• Currency crisis hinders raw material procurement and causes financial problems – NECA
•Small businesses decry impending closures, lawmakers accuse airlines, schools of asking for dollars
The Naira further depreciated on Tuesday, exchanging between $1,005/$1,025/$1,025/$ against the dollar in the parallel market.
Small business owners, the Employers Council of Nigeria and manufacturers who spoke to Punch expressed concern about the decline in the value of the naira, warning that it would lead to factory closures and subsequent job losses.
The naira has been on a downward trend since the Central Bank of Nigeria allowed the currency to float freely against the dollar and other world currencies in June.
The decline has left manufacturers struggling even more to obtain raw materials, with more companies planning to lay off more workers or close their doors.
Due to the decline in the value of the Naira, manufacturers are facing cuts in production, employment and imports of raw materials.
Naira reached 1,025/$
Exchange bureau operators who spoke to Punch said naira was exchanged for $1,005 to $1,025 to the dollar in the parallel market on Tuesday.
Speaking to one of our correspondents, Yusuf Kareem, a BDC operator in Lagos, said: Money is still scarce. The value of the naira is declining. ”
Musa Yunus, another BDC operator in Lagos, said, “Two weeks ago the naira was trading at 980/$ and now it is at 1,020/$. I don’t know what’s going to happen.”
Another BDC operator in Lagos, who simply identified himself as Idris, said: “Right now I don’t know if you can buy up to $1,000 from me because it’s not available.” We buy him at a rate of 1,000/$, but I sell him at a rate of 1,015/$. ”
“We sell at 1,010 naira to the dollar and buy at the rate of 1,000 naira,” said Babangida, another BDC in Lagos.
However, the Deputy Governor of Money Exchange Operators Association, Zone 4, Use, Abuja, Mr Muhammad Nera, said the rate on Tuesday ended at 1,015/$.
He said, “At the end of the transaction, I was buying at N1,010/$ and selling at N1,015/$. But I don’t know what the interest rate will be tomorrow (today).”
At the Investors & Exporters foreign exchange window, the Naira fell slightly from Monday’s 765.02/$ to close at 765.83/$ on Tuesday, according to FMDQ’s official statistics. It recorded total sales of $60.3 million on the official market.
Small businesses and manufacturers lament
The Chairman of the South West Nigeria Small and Medium Enterprises Association, Dr. Solomon Aderoju, in an interview with one of our correspondents, said the currency crisis would hit many industries.
He said production costs have increased due to the fall in the value of the naira.
“Even if small and medium-sized enterprises produce products, they won’t be able to sell them because their purchasing power will decline and people won’t buy,” he said.
“Some of us who have borrowed money from banks will not be able to meet their obligations. It is a compound problem. They will not be able to repay the loan. Some of our companies will import raw materials from other countries. This will also increase the cost of raw materials. These problems will put small businesses out of business. As I speak, many companies are closing shop due to these problems. Masu.”
He added that companies are also grappling with other challenges, such as rising fuel costs.
“This is not the only issue. There are other issues we are fighting too, such as the cost of fuel and the lack of marketability of our products. Foreign products compete with local products in Nigeria. Among these products Some of them are not as high quality as ours, and there is no way to benchmark them because they are cheap.
“And that is why we are concerned about the African Continental Free Trade Agreement that former President Buhari signed. The fact that we are now trading without borders means that other countries It means we can come here and sell products that are cheaper than what we produce at home,” he added.
Mr. Nii Yusuf, Chairman of the Nigeria Economic Summit Group, also pointed out some serious implications of the decline in the value of the Naira.
He said, “This will lead to an increase in import inflation as the prices of imported goods will rise and at the same time export earnings in naira of companies exporting goods and services will also increase.”
“If there are more exports than imports, the net effect will be positive. Higher import prices may also help dampen demand for some imports in the medium term.”
Also speaking, the Executive Director of the Employers Council of Nigeria, Mr. Adewale Oyelinde, said the main focus should be on how the government addresses challenges related to foreign exchange.
“Currently, currency conditions are creating significant obstacles to the procurement of critical materials and disrupting our financial forecasts,” Oyerinde said. Escalating foreign exchange issues are hindering progress, and until they are resolved our efforts cannot get off the ground. ”
However, Nigeria Economic Summit Group facilitator Dr. Ikenna Nwaosu said this would result in the closure of many businesses.
“Some companies will go out of business,” he said. “First, if the cost of production or raw materials exceeds a certain point, and the market cannot accept a certain price to sell the final product, the final will be in the red. So many people will have to stop producing, and that means there will be job losses, probably temporary ones. Because we might be shut down for a while. There could be a snowball effect. The federal government has closed all special foreign exchange windows, which would lead to closures of businesses. Finally, there is no special window for students going abroad. Therefore, it has an impact on the education sector as well. Previously, we used to buy through special windows, but now we buy on the open market.”
Mr. Nwaosu lamented that the continued increase in the dollar rate will lead to an increase in oil prices due to purchasing power.
He said, “Then the first thing you will be asked is that the price of petrol will go up because of the purchase cost. Secondly, the exchange rate on which the Nigerian Customs Service calculates the import charges will go up. It will rise again, and when that happens, import duties will rise, and at the end of the day, the price increase will be passed on to the final consumer. Inflation will also accelerate, and food prices will rise due to higher fuel prices and higher import duties. And that means that negotiations on the minimum wage will become even tougher. The Nigerian Labor Congress has set the minimum wage at 200,000 naira. What will happen if the dollar continues as it is? The main impact on rates. I recommend that there should be direct intervention from the CBN. The President’s directive that we should hand it over to the CBN and let market intervention take over is not working for us. . And let me tell you, a war in the Middle East will make our dollar stronger even more.”
“The system is already paralyzed, especially the cargo transport sector, which includes ports, borders and airports,” said Pius Ujubuonu, president of the Nigeria Association of Licensed Customs Brokers. The amount we used to pay him, for example, 2 million naira, has gone up to 7 million naira, which is not healthy. It kills business. If the current situation continues, it is unclear whether imports will stop in the coming months, and many cargoes will be abandoned. ”
Sales reps plan a survey
The House of Representatives on Tuesday directed the Banking Regulatory Commission to investigate the use of the dollar and other foreign currencies as legal tender in Nigeria’s domestic transactions.
It also requires the CBN to carry out monetary policy adjustments to stabilize the currency, address speculative activities in the foreign exchange market, and increase the withdrawal limit for naira to reduce pressure on dollar and other He called for addressing the impact of the depreciation of the naira on the currency. in dollars and other foreign currencies.
It also called on the federal government to develop policies and structural reforms to reduce corruption and promote economic diversification within the national economy.
The resolution to investigate the use of the dollar and other foreign currencies as legal tender for domestic transactions in Nigeria was a sequel to a motion tabled by Mr. Ismail Dabo (APC, Bauchi) during Tuesday’s plenary session.
Moving the motion, the lawmaker said that since the declaration of unity by President Bola Tinubu, the naira has continued to depreciate against major currencies due to lack of foreign exchange.
Dabo said the country’s inability to earn enough foreign exchange means the naira could depreciate further, triggering crippling inflation. He noted that oil theft had further reduced the country’s ability to earn foreign exchange.
“Although the President’s intention is to allow market forces to determine the value of the naira, the alarming exchange rate has affected the Nigerian economy, causing untold hardship due to increased dollar demand and dollar scarcity. .
“About 90 percent of Nigeria’s total export earnings come from oil, which is the mainstay of the country’s economy, but fluctuations in oil prices around the world have a significant impact on the country’s foreign exchange market. “It explains why it continues to fall,” he said.
Dabo added: “The depreciation and depreciation of the naira could increase Nigeria’s external debt servicing costs and reduce government spending in critical sectors such as health and education.”
Mr. Ademolin Kwe (APC, Lagos), who contributed to the motion, said the CBN needed to tackle the depreciation of the naira while curbing the use of the dollar in the country.
He said that while most international airlines require dollars to pay for airfare, real estate companies also require dollars as a means of payment.
“Today, if you want to fly on a foreign airline, you are charged dollars. In some high-end markets, especially real estate, you are charged dollars. This is a crime,” Que said.
Also expressing support for the motion, Mr. Bamidele Salam (PDP, Osun) pointed out that the new management of the CBN has not provided any policy direction since its confirmation in the Senate.
“The appointment of the management team has since been confirmed, but we have not heard any policy statement from him. The market is reacting to the policy statement,” he said.
The House also called on the federal government to boost exports and reduce imports by increasing foreign investors’ confidence in its fiscal and monetary policies.
The Act mandated the Banking Regulatory Commission, the National Security and Intelligence Commission to engage with the Central Bank of Nigeria for the purpose of initiating a compliance strategy.