounts directly from Nigeria, has created a billion-dollar business for currency speculators.

    “Dollar deposits and transfers to suppliers’ accounts are only possible if the money came in from a foreign account as inflow. What we do is collect the equivalent in naira while our agents in Benin Republic make dollar equivalent deposits into the importer’s domiciliary account from where he transfers the fund to foreign suppliers,” he explained.

    That way, Abdulkareem explained, the importer will be able to beat the regulator’s caveat that ‘only foreign inflows’ can be transferred to suppliers. He explained that although it is a tedious process, but it has enabled importers to escape regulatory sanctions while allowing him to take commission on every successful transfer.

    Another currency speculator, who pleaded for anonymity, said the rejection of across-the-counter foreign currency cash deposit by banks has been creating problems for importers.

    He said: “The surplus dollars in the street market is unavailable to the local importers as they cannot transact with it through their bankers. The neighbouring countries are having a field day mopping up the excess dollar cash liquidity at a very cheap rate for the use of their imports to the detriment of importers. Importers are diverting the payment for their imports to neighbouring countries.”

    The importers are also diverting their consignments to ports in neighbouring countries. The ports of Tema and Tokoradi in Ghana as well as the Port Autonome de Cotonou, in The Republic of Benin are their preferred choices.

    “The policy change is helping businesses in neighbouring countries at the expense of Nigerian lenders. I believe that operators should expect further market disequilibrium,” he warned.

     

    An economy at the crossroads

     

    Operators in virtually all the sectors have been thrown into confusion following the June 2015 CBN monetary policy that barred importers of 41 items that can be sourced locally from accessing to its official forex window.

    The issuance of the prohibition list by the CBN has banned importers of such items from benefitting from CBN’s forex window, which is the cheapest. Those wishing to import these items can no longer  source forex locally for their shipment. Exporters cannot use their proceeds to ship them into the country neither.

    Under the new regime, export proceeds domiciled in one bank cannot be transferred to another bank. The apex bank also prohibited the deposit or transfer of foreign currencies from domiciliary accounts, with deposit banks.

    Since the CBN forex squeeze came into force, operators in key sectors, such as manufacturing, banking, oil & gas, maritime and telecommunuications, among others, have difficulties in transfering funds freely to meet obligations to their foreign partners.

    Although, importers and manufacturers were the first to scream blue murder over the policy’s debilitating effects on their businesses, the crippling effects of the policy has now spread like a wildfire to other sectors.

    The print media industry appears to be the latest to be hit by the forex regime described as vexatious by many operators. Although, newsprint, which is the most critical raw material for newspaper publishing business, is not among the 41 restricted items, publishers have been finding it difficult to open Letters of Credit (LCs) with their bankers for the importation of the material.

    The Nation learnt that most newspaper outfits have run out of stock of newsprint and that opening LCs with foreign suppliers has become a complicated process. A reliable source close to one of the affected newspaper houses told The Nation, that some of the LCs opened for newsprint import about six months ago, have not been completely processed by their bankers and foreign suppliers.

    The fear, according to the source, who pleaded to remain anonymous, is that with the existing stock being depleted and the delay being experienced in replenishing stock, some media organisations may be forced to shut down. And the implication of doing so, he said, would be too grave.

    For instance, he said some newspaper houses that may not cope with the attendant staff redundancy arising from the delay in stock replenishment, may be forced to lay off workers.

    The thinking of most media owners and practitioners is that it is bad enough that most of the good hands in the industry are leaving the profession in search of greener pastures in politics without replacement. So, it would be a disservice to the nation if more hands are lost to the policy.

    Prior to the policy came into force, banks were using between a week and a month to convert LCs to the equivalent of the forex required by importers and manufacturers to import or carry out transactions.

    But because the volume of foreign currency available for business transactions has seriously reduced on account of the new policy, banks now insist that customers must pay the full value in the local currency of what they are importing within 48 hours before their LCs could be processed.

    Newspaper owners, who have now been boxed into a corner by the forex restriction, ought to turn to local newsprint suppliers/vendors, but local supplies lack the capacity to bridge the supply gap. The few existing newsprint suppliers cannot meet the requirements of the print media.

    The reasons are obvious. The three integrated pulp and paper mills – Nigerian Paper Mill (NPM), Nigeria Newsprint Manufacturing Company (NNMC), and Nigerian National Paper Manufacturing Company (NNPMC), have gone moribund. Therefore, newspaper owners must rely on imports at huge cost.

    As at the last count, Nigeria spends over N50 billion on paper and paper-related products’ importation annually, according to the Director-General, Raw Materials Research and Development Council (RMRDC), Dr. Hussaini Ibrahim.

    Dr. Ibrahim spoke recently at one-day forum for stakeholders in the pulp, paper and paper products, printing and publishing sector, with the theme: “Optimising pulp and paper production in Nigeria” organised by the Council in collaboration with Manufacturers Association of Nigeria (MAN) in Lagos.

    The RMRDC chief, who spoke through a director of Agriculture & Agro-allied Department of the Council, Dr. Abimbola Ogunwusi, stressed that government’s poverty alleviation and employment generation aspirations might not be realised if the mills continued to be comatose. He noted that there is need for new investments in the sector if the country must become self-sufficient in pulp and paper production.

    While Dr. Ibrahim may have spoken the minds of operators and stakeholders in the print media, given the outcry over rising cost of newsprint, MAN’s Director-General, Chief Remi Ogunmefun, was quick to note that the recent dearth of forex remains a stumbling block to self-sufficiency in pulp and paper production.

     

     

     

     

     

    Job loss fear grips media

     

    Operators and stakeholders in the media industry, particularly those in the print segment are losing sleep over likely closure and subsequent loss of jobs. And they have reasons to be so afraid. For one, the crippling effects of the policy are coming at a time the cost of newsprint has skyrocketed, forcing many newspaper publishing outfits to adopt cost-cutting measures, including a reduction in both print run and paginations.

    Traditionally, there are two streams of income for newspaper houses – the number of copies sold or advert patronage. Unfortunately, advert revenues have dropped sharply in recent time, a trend which observers blame on the dwindling economy.

    According to a media specialist, the rising cost of production caused by lack of basic infrastructure, especially electricity remains a common threat to operators. The specialist told The Nation that the print media faces peculiar challenges, which, if not addressed, would lead to closure of many media houses and subsequent staff lay.

    He listed some of the challenges to include poor reading culture, drop in copy sales and declining print run, adding that even if copy sales goes up, most newspaper houses would still be unable break even unless the adverts roll in.

    He also said this might be difficult considering the current situation where many advertising agencies place adverts in newspapers, collect money from their clients and refuse to credit the accounts of the newspapers.

    As if this is not enough heartache for print media owners, the expert said because of rising cost of production, most newspapers are cutting down their number of pages, thus inadvertently making themselves vulnerable to threat of competition from digital media.

    Incidentally, digital media, he noted, have also been affecting advertising revenue to the traditional media. Besides, readers now have options of switching to online or digital media to get the same news the traditional media offer. Worse still, newspaper owners are reducing the number of pages despite retaining the same price.

    The specialist, whose experience spanned several African countries, said the CBN policy has succeeded in adding to the woes of operators in the print industry, whose fortunes have been dwindling lately. He said the country may have to brace for possible closure of more media houses and massive job losses.

    Noting that the bleak future of the media industry, he said the CBN would have to review its policy to avert the impending doom, adding that such a review could be outright cancellation, or the introduction of some soft-landing measures to cushion the effect on the media industry, considering its critical role.

     

    Call for special intervention

     

    Former Abia State Governor and publisher of The Sun newspaper titles, Dr. Orji Uzor Kalu, said the media industry deserved a special intervention fund from government at a reduced interest rate among other palliatives if it must carry on with the business of publishing.

    He called on the President Muhammadu Buhari administration to come to the aid of print media owners to avoid job loss due to increasing production cost.

    Kalu said the print media industry was getting closer to the edge of the precipice as the industry runs at a loss due to rising operational cost. He, therefore, appealed to the President to urgently intervene to prevent job cuts by media owners and for them to stay afloat.

    “The operational cost media houses have to contend with is huge and keeps rising daily. We are dying from the burden. Our businesses are suffering,” he lamented.

    Kalu, who spoke in Lagos, recently, said media owners are reeling under the weight of rising cost of newsprint, ink, blankets and plates and other consumables in the print media.

    Using The Sun Publishing Ltd. As a case study, he said the company uses 2, 800 tons of newsprint every month and when added to the cost of freighting, the dwindling fortunes of the naira and power challenges, it becomes obvious that newspaper publishing business is facing more difficulties by the day.

    His words: “The Federal Government needs to come to our aid. If this bad tide is not stemmed, media owners may resort to downsizing to save cost and that will further worsen the nation’s already bad unemployment figures.”

    Kalu informed that all media houses have producing every copy of the newspapers at a loss.

    “The average cost of printing a copy of a newspaper is N500 and we sell for N150 or N200. That means, media owners are subsidizing every copy our readers get with N300. How long can we go on like that and stay in business? The government has to intervene to ensure journalists keep their jobs and we stay afloat,” he said.

     

    Oil & gas industry also cry

     

    The policy has also raised the blood pressure of operators and workers in the oil & gas industry. Some of them who spoke with The Nation expressed concern over the heavy toll the forex policy is taking on their operations, warning that the situation may compel employers to lay off workers.

    Major Oil Marketers Association of Nigeria (MOMAN) Secretary Olufemi Olawore blamed the rising petrol and diesel prices on the high exchange rate. He said the directive issued by the Federal Government to reduce the level of exposure of oil companies to forex market instability contributed to the current fuel scarcity.

    His words: “This is an unfortunate situation in which we find ourselves. As the price of crude oil and the international price of diesel were dropping, the government devalued the naira. For instance, for Premium Motor Spirit (PMS), the exchange rate for bringing the product before devaluation was N171.36 per dollar. At that rate, the landing cost was N90.67.

    “At another point, the foreign exchange rose to N188 per dollar, while the landing cost rose from N90.67 to N98 36. Now, the exchange rate has increased again to over N200 in the market, and you can imagine what the landing cost of PMS would be now.”

    Former President of the Nigerian chapter of International Association of Energy Economics (IAEE), Prof Adeola Akinnisiju, said the instability being witnessed in the foreign exchange market has been affecting operators in both the local and international petroleum industry.

    According to him, the bulk of equipment used in oil production and exploration activities are imported, and this implies that operators would need to spend more money to source equipment abroad.

    He lamented that the development has resulted in the review of contracts given to local firms by oil majors, with attendant implications on the industry.

     

  • ‘Forex restriction’ll enhance industrialisation’

    ‘Forex restriction’ll enhance industrialisation’

    The Central Bank of Nigeria’s (CBN) policy restricting importers of 41 items from sourcing funds from the official forex market is crucial to Nigeria’s industrialisation drive, says the Managing Director/Chief Executive Officer, Tempo Paper & Packaging Limited, a manufacturing firm based in Sango Otta, Ogun State, Seun Obasanjo. In this report, he tells Senior Correspondent COLLINS NWEZE that the policy will also enable the country look inwards, build capacity and transform from consumption-based economy to production-based.

    For most people in the industrial sector, the Central Bank of Nigeria’s (CBN’s) policy restricting the import of 41 items with funds sourced from the official forex window could boost the country’s industrialisation.

    Experts believe the policy has implications on whether or not the country will leapfrog from being a consumption-based economy, to production-based economy, and perhaps, over time, become a net exporter of finished goods.

    One of such experts is Managing Director/Chief Executive Officer (CEO), Tempo Paper & Packaging Limited, Seun Obasanjo, who believes the CBN acted well by banning the import of the items, including toothpicks, private jets and rice from using official forex window to fund such consumption.

    For him, such controls would help stabilise the naira, replenish reserves and boost manufacturing, thereby giving the economy the boost it needs to transform to an industrialised nation.

     

    Merits of the CBN Policy

    Obasanjo told The Nation: “With regard to the 41 items on the restriction list released by the CBN, it is a step in the right direction. No nation can develop without industrilisation. What the CBN is saying is why can’t we produce these items locally?

    “Although it is going to be tough because of poor infrastructure, especially the port congestion, poor power supply, and poor skilled manpower, among others, but the bigger picture remains that Nigeria is headed to be a globally recognised industrialised country by instituting this policy. The policy will help us look inwards to build capacity.”

    He believes that to get the local industry into the league of big players where it can begin to act with full capacity in the production of goods and services, the government should provide the infrastructure.

    “It is not a one direction approach. All hands must be on deck to get Nigeria to its desired destination of being an industrilised nation. By fixing power alone, the cost of production of goods and services will drop significantly, helping the operators to compete in the global market. The same thing applies to low interest rate which is needed to make the manufacturers also compete favourably by reducing the cost of their operations,” he said.

    On the claim by some manufacturers that some of the banned items are their raw materials, Obasanjo said the Common External Tariff being implemented in Africa covers the entire region. “What is seen as my raw materials can be someone else’s finished goods. The principle of the policy is to drive local production and create jobs for the population,” he said.

    Continuing, he said: “If I am producing everything in Nigeria, it means Nigerians will be employed starting from drivers, cooks, secretaries, cleaners, gardeners and even security personnel. That is a major contrast if the goods are imported. By producing goods locally, so much value will be added to the domestic economy.”

    “If the farmers are producing locally, it will improve their capacity overtime and also creates job. It will help Nigeria to leapfrog from consumption-based economy to production-based economy. We can even become a net exporter of several items.”

    On other benefits to local production, he said being the net exporter of goods and services, places the country in a vintage position to earn huge forex. Hence, instead of scrambling to buy dollars, the manufacturers can earn dollars and boost the domestic currency.

    • Obasanjo
    • Obasanjo

    But achieving this, Obasanjo said, would require the co-operation and support of all stakeholders. “It has to be a coordinated effort and the policy needs to be encouraged. The support should come from all stakeholders. Although some people are going to lose out in the short term because they are importing these items, if we boost the local production capacity, in the long-run, we will all be better off,” he promised.

    To show that it is possible, Obasanjo, who manufactures corrugated cartons and flexible packaging for various items, such as confectionary, bread, noodles, spaghetti among others said there are multinational companies that have continued to produce locally over the years, employing millions of Nigerians.

    For instance, Nestle, Procter & Gamble, PZ, and Coca Cola are manufacturing companies producing and manufacturing their products as well as employing millions of Nigerians.

    “These companies are examples that should be followed by those still importing goods into the country. A lot of people are pushing for a complete liberalisation of the economy but that will open our ports to outsiders. Such policy, will simply finish our local producers because the economic dynamics are not the same,” he said.

    Explaining further, he disclosed that the interest rate in China is not the same with that of Nigeria. “If I am producing in China, I borrow at two per cent, electricity is stable among other favourable factors. But in Nigeria, you will borrow at over 20 per cent and still you generate your own power. There is additional costs attached to goods produced in Nigeria, hence they cannot compete favourably if the ports are opened for foreign goods to enter,” he said.

     

    Why govt must reduce cost of operation

    Obasanjo insisted that it was high time that the government focused on reducing cost of operation for the local industry. “We need to focus on productivity and increasing our efficiency in all the economy. It is when we have done that, that will be able to compete favourably in the global market,” he predicted.

    For him, the forex restriction by the CBN is one major step to taking Nigeria on its industrialisation promised land.

    He regretted that many real sector operators were boosting job opportunities in other countries and depriving their citizenry of jobs by making some frivolous imports while also calling on the government to diversify the economy.

    “How can Nigerians be importing cement, margarine, palm kernel, vegetable oil, poultry products (chicken, eggs and turkey), Indian incense, tinned fish in sauce (Geisha, Sardines), cold rolled steel sheets, galvanised steel, roofing sheets, wheelbarrows, head pans, metal boxes and containers, and enamelware which can be produced locally. It is a good thing that the CBN is correcting this anomaly,” he said.

     

    Policies that are needed

    He said aside the restrictions, the apex bank had overtime, instituted some policies meant to boost the real sector and enhance local production.

    He listed the intervention products in power, aviation, manufacturing, small and medium enterprises as good examples of the CBN’s roles in building a vibrant and productive industrial sector.

    He said he would continue to support the growth of the economy and the reforms in the power sector, as well as small businesses and agriculture.

    For power sector, the CBN linked the challenge faced by the sector to unattractive pricing of domestic gas and legacy debts that has inhibited investment in gas supply and infrastructure.

    These challenges are interconnected with the unexpectedly large revenue shortfalls in the industry, which needed to be fixed.  That prompted the CBN to institute the Nigerian Electricity Market Stabilisation Facility (NEMSF), where N213 billion has been mapped out and is being disbursed to settle legacy gas debts and shortfalls in revenue for operators to boost power supply.

    Besides, the CBN has, to unlock the potential of the real sector to engender output growth, value added productivity and job creation established a N300 billion Real Sector Support Facility (RSSF).

    The facility will be used to support large enterprises for startups and expansion financing needs of N500 million up to a maximum of N10 billion. The real sector targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors. The fund is expected to improve access to Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors of the economy.

    It will also increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide inputs for the industrial sector on a sustainable basis.

    There are also the N200 billion Commercial Agriculture Credit Guarantee Scheme (CACS), N300 billion Power and Airline Intervention Fund (PAIF) and N200 billion Small and Medium Enterprises Restructuring and Refinancing Facility (SMERRF). All these funds provided by the CBN are meant to boost economic development, and come at single digit interest rate.

    The CACS was meant to fast-track the development of the agricultural value sector of the economy through the provision of credit facilities at a single digit interest rate to large-scale commercial farmers; the PAIF was meant to resuscitate power and aviation sectors while the SMERRF is for supporting small businesses financially.

    But Obasanjo believes the apex bank should not stop there, but must follow up to ensure the funds are well utilised, adding that more of such funds are needed.

    He said the forex policies and provision of the real sector funds are in tandem with the regulators’ long term vision for the economy.

    But he insisted that the CBN can only handle the monetary policy and not the fiscal policy. “CBN is not in charge of fiscal policy like taxation. The federal government can provide tax holiday and help more people come in and start local production. What the CBN is doing has to be supported with fiscal policies,” he said.

    He cited the automobile policy as one that should be replicated in other sectors of the economy, adding that government’s efforts in that sector is yielding positive results as local assembly of vehicles has started.

    “The Federal Government should see how the local production of the banned items will start. This will help reduce the demand for dollar and lead to stronger naira. The only way you can make the naira stronger is to have less demand for dollar,” he said.

    “The price of crude oil has fallen from over $100 per barrel to below $60 per barrel. The farmer does not care whether oil price drops or not. These are value-chains that do not involve dollar. That is where we should develop the economy from and grow it”.

    Continuing, he said: “We have a huge population base that is productive and intelligent. A majority of the most intelligent people in the world are Nigerians. We have fertile land and most of the populations are able-bodied people that can work. So, nothing should hinder us in our road to industrialisation.”

     

    Standardisation as a panacea for growth

    However, Obasanjo said for Nigerian products to attract the needed patronage, there must be standardisation. He admitted that such could be gained with time and experience.

    “Standardisation is a function of advancement in technology. In 25 to 30 years ago, nobody wanted to buy Taiwan products. Today, Taiwan is producing world-class products. It is now Chinese products that people runaway from buying but in the next 20 years, Chinese products will become standardised. That is why I want Nigeria to begin to produce locally those things it is importing today. The local guys in China and Taiwan are learning the know-how and will continue to produce. That is why I want Nigeria to begin to produce to give our people opportunity to develop our own standards,” he said.

    He said the Standards Organisation of Nigeria (SON) can encourage local companies to improve on their standards. It is not going to happen overnight. It takes time but Nigeria will be better for it. “If we keep consuming foreign goods, we have conceded defeat,” he said.

  • ‘Forex restriction is affecting manufacturers’

    ‘Forex restriction is affecting manufacturers’

    Mr. Taiwo Adeniyi, Group Managing Director/Chief Executive, Vitafoam Nigeria Plc, in this interview with Ibrahim Apekhade Yusuf, speaks on the downside of the CBN policy restricting foreign exchange to businesses. Excerpts:

    How is the new policy on forex restrictions affecting your company?

    For us in Vitafoam, I can tell you 80per cent of the materials that we use are not in this environment again because they are by products of petrochemicals. We do not have them being refined here yet neither are they being produced here yet. So they are being imported into this country. But what has happened today is the fact that the government policy on forex is having a toll on us because now, forex is not available. And yet we need to establish letters of credit, as such, we have to source forex outside of the CBN platform. And when you’re going to source forex outside of the CBN platform that means you just have to source it in the parallel market. But again, the parallel market is also being controlled. So, for you to be able to have access, it is tough. In fact, the latest one that is causing us serious challenge is the fact that before you can service an LC, 48 hours before the bank can go and bid, the cash must be made available. The reverse used to be the case before now. Before now, the bank goes to make a bid on your behalf based on document evidence and the CBN in turns gives its authorisation, that is approval and the bank make the funds available once your bid is successful.

    But right now, the CBN is saying 48 hours before you bid, the funds must be made available and even when that is done, it would not guarantee that you will get what you ask for. So, it’s a tough one. But again, as it is with everything, it might be rough initially but as we go on, it sure will get better.

    As a member of the manufacturing sector have you made entreaties to the government to give you more allowance as it were?

    Of course, representation is being made by the Manufacturers Association of Nigeria (MAN) to the CBN to say that you can’t shut out industries because the kind of forex that we require is not the kind you can get from one bureau de change and you think it would be sufficient. Agreed the policy has been made and they need to see it run. But we expect people to come up with better options because if we don’t try you won’t know whether it will work.