Manufacturers To FG: We Want Preferential FX Allocation

About 24 hours after the Nigerian Employers’ Consultative Association (NECA), advised the federal government to review its floating exchange rate regime in order to save the country from monetary collapse, the Manufacturers Association of Nigeria (MAN), on Wednesday has cried out over the fate of the naira, saying for Nigeria to boost its production base, priority FX allocation must be given to the sector.

MAN, which claimed that a 60 per cent increase in the customs duty in the last three weeks was unsustainable, also disclosed that less than 20% of FX requirement was available in the banks.

At the same time, concerns have continued to mount over crypto speculations, especially as the naira depreciated further at the parallel market, closing in Wednesday at N1920/$1.

It, however, gained marginally on the official FX market to close at N1,542.58/$, compared to N1,551.24/$1 it closed on Tuesday.

The daily turnover on the official FX market was $172.14 million, which was an increase by 46.72 per cent compared to $117.32 million recorded on Tuesday.

Another major risks to the Naira in the country’s unregulated P2P crypto market, where a manipulative tactic known as spoofing pose major threats to the value of the local currency.

This involves individuals or groups placing large buy or sell orders on the platform without intending to execute them.

This creates a false illusion of high demand or abundance, influencing others to buy or sell at manipulated prices.

The deceptive practice, often used in conjunction with pump-and-dump schemes, preys on unsuspecting investors, leaving them with significant financial losses and as in the case of Naira, has resulted in creating Fear of Missing Out (FOMO) and price depreciation and devaluation.

Analysts have said the potential of the crypto industry cannot be ignored, arguing that the  growth must be adequately regulated.

The current rate of the cryptocurrency (USDT) on the Binance exchange was N1863.9 as at yesterday. This pair showed an increase in the price of 0% for the last 24 hours.

Thus, the volatility of the cryptocurrency to naira since yesterday was 9.95%. The pair was traded on Binance with. 24-hour volume of N2,663,857,956.

These came as the Economic and Financial Crimes Commission (EFCC), yesterday, raided and arrested some Bureau De Change (BDC) FX traders as part the renewed efforts to stabilise the naira exchange rate.

But the  Association of Bureau De Change Operators of Nigeria (ABCON), has attributed the current foreign exchange volatility to largely forces of demand and supply amid the liquidity crisis in the segment.

NECA had warned that, “no heavily import-dependent nation such as Nigeria allows its currency to swim in the murky waters and vagaries of the invisible hand; it has to be transparently guided.”

NECA, which stated this in a press statement titled, “Government Should Eschew Pride to Address the Current High and Rising Unemployment,” in which it commented on the National Bureau of Statistics’ (NBS) 3rd quarter of 2023 unemployment report, blamed the escalating unemployment rate in the country on federal government’s policies that didnot support the operations of the private sector.

Director General of NECA, Mr. Adewale-Smatt Oyerinde, said: “The rise in unemployment rate by 80 points during the quarter could be a presage of looming unemployment crisis in the country, particularly with the current harsh economic condition.

“Therefore, to circumvent such crisis, it is important to question the causes of the current spike in unemployment rate and decipher solutions to mitigate further degeneration in the index.”

Oyerinde added that since, “the beginning of 2023, government has been implementing policies that do not support the operations of the private sector, which incidentally are the highest employer in the economy.”

According to him, “Some of the policies that are inimical to business included the currency redesign policy of the CBN, the removal of fuel subsidy, the floating of the foreign exchange, increase in various taxes including excise duties and most recently, upward review of the foreign exchange rate for clearing of imports by the Nigeria Custom Service and banning of alcoholic beverage in sachet and pet bottle of less than 200m.

“These measures are swiftly dragging most private businesses to the brink of collapse,”  noting that as the economy stood, “there are many more companies to join the exit train or close shop if the current harsh operating environment persists.”

However, MAN, which seemed to be feeling the pang of the economy more, insisted that for Nigeria to boost its production base, priority FX allocation must be given to the sector, maintaining that a 60 per cent increase in the customs duty in the last three weeks was unsustainable.

Director General of MAN, Segun Ajayi-Kadir, who spoke on Channels Television, stated that the current situation wherein manufacturers could not plan sustainably due to the volatility of the dollar and the incessant hike in customs duty did not augur well for a nation that aspired to industrialise.

Ajayi-Kadir argued that historically, Nigeria had not intentionally promoted domestic production, insisting that there was no way Nigeria could control the exchange rate, without a strong local production base.

If the current situation continued, the MAN chief stated that the, “naira will continue to pursue” the dollar and will never catch up. Our domestic production is weak. We have not taken adequate measures to be able to promote domestic production.

“No matter what policies you adopt, if what you need is available in dollar, if you rely for your daily living on what is imported and sold in dollar, there is no magic that will allow you to be able to have an exchange rate that is positive.

“Many other theories may arise like roundtripping, hedging against the naira and so on and so forth, but if there is no high demand, the prices will not rise. So, it is just for government to make a strategic choice to deliberately promote domestic production of the things that will normally require dollar,” he argued.

According to him, politics and emotions aside, the authorities should quickly move to find appropriate solutions to the problems, warning that the “free fall” of the naira and the galloping cost of foreign exchange if not addressed, would be “potentially very explosive”.

Ajayi-Kadir, therefore, called on the government to ensure the allocation of dollars to the manufacturing sector as a priority, explaining that the outcomes of such decisions can always be tracked.

“For instance, there are some machines and spare parts that are not available locally. So, they have to be imported into the country. We’ve never had adequate supply of forex from the banks.

“And we have made spirited attempts to engage government in such a way that you prioritise allocation to the sector, because it is one sector that has the capacity to even help you to generate the dollars that you need.

“So, if you give a manufacturer adequate FX that he needs to import his raw materials, you can easily trace the process completely from raising the form ‘m’ to when the product is cleared at the port, you can completely understand what he’s doing with the FX that he has got from the official market.

“If he’s able to bring it in, he’s going to produce at a cost that is lower than it should have been. And then he will be able to sell. That means he will be able to help you to bring down inflation and help you to generate more jobs.

“He is going to pay more taxes, he is going to provide more business for people who do wholesale or retail and households’ needs will be met. We are going to expand the content of our local manufacturing,” he pointed out.

Describing the rate at which manufacturers’ imports duties were calculated as worrisome, the MAN DG stated that the current situation was not sustainable.

“In the last three weeks, we have seen the 60 per cent increase in the calculation of our import duty. So now, it is being done at N1,600, I think it will go to N1700,” he lamented, whereas, according to him, the importer mighthave a conversion rate of N950 in mind,” he added.

EFCC Arrest BDC Operators in Kano, Ibadan

No fewer than seven forex traders at the popular FX  market popularly known as WAPA, were arrested by the operatives of the EFCC in Kano on Wednesday.

Confirming the operation to journalists, the chairman of the Market Sani Wada, dispelled the rumors making the round that his members were hoarding dollars in the market which has more than 200 licenced FX traders.

“It was a joint taskforce that raided the market in search of those who are hoarding dollars and causing the depreciation of in the value of Naira.

“They have arrested no fewer than seven individuals, some of them are our bonafide members and others are only passersby. All of them were arrested randomly and none of them were arrested carrying dollar.

“Although we are yet to meet the task force, they told us they are going to screen them to confirm their identities,” he said.

Wada further explained that “When they struck, they hindered activities in the market as people closed down their offices, however, things have since returned to normal.

The Chairman also urged the federal government to adopt whistleblowing tactics to track down those engaged in hoarding dollars in the country.

Also at Ibadan, Oyo State, the EFCC raided offices of some BDC operators.

It was learnt that the anti-graft agency during the raid, arrested no fewer than 12 operators, with shops in the Sabo area, a community in Ibadan North local government area dominated by Northerners.

A source said, “They arrested 12 people. They came around 10-11 am.”

While confirming the development, the Chairman of the Bureau de change operators, Alhaji Aminu Ibrahim Babankande, said he was still investigating the number of people arrested.

He said, “I don’t know the number now. We are still investigating. We are ready to cooperate with the government.”

ABCON Blames FX Volatility on Market Forces, Liquidity Challenges

Association of Bureau De Change Operators of Nigeria (ABCON), yesterday attributed the current foreign exchange volatility to largely forces of demand and supply amid the liquidity crisis in the segment.

ABCON President, Mr. Aminu Gwadabe, said amid limited FX supply, there had been a high demand for the greenback, leading to Naira’s persistent weakness in recent times.

Speaking to journalists via conference, he backed the current clamp down on FX traders whom he claimed were street traders without offices – and who are not licensed by the Central Bank of Nigeria (CBN) to operate.

He emphasised that ABCON remained a lawful and regulated entity and would not engage in street activities.

He revealed that the association had concluded plans to automate FX trading activities within three weeks, adding that it is currently awaiting a “No Objection” certificate from the CBN to kick-off.

He said the move would revolutionise the entire retail exchange market, adding that the association was opposed to any form of street trading and “we support any actions that will remove street trading”.

He said, “Street trading affects me also, I have an office but my clients cannot come to my office because of the menace of street traders. We support any action that will discourage the menace.

“I want to congratulate the government, and the CBN if it can be sanitized it, and we support any sanitisation that can remove street trading.

“As we’ve all seen, there is no place on earth that you can go and see rampant street trading of FX, so we’re in support of the clamp down.”

He also said that the frequent stigmatisation and criminalisation of the Bureau de Change segment was largely due to a lack of understanding, adding that “even with the security agencies, there is lack of clarification between who is licensed and who is not”.

Gwadabe specifically hailed the new management of the central bank for creating a rare channel of constructive engagement with ABCON within the past two and a half years.

He said, “This is the first time we have seen engagement and a listening CBN.”

The ABCON president further called on all licensed Bureau De’Change Operators to be cautious, and careful and operate within their offices.

He said, “You are licensed by CBN, and as a licensed Bureau De’Change, you must operate within the ambit of the regulation most especially in your office, don’t do it on the streets.”

Emmanuel Addeh, James Emejo, Dike Onwuamaeze, Nume Ekeghe, Ahmad Sorondinki and Kemi Olaitan 

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