Naira Crisis: Manufacturers’ commodity imports have reached 8, , .naira. The results show that manufacturers have spent at least $7.9 trillion on commodity imports over the past three years.
According to manufacturers, the high bill for importing raw materials results from the decision of traders to buy foreign currency on the parallel market at high exchange rates, due to the lack of foreign currency on the official market.
An analysis of the National Statistics Office’s foreign trade reports also revealed that Nigeria was only able to export N1.77 trillion in commodities during this period, creating a trade deficit of N6.1T , Factsheet shows manufacturers imported $570.6 billion worth of raw materials in Q2 2020.
This number rose to 710.2 billion naira in the third quarter of the same year and then to 715 billion naira.7 billion in the fourth quarter.
Another data collection showed that raw material imports by manufacturers amounted to 2.9 trillion naira in 2021. That number dropped to 2.4 trillion naira in 2022, and 555.4 billion naira worth of commodities were recorded in the first quarter of 2023. imported.
The main commodities imported during this period included cane sugar from Brazil, dairy products from Ireland, perfume mixes from Ireland and Swaziland and lubricating oils from the Netherlands. , Local sourcing of raw materials in manufacturing averaged 52.8 percent, up from 51.5 percent in 2021, according to the Nigerian Manufacturers Association’s Biennial Economic Report.
MAN said the increase in the use of local commodities was due to the increasing difficulty in sourcing commodities in the forex market, which has forced producers to look for more commodities despite the huge costs involved. The report states, among other things:
“It is therefore important that the government reassess its role in local development and resource production in terms of financing.”
“The lack of local API production is having devastating consequences for pharmaceutical production, especially in the current situation of acute tightness in the foreign exchange market.”
In an exclusive conversation, MAN CEO Segun Ajayi-Kadir said that managing the volatility of the foreign exchange market is of decisive importance for industrial production.
According to him, the lack of foreign exchange among producers leads to high costs for imported raw materials and, as a result, high production costs.
This will push up commodity prices, he said. He said, “But the reality is that even in this sector, the government does not have the currency to meet the demands of the economy.”
Oil revenues are the main source of foreign exchange flows into the country and Nigeria has not even been able to meet OPEC’s export quota for the country.
“The situation is that the government has limited access to the foreign exchange market for the economy and recent exchange rate volatility has complicated supply-side constraints.
In his recommendation, Ajayi-Kadir called on the government to establish a specific rate for calculating import duties on inputs such as raw materials, machinery and spare parts that are not available locally.
Former MAN Chairman Mansur Ahmed, speaking at the Cross River State Branch/Akwa Ibom AGM, said farmers can collect only 5% of their cash needs from banks. For his part, Gabriel Idahosa, Vice President of the Lagos Chamber of Commerce and Industry, cited the failure of Nigeria’s import substitution strategy as the cause of the country’s over-reliance on imported commodities. He added that importing raw materials for manufacturing purposes would not be particularly harmful to the local economy if Nigeria could also export raw materials to other countries to offset the foreign exchange spent on imports.
He said, “Many companies just import raw materials. In some areas we can’t do the reintegration because we don’t have the resources or the technology to do it.
“If you build a car in Nigeria, you can’t go back to building engines or even making tires. They import pretty much most of the components and just put them together.”
