The Manufacturers Association of Nigeria (MAN) has sounded the alarm, warning that the prolonged forex crisis may soon force factories to close down.
Manufacturing Sector Faces Impending Shutdowns As Forex Crisis Threatens
In a recent interview with AIT, MAN’s Director-General, Segun Ajayi-Kadir, emphasized the severity of the situation. Ajayi-Kadir revealed that manufacturers are struggling to acquire up to 20 percent of their needed foreign exchange from official channels, leaving them reliant on the volatile parallel market.
This scarcity has driven up production costs significantly, resulting in decreased capacity utilization across the sector.
Ajayi-Kadir expressed concern over the mounting unsold inventory, attributing it to the adverse effects of the exchange rate crisis, inflation, and other macroeconomic challenges. He warned that unless there’s a significant improvement in sales, manufacturers may be compelled to halt production or downsize their workforce, potentially exacerbating the already dire employment situation.
READ ALSO:
- Forex Crisis Threatens Operations of Nigerian Modular Refineries
- Forex Turnover Plunges, Leading To Naira Depreciation As Dollar Sales Drops By $252m
- Nigeria Govt Plans To Raise $10bn To Boost Foreign Exchange As Naira Trades Above N1,850
Forex Crisis Leading To Job Losses in the Manufacturing Industry
The looming threat of job losses in Nigeria’s manufacturing sector has been underscored by Ajayi-Kadir. He projected that the first quarter of 2024 could witness a surge in job cuts compared to the previous year. The relentless depreciation of the naira against the dollar, coupled with forex volatility, has left manufacturers grappling with uncertainty. Ajayi-Kadir stressed that the current operating environment is unsustainable, making it impossible for genuine manufacturers to operate profitably.
He urged the government to take decisive action, including scrapping the controversial price verification portal introduced by the Central Bank of Nigeria. Additionally, Ajayi-Kadir called for the establishment of new credit windows with favorable interest rates to alleviate the pressure on manufacturers.
Challenges Persist Despite Government Efforts To Curb Forex Crisis
Despite government interventions, challenges persist in the manufacturing sector. Ajayi-Kadir lamented the unavailability of forex, even for those who had paid for it in advance through the futures market.
He highlighted the adverse impact of frequent exchange rate fluctuations on cargo clearance, warning that it would inevitably lead to price hikes for consumers.
The recent rapid depreciation of the naira, reaching N1,665.50/$1 as of last week, has further exacerbated the woes of manufacturers heavily reliant on imported inputs. With no immediate solutions in sight, the manufacturing industry faces an uphill battle to sustain operations amidst the ongoing forex crisis.
In summary, Nigeria’s manufacturing sector is at a critical juncture, with the forex crisis posing significant threats to its viability. Urgent government intervention is needed to avert potential factory closures and widespread job losses, ensuring the sector’s resilience amid challenging economic conditions.