CBN policy: Massive job cuts looms in manufacturing sector

The federal government’s drive to create jobs for millions of unemployed Nigerians may suffer a huge set back following the Central Bank of Nigeria’s (CBN) recent directive excluding some essential raw materials from the list of items valid for forex in the Nigerian Foreign Exchange (forex) markets. According to business analysts, this move will in no time lead to the lay-off of over 40, 000 Nigerians who work in the manufacturing sector.

President Buhari

It will be recalled that the CBN recently excluded some essential raw materials from the list of items valid for forex in the forex markets. According to the CBN, the policy is intended to sustain the stability of the foreign exchange market, “resuscitate local manufacturing” and change the structure of the economy.

Reacting on the looming danger as a result of the policy, president, Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, said most manufacturers might be forced to shut down and move their operations to neighbouring countries for business activities due to their inability to access foreign exchange for raw materials and other critical inputs. This, he believes, would lead to massive job loss in the manufacturing sector.

“There is pressure on manufacturers to lay off their workforce before the end of the year. Most manufacturers affected have been unable to produce lately due to lack of foreign exchange, delays in the processing of Form ‘M’ to import raw materials in order to meet demands and this has adversely led to loss of market share.

With this continuing, massive job loss is anticipated in no time from now,” he said.

For example, the manufacturing sector using Crude Palm oil as raw material in their daily production of goods like biscuits, noodles, cosmetics among others will be affected as the locally produced and supplied raw material cannot meet the required demand for production.

According to IndexMundi, a data portal, the domestic palm oil produced totalled 930,000 MT in 2014, while the consumption of palm oil in Nigeria amounts to 2.0 million MT per annum in exclusion of the manufacturing sector.

The official figures states that the shortage in oil palm industry is estimated to be around 1.07 million MT annually. This poses a very precarious situation for the manufacturing sector that depends largely on CPO as a major source of raw material. If this shortage is not filled with importation of high quality food grade palm oil, the economy will lose further investment in the manufacturing sector as companies would shut down and staff laid-off.

Among the 41 items marked as ‘Not Fit for Forex’ also include: rice, cement, margarine, meat and processed meat products, vegetables and processed vegetable products, Poultry chicken, eggs, turkey, Private airplanes/jets, Indian incense, Tinned fish in sauce(Geisha)/sardines, Cold rolled steel sheets, Galvanized steel sheets, Roofing sheets, Wheelbarrows, Head pans, Metal boxes among others.

The resultant effect of this is an outrageous increase in the cost of these items locally for consumers and ultimately inflation, which is largely due to inability to access foreign exchange.

The LCCI president further lamented that, for an economy that is largely driven by the private investors, the government should source for alternative means rather than resorting to a total exclusion of certain items from the foreign exchange market.He however urged the FG to prevail on the CBN to review the policy in the interest of the workforce, the private sector and the economy at large.

Source: Vanguard