N895/$: Manufacturers Advise FG on How Changes in BDC Operations Will Boost Industry Performance

N895/$: Manufacturers Advise FG on How Changes in BDC Operations Will Boost Industry Performance

  • The Manufacturers Association of Nigeria has advised the government on how to solve the FX issue through the BDCs
  • This followed a report that the naira hit its lowest against the US dollar in the official foreign exchange market in the new year
  • The manufacturers are also of the opinion that the cost savings from fuel subsidy be directed to production-focused policies

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Manufacturers Association of Nigeria (MAN) has charged the federal government with setting lower and upper bounds in the management of foreign exchange rates.

This, it said, is part of efforts to improve the performance of the manufacturing sector in particular and the economy overall over the next year.

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Manufacturers advises FG on how changes in BDC structure will boost industry performance
Manufacturers want the government to reduce the number of BDCs operating in the country. Photo Credit: Vithun Khamsong, Witthaya Prasongsin
Source: Getty Images

In addition, they want the government to reduce the number of Bureau De Change operators operating in the country.

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Segun Ajayi-Kadir, director general of MAN, made the recommendations while responding to questions on its 2024 outlook, according to a Vanguard report.

The recommendation comes as Nigerian currency started the new year at its lowest level against the US dollar in the official foreign exchange market, raising concerns for manufacturers.

Legit.ng reported that the naira dropped to its lowest level in the foreign exchange market, continuing its weak performance into Wednesday, January 3, 2023, to trade at N1,035.12/$.

The naira, however, bounced back to gain on Thursday, January 5, to close at N895.23/$, according to FMDQ data.

More recommendations for the government

Ajayi-Kadir suggested that the government should prioritise forex and credit allocation to manufacturers and the patronage of made-in-Nigeria products.

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He stated:

“The government should manage the floating exchange rate system within an acceptable lower and upper bound, pending the actualization of net-exporting economy aspirations; Prioritise forex and credit allocation to the manufacturers and reduce the number of BDCs into large and well-established operators to curb their excesses and untoward operations through effective management and supervision.”

The MAN DG also recommended that the government implement a number of production-focused policies with the money it saves from the fuel subsidy.

He further stated that more structural measures should be implemented to counteract the unique inflationary pressures brought on by energy, transportation costs, and insecurity.

To increase electricity production and encourage energy efficiency, it also wants the government to restructure the power industry and provide incentives for investments in renewable energy sources.

He added:

“Give priority to patronage of made-in-Nigeria product in all its purchases and for all government contracts and projects, and mandatorily upscale patronage of made-in-Nigeria products by deliberately reducing the excessive reliance of the country on imported products.

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"The three tiers of government should enforce the implementation of the Executive Order 003 for their ministries, departments and agencies.
“Encourage local sourcing of raw materials through comprehensive and integrated incentives to address the challenges of low productivity and imported inflation; and Encourage sub-national governments and private investors to leverage the opportunities provided by the Electricity Act 2023 to improve energy security in Nigeria.”

In addition, he said that the Central Bank of Nigeria (CBN) ought to create a long-term structure for directing credit interventions—apart from direct interventions—into the industrial sector.

To expedite the realisation of a $1 trillion economy, MAN also wants the government to organise commercial banks to knowingly offer long-term loans with single-digit interest rates to the manufacturing sector.

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Legit.ng reported that the Association of Bureau de Change Operators of Nigeria (ABCON) asked the Central Bank of Nigeria to sell forex to them to improve dollar liquidity.

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ABCON President Aminu Gwadebe, in a telephone interview with Legit.ng, said that such a decision would help ease the pressure on the naira.

He stressed that BDCs can go a long way in helping the CBN monetary policies and efforts to create stability in the forex market.

Source: Legit.ng

Zainab Iwayemi avatar

Zainab Iwayemi (Business Editor) Zainab Iwayemi is a business journalist with over 5 years experience reporting activities in the stock market, tech, insurance, banking, and oil and gas sectors. She holds a Bachelor of Science (B.sc) degree in Sociology from the University of Ilorin, Kwara State. Before Legit.ng, she worked as a financial analyst at Nairametrics where she was rewarded for outstanding performance. She can be reached via zainab.iwayemi@corp.legit.ng

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