‘Local raw materials sourcing to stimulate real sector growth’
Notwithstanding improved access to foreign exchange for importation of raw materials, operators in the real sector have been urged to further explore local sourcing to mitigate the impact of forex on their businesses in 2017.
Though the nation’s real sector operators were able to access about $2.53 billion at the interbank market in a period of four months, raw material sourcing averaged 46.3 per cent at the end of the first half of 2016, with analysis of activities in the remaining part of the year showing a further effort to increase local sourcing due to scarce foreign exchange.
During the period, the increased intervention helped to reduce backlog of demand among manufacturing companies for raw materials, as well as keep some pharmaceuticals in operations.
The Central Bank of Nigeria (CBN), through its special intervention programme, ensured a three-month access to forex for the operators amounting to $1.53 billion and ended the year with a $1 billion sale on the Forwards Market.
The $1 billion on the forward market sale in December, which is the largest special auction since the inauguration of the flexible exchange rate policy in June last year, was aimed at clearing a backlog of dollar obligations in key economic sectors.
Before the intervention, banks were told to prioritise airlines, manufacturing firms, petroleum products importers and agriculture sectors, in their requests and disbursements.
Among the sectoral groups, the food, beverage and tobacco sector, non-metallic mineral products and basic metal, iron and steel, fabricated metal sector ranked top in sourcing raw materials locally.
The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele had noted that the demand for forex has reached an all-time high of over $1.2 billion weekly or $4.8 billion monthly, noting that when he assumed office in June 2014, the nation’s forex reserves had fallen from an high of $62 billion in 2008 to only $37 billion.
“Rather than build on the one-time burgeoning base of agricultural production and manufacturing we had, we invested less in power, infrastructure, education, and health. As our schools began to dilapidate and teachers went on incessant strikes, we sent our children overseas even for primary school education. As doctors preferred to practice in the U.S and UK and hospitals lacked even hand gloves, we embarked on a medical exodus abroad even for basic diagnosis.
“As our manufacturing companies started closing especially for lack of power, we gladly substituted them with seemingly cheap imports while inadvertently exporting jobs and importing poverty to our country.
“The size of our FX reserves and the value of the Naira critically depend on our lifestyles and on the value and types of imports we allow into this country. Imagine for a minute that 90 per cent of the things you buy in Shoprite stores across the country are imported: the eggs and avocado peers are from South Africa, the meat is from Zambia, and Moet Champagne is from France.
“What then can we do to remedy this situation? Is it our inflexible destiny or collective decision to rely so much on other countries for her basic needs? What kind of future do we really want as a people? I do not think that one policy decision from any arm or agency of government can answer all these questions”, he added.
President of Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, explained that the sector is passing through difficult times and would require manufacturers to be creative to remain in business, while seeking incentives from the Federal Government to encourage local production.
He said the resource based industrialisation policy which involves the utilization of the nation’s abundant natural resources in producing products that the country needs would not come without a cost, urging manufacturers to retool existing technologies and production processes.
He pointed out that government has a lot to do to make the new orientation of a resource-based industrialisation policy successful, advising that government should create attractive incentives for investors who would engage in the processing of the abundant agricultural and mineral resources from primary produce to secondary or intermediate products.
“This would go a long way in attracting potential and current manufacturers into the use of local raw material inputs. In the meantime, government has to look for viable options of making forex available for manufacturers as we must remain in production,” he added.