Despite efforts to reduce importation and increase the percentage of local contents in production, Nigeria’s manufacturers still spent N1.88 trillion on raw materials importation in the first nine months of the year, according to the latest report from the National Bureau of Statistics (NBS).
The report which covers the first three quarters of the year pointed out that despite the size of importation, the raw materials imported decreased by 22.36% from the N2.43 trillion imported in the same period of 2021.
This, manufacturers attributed to foreign exchange scarcity that made it impossible for most firms to import as usual, and in most cases compelled them to seek local alternatives.
They, therefore, lamented the challenges in accessing forex at the black market where the exchange rate against the United States Dollar was as high as N800/$ a point this year.
Speaking on the situation, George Onafowokan, the Chief Executive Officer of Coleman Technical Industries, explained that the weak Naira, especially in the black market where most manufacturers source forex, was the reason for weak manufacturing activities.
He said, “The volatility which caused a 36 per cent increase in one week or so was not to anybody’s benefit. It distorted the markets. Manufacturers kept repositioning, and eventually, the whole manufacturing sector almost went into comatose. Some companies had to stop selling and production, because there was no way they could replace their stock.”
Nigeria’s manufacturers are indirectly forced to deal with the irregularities of an unstructured black market when Bureau de change operators were denied forex allocation.
“Whether you are buying raw materials or machinery, you are still dependent on the black market, unfortunately,” he said.
On his part, Ike Ibeabuchi, a manufacturer of chemicals and Chief Executive Officer of MD Company Limited said even himself has been struggling with severe raw material shortages due to forex illiquidity.
“My raw materials were depleted two months ago, but I have not been able to restock them because I cannot find dollars. Also, the dollar rate is also making it almost impossible for many of us to continue in the manufacturing business,” he said.
Another manufacturer, the Chief Executive Officer of Kenfrancis Farms, Ifeanyi Okereke, said forex inaccessibility has forced him to shut down his own company.
He said, “We started in 2016 believing in Nigeria and hoping that we could process agro products and export them, but getting raw materials to carry out this objective became a problem. Our cost of production skyrocketed and, at a point, it became clearly impossible to continue operations. We suffered severe shortages before we closed down,” he said.