By Yinka Kolawole

Several multinationals and businesses have  become distressed or completely shut down operations over the past one year, mostly due to foreign exchange (forex) scarcity and heavy forex-related losses, among other factors. 

Indeed, many manufacturing companies recorded huge losses as a result of forex losses, running into trillions of Naira, occasioned by the depreciation of the currency.

This has prompted outcries from operators, investors and other stakeholders for government intervention to save the manufacturing sector from total collapse.

The Manufacturers Association of Nigeria (MAN) declared that 767 manufacturing companies shut down in 2023 while 335 others became distressed due to multidimensional challenges besetting the sector.

To put the precarious situation of the Nigerian manufacturing sector in proper perspective, there has been a reduction in global demand for Nigerian products as buttressed by a National Bureau of Statistics (NBS) report that confirmed that the manufacturing export value of Nigeria plummeted by 166 percent to N778.44 billion in 2023 from N2.07 trillion in 2019.

As a matter of fact, data from the World Trade Organisation revealed that South African manufacturing export value at $46 billion in 2022 was over 15 times greater than that of Nigeria which was $3 billion in the same year. 

Additional albatross 

Considering all the binding constraints that the sector has been grappling with, MAN sees the forex-related losses being incurred as avoidable additional albatross.

According to MAN, its members lost about N1.5 trillion in the last six months to forex-related transactions.

Director-General of MAN, Segun Ajayi-Kadir, noted that the forex-related losses incurred by the manufacturers revolved around interest payments that have accrued as a result of the Central Bank of Nigeria’s (CBN) delay in settling outstanding forex forward contracts, excess payments made for import duty assessment and the depreciation of the Naira.

He lamented that the loss had put the manufacturing sector in a state of distress and that more factories may close if the situation is not resolved.

“Within the last six months, our companies have incurred not less than N1.5 trillion in forex-related transaction losses. By the time our results are out for the first quarter of 2024, in terms of the performance of companies, this will be very clear,” Ajayi-Kadir stated.

Data from the Nigerian Exchange Limited, NGX, shows that 16 major  local and multinational manufacturing companies listed on the Exchange recorded a combined forex loss of over N792 billion in 2023.

The companies and forex losses incured include: Cadbury Nigeria N18.299 billion; International Breweries, N 57.599 billion;  Nestle Nigeria, N173.92 billion; Nigerian Breweries, N153.33 billion; NASCON Allied, N8.54 billion; BUA Cement, N69.95 billion; Lafarge Africa, N21 billion; Guinness Nigeria, N49.1 billion; Dangote Cement, N164.07 billion; and BUA Foods, N73.56 billion.

Others are: Dangote Sugar, N148.33; billion; Okomu Oil, N210 million; Notore Chemical, N5.59 billion; Vitafoam Nigeria, N103 million; Beta Glass, N980 million and Unilever N6.94 billion.  

Many of the companies suffered the heavy losses despite increases in their prices and in their revenues

Recently, Nigerian Breweries (NB) announced that it was shutting down two of its nine plants temporarily and Jubilee Syringe, located in Akwa Ibom State, also announced it was shutting down operations.

Case for intervention 

Making a case for government intervention, Dr Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE), said that the government has to come to the aid of manufacturers urgently to ensure the survival of the industries. 

Yusuf stated: “The role of FX losses in the closure of many of the affected businesses cannot be over-emphasised. Most of these companies suffered heavy losses running into billions of naira and have not been able to rebound from the losses. 

“A lot of companies, especially multinationals, have heavy forex exposure, as they source most of their materials from outside the country. It is therefore not surprising that they are the most hit. Also, it must be stressed that purchasing power is extremely poor, many people are unable to buy what is being produced.

“These problems are just a part of the many other issues businesses face. If we are serious about saving our industries from total collapse, the government has some work to do.”

On CBN’s claim that it has cleared all unsettled forex requests, President of MAN, Francis Meshioye, said the forex requests by his members were yet to be cleared.

Meshioye said: “They have not cleared it. We know there are a lot of issues surrounding forward contracts, especially forex that is due to be paid. The agreement is that it should be paid at a future date, and the future date has passed.

“They are in arrears. This is a concern to the manufacturers because it has a lot of effects, not only on the manufacturers but the country as a whole, because it demonstrates lack of integrity.”

Also speaking to the issue, MAN DG, Ajayi-Kadir, called on CBN to reassess the requests to avoid any possible pushback in the form of litigation on the part of the manufacturers, which may further worsen the already dire situation.

“It is a very difficult situation for manufacturers. You can imagine, some of these forwards are more than two years old,” he added 

The Nigerian Exchange Group has also called for the intervention of the federal government to ease the challenges faced by the manufacturing sector in the country.

Speaking when the Minister of Industry, Trade and Investment, Dr. Doris Uzoka-Anite, visited the NGX Head Office in Lagos,  Chairman of the NGX Group, Dr Umaru Kwairanga, said: ” It is important for the government to engage players in the capital market.

“This is so that they can know the challenges and be able to proffer solutions to aid the listed companies.”

Also speaking, Chief Executive Officer of Dangote Sugar Refinery, Ravindra Singhvi, lamented the lack of hedging mechanism for their foreign exchange loans and how the high-interest rate needed to come down to ease the operations of manufacturers.

He said: “There are no hedging mechanisms for us and this leaves us exposed to changes in the currency market.”

On his part, Managing Director of BUA Foods, Engr. Abioye Musibau Ayodele, said: “I think the economy is trying to recalibrate. The forex situation impacted the manufacturing sectors negatively.”

FG pledges support 

Meanwhile, the federal government has assured the manufacturers that appropriate steps are being taken to ensure not just the survival but facilitate the growth of the sector.

Uzoka-Anite, Minister of Industry Trade and Investment, gave the assurance at a recent engagement with stakeholders in Lagos.

She reaffirmed the federal government’s commitment to support the business community to enable their businesses to thrive.

“The government will assist businesses in overcoming the current economic difficulties and create an environment in which industries can continue to thrive,” she stated.

Uzoka-Anite expressed the government’s commitment to sustaining industry and manufacturing, highlighting initiatives such as the Consumer Credit Scheme to boost purchasing power, sector-specific interventions in power and agriculture to reduce production costs, and ongoing dialogue for financial reporting with the Financial Reporting Council.