Almost one year after the President Muhammadu Buhari-led administration took over the reins of power and with no clear direction of where the economy is headed, businesses have continued to pine under the yoke of stifling regulatory headwinds, report Ibrahim Apekhade Yusuf and Franca Ochigbo
Most businesses out there are no longer at ease. And the reason for this is not far to seek: Many of these businesses are fighting the battle of their lives as their corporate existence is being threatened, no thanks to the rather hostile operating business environment.
Although most of the businesses had anticipated that the new government in power would take awhile for it to gather steam, they had hoped that life would be back on an even keel in no time at all. But nearly after one year that hope has remained forlorn.
Crux of the matter
A number of policies have had rippled effects on businesses across the board, chief among which is the Central Bank of Nigeria (CBN) policy restricting the use of Naira cards abroad. This is the second time the CBN is putting restrictions on the use of naira cards outside the country — one of many other policies put in place by the CBN Governor, Godwin Emefiele who will stop at nothing to save the Naira.
However, some speculators had warned at the time that if the authorities in charge are not careful, there may be another devaluation of the national currency very soon. Thus many entrepreneurs have been forced to wait for the economy to stabilise before they can continue carrying out their business.
Last month, the CBN Governor said that the bank will not devalue the Naira again despite calls for the devaluation of the currency in times of economic turmoil.
According to Mr Emefiele, the Naira is ‘appropriately priced’. So far, the CBN governor has tightened monetary policies and exchange rate rules as well as imposing a ban on 41 imports, limiting daily withdrawals by Nigerians with domiciliary accounts, which has affected several transactions.
The CBN also issued a press release to the banks on meeting all forex demands for eligible invisible transactions as follows: Foreign ATM cash withdrawals will have a daily limit of $300, foreign transactions by POS or an e-channel will have no daily limit.
Besides, it placed annual limit on ATM, POS and e-channel transactions to $50,000 just as people were instructed to only acquire foreign currency for eligible purposes such as BTA, PTA, medical fees, school fees, mortgage payments et cetera, through banks with the use of ‘Form A’ for invisible transactions and ‘Form M’ for visible transactions.
In order to stop the Naira devaluation and currency speculation, Nigerian banks stopped the acceptance of foreign currency cash deposits into domiciliary accounts in August 2015.
People were only allowed to withdraw cash in either foreign currency or the Naira equivalent from their domiciliary accounts. Banks were told to not accept cash deposits into domiciliary accounts but to receive inward FX telegraphic transfer from other banks.
An instruction was issued to all deposit banks, microfinance banks and primary mortgage institutions, mobile money operations, switch and other payment system services concerning electronic payment system.
Importers of a list of 40 goods and services were therefore denied access to foreign exchange in the Nigerian foreign exchange market in order to encourage local production of these items. The importation of these goods were not banned, thus importers desirous of importing these items were instructed to do so using their own funds without any recourse to the Nigerian Foreign exchange markets.
Usage of Naira-denominated cards overseas
In compliance with the CBN directive on the international restriction of Naira cards, on June 06, 2015, Naira-denominated Corporate Cards were no longer enabled for cross-border payments with immediate effect.
This policy was to review the existing usage of Naira-denominated cards downwards from $150,000 to $50,000 per annum.
Stakeholder voices
Speaking at separate fora recently, President of Manufacturers Association of Nigeria MAN, Mr. Frank Jacobs and Director General of the Lagos Chamber of Commerce and Industry LCCI, Mr. Muda Yusuf, have described as stifling the prevailing operating business environment.
The MAN President noted that many operators in the nation’s real sector closed shop in 2015 due to harsh operating environment characterised by poor infrastructure, low consumer demand and unfair competition from low quality products smuggled into the country, warning that many more firms would close down due to the foreign exchange policy.
“These companies have invested heavily in plants, equipment and machinery worth several billions of dollars in the country and what the CBN is indirectly telling them is that it is not bothered about the challenges this policy has posed to our members with the attendant loss of jobs”, the MAN boss said.
While calling on the Federal Government to have a rethink on the policy by making foreign exchange available for real sector operators that need to import raw materials, he warned that if not reversed, the policy will lead to the closure of more companies.
According to Yusuf, the forex restriction policy has had great danger for the Nigerian economy, especially in the first quarter of 2016.
One of the direct implications of the policy is that many firms would be left with only one alternative, which is to embark on a mass sack of their work force in a desperate move to reduce cost in order to remain afloat.
Expatiating, he said: “The position of the LCCI is that we want the CBN to lift the ban on foreign exchange now because government needs to do something urgently to convince Nigerians, private sector operators and manufacturers. We believe that lifting the restriction on foreign exchange and adjusting the exchange rate of the naira will make substantial impact on the nation’s economic recovery.”
Millions of jobs on the line
The lull in business activities occasioned by the stifling operating environment is already taking its toll on businesses with millions of jobs threatened across the sectors.
Leaders of Food, Beverage and Tobacco Senior Staff Association, FOBTOB, have raised the alarm that the nation may lose three million jobs in the sector if government does not urgently review its foreign exchange (forex) policy.
The labour union stated this in Lagos on Wednesday at a press briefing, alleging that companies in the sector are on the verge of shutting down because of their inability to raise foreign exchange to import raw materials.
According to the union, leading companies in the sector have invited labour for discussion on retrenchment of workers.
These companies, FOBTOB said include Nigerian Flour Mills, Nigerian Breweries Limited, Guinness Plc, Nigerian Bottling Company, 7-UP Bottling Company Plc, Friesland Campina Wamco Plc.
While calling on government to intervene to save the industry and millions of jobs, FOBTOB alleged that not less than 1,500 workers had been sacked in the last three months over the forex crisis.
According to FOBTOB President, Quadri Olaleye, employers in the sector had come up with different reasons to sack workers and that about 3000 workers were sacked between 2012 and 2015.
He said: “The current situation has reached a pathetic level, because it seems all the employers in our sector are in competition with each other on who can lay off the most workers.
“Every company is now calling for a downsizing of the workforce, and this time under the guise of lack of foreign exchange due to the Federal Government’s recent policy on foreign exchange.
“We are aware that not all the raw materials used in our industry can be sourced locally. Where they can be found, they are mostly not available in commercial quantity.”
The union called on government, through the Central Bank of Nigeria, CBN, to take a second look at the policy on foreign exchange to avoid shutting down the companies in the sector.
Need for action plan at the ministry
The President, National Association of Nigeria Traders, NANTS, Ken Ukoaha has lamented that there does not seem to be any policy direction for the Ministry of Industry, Trade and Investment.
Ukoaha who made this observation during a media capacity building in Abuja at the weekend, said inasmuch as he supports the present government, the previous government did a good work in giving Nigerians beautiful policies, though marred by corruption.
He however, impressed on the present government, the need to borrow a leaf from the past policies as they can serve useful purpose.
“We are calling on the new administration to give us a template to work with, an economic blueprint, so that after four years we can come to say this is the criteria for the benchmark given, this is where you passed and failed.”
While noting that the transition agenda has elapsed in 2015, it will be one year in May 29th 2016, with nothing to show for it, he urged the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelama to be alive to his responsibilities.
Ukoaha said the present budget should be critically looked at to ensure what happened with the padded budget that was cancelled does not happen again.
N350b bailout to the rescue
Meanwhile, the federal government has said that it will inject N350 billion budgeted expenditure to revamp the Nigerian economy in the next few months. Giving this assurance was the Minster of Fiannace, Mrs. Kemi Adeosun. According to her, the bailout funds will go a long a way in cushioning the effects of the long-suffering masses.
