FX crisis: Made-in-Nigeria products fall 27% to N7.4tn

The monetary value of goods produced by Nigerian manufacturers has nosedived by 27 per cent between 2017 and 2021.

According to a five-year data obtained from the Manufacturers Association of Nigeria and analysed by THE Punch, N9.43 trillion worth of goods were manufactured in 2017, but this took a downward plunge to N7.39 trillion by the end of 2021.

The decline is deemed significant considering a 19 per cent naira devaluation over the period and the Nigerian government’s pledge to bolster the sector to diversify the flagging economy.

“This is a major reduction,” said the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf.

“The major causes of this situation are challenges of foreign exchange, energy, inflation and China imports,” he said.

“The foreign exchange situation has worsened, and most of them are heavily dependent on imported raw materials. General inflation has affected aggregate demand for their products, forcing some of them out of business,” Yusuf, who is a former director-general of the Lagos Chamber of Commerce and Industry, said.

He explained that the energy crisis had been going on for over five years and the influx of cheap products from China had not made life easy for local manufacturers.

Nigeria is facing an acute currency crisis which has sent more than 20 companies out of business. The inter-bank exchange rate of the dollar was N360 in 2017, but the now Nigerian Autonomous Foreign Exchange Rate has swung from N415 to N430 in the last one year. The rate was N427 on Tuesday, July 26.

The parallel market where manufacturers scramble for forex has hovered between N600 and N660 in the last four months, plunging the economy into further crisis.

President, Association of Bureaux de Change Operators of Nigeria, Alhaji Aminu Gwadabe, said naira was hard hit by a combination of several factors, including currency substitution, politics and exclusion of BDCs from participating in the FX market.

THE Punch gathered that the price of diesel had risen by over 200 per cent in less than nine months. Gas, usually purchased with dollars, has had its price elevated since Russia’s invasion of Ukraine early in the year.

Manufacturers spent N425 billion on alternative energy sources such as gas, low-pour fuel oil, diesel, and petrol between 2017 and 2021.

The Director-General of MAN, Segun Ajayi-Kadir, said with forex and energy crises raging, Africa’s most populous nation could lose its manufacturing sector without a comprehensive policy.

“The manufacturing sector in Nigeria employs over 5 million workers, directly and indirectly with an 8.46% contribution to Gross Domestic Product. The sector also dominates export trade in the West African region, generates foreign exchange, contributes substantially to revenue of the Government and human capital development in Nigeria.

“It is therefore imperative that manufacturing be given priority and safeguarded against steep deadline. This should be backed with a comprehensive and integrated support system during times of crisis. Its performance should be enhanced through a pro-manufacturing policy that will encourage scale and lower unit cost of production,” he said.