Negative effects can’t be overemphasized, says ASBON
By Yinka Kolawole
The Manufacturers Association of Nigeria (MAN) has linked the low utilization of local raw materials in the manufacturing sector to policy intervention in the official foreign exchange (forex) market by Central Bank of Nigeria (CBN).
In its 2019 half-year (H1’19) report, MAN hinted that the use of local raw-materials in the sector has maintained downward trends since CBN commenced intervention in the official forex market in 2017. In the half-year review, MAN stated: “The relatively more available forex resulting from the intervention may have been rubbing off negatively on backward integration agenda as firms prefer to import raw-materials as against inward looking.
“In the first half of 2019, local sourcing of raw-materials in the manufacturing sector increased marginally to 57.0 percent from 56.87 percent recorded in the corresponding half of 2018, representing 0.13 percentage point increase over the period. It however declined by of 6.7 percentage point when compared with 63.7 percent recorded in the preceding half.”
Corroborating MAN’s position, National President, Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, agreed that forex availability has encouraged more influx of raw materials into the country.
Egbesola, in an exclusive chat with Vanguard, stated: “Though there is relative stability in the forex market largely due to the continued intervention of CBN, the impact has been double-sided as rightly expressed by MAN.
“Availability of forex has in no small way, encouraged more influx of raw materials into the country that hitherto could have been produced locally here. The negative effects of this cannot be overemphasized.
“However, we cannot get it perfectly right in just one day. I am sure CBN must have also noticed this anomaly and are already on the drawing table to arrest the negative trend.
“For the local industries to survive effectively and competitively in producing the needed raw materials for our local industries, more needs to be done by government beyond the issue of forex. If our economy is to grow, this sector needs more direct intervention from government to be able to produce standard, quality, price competitive and manufacturers’ friendly raw materials for local use.”