The Central Bank of Nigeria (CBN) is set to compound the woes of manufacturers with the creation of a special foreign exchange (FX) window for them, according to analysts at United Capital in a note to clients.
The research firm adds that the apex bank inadvertently introduces another confusion to the existing multiple exchange rate system that continues to deter foreign investor interest in the Nigerian economy.
“Rather than increasing the existing number of FX windows, we recommend unifying existing FX windows and introducing conscious efforts to increase Nigeria’s ability to earn FX via improved value offerings to international markets,’’ said analysts at the research house.
They advise the CBN to work with key stakeholders to actualise the RT200 FX policy that would provide a long lasting solution to the foreign exchange crisis that is contributing to rising inflation.
Last week, during the Manufacturers Association of Nigeria Export Promotion Group’s Annual General Conference in Lagos, the Minister of Trade and Investment, Niyi Adebayo, hinted that the government will begin steps towards creating a separate and special foreign exchange window for exporting manufacturers.
The country’s foreign exchange woes that began in 2015 (brought on by the precipitous drop in crude oil price of mid-2014) was worsened by the coronavirus pandemic and global geopolitical tensions.
Of course, manufacturers are the worst hit by this crunch as they find it difficult to import raw materials and equipment to meet production and some have shrunk their workforce in order for them to stay afloat.
Rising inflation across the globe, a strong dollar, and incessant devaluation of the Naira have balloon manufactures’ cost of production.
The implications of rising input cost is that it erodes profitability, which leads to deterioration in cash flows and technical insolvency. It results in a significant deprecation in share price and weak valuation as investors dump shares over uncertainty of dividend payment.
Nigeria’s Inflation hit a new high of 20.77 percent in September as food supply, foreign exchange crisis, and increases in import costs worsened, according to a recent data by the National Bureau of Statistics (NBS).