Manufacturers lose N500bn to flexible forex policy
The Manufacturers Association of Nigeria (MAN) yesterday lamented that its members lost a whopping N500billion to the flexible exchange rate introduced by the Central Bank of Nigeria (CBN).
Its Chairman, Apapa Branch, Mr Babatunde Odunayo, who spoke yesterday during the branch’s 45th Annual General Meeting (AGM) in Lagos, Letters of Credit and Form Ms approved to manufacturers at N197/$ before the regime of the flexible exchange rate on June 20, are now expected to be redeemed at N320.
A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller would be received on time and for the correct amount.
“Unfortunately, this unfolding situation poses a great burden on manufacturers since the pricing of the related manufactured goods was made at N197 or N198 to dollar when it was approved.
“Manufacturers currently face up to N500 billion in exchange difference between the approved Form M and Letter of Credit established rates and the flexible market rate of N320 to a dollar.
“This is a huge loss that manufacturers are expected to bear, whereas the related goods had been mostly sold before the commencement of the new exchange rate system,’’ Odunayo lamented.
He said the exchange rate loss of N500 billion reflected in their accounts and had led to factory closure, unemployment and loss of investments in the sector.
According to him, the exchange rate losses will require additional working capital to shore up cash difference between N320 and N197.
“Many of our members are in the middle of factory projects execution, but the viability of such projects is now questionable due to recent forex (foreign exchange) developments,’’ he said.
Odunayo warned that if loans were not reversed to pre-flexible exchange rate at which the transactions were contracted, losses to manufacturers would be colossal.
He urged the government to remove pre-approved form M from the flexible forex market and deal with it through a structured sovereign loan.
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