Dollar Crisis Won’t Make Nigerian Products Competitive, Says Manufacturer

The Managing Director of FAE Ltd, Funlayo Bakare-Okeowo, has said that Nigeria’s foreign exchange scarcity and power crisis have pushed the prices of goods so high that it will struggle to sell them at competitive prices in other African countries.

The MD of the Lagos-based manufacturer of envelopes lamented that high prices will be the biggest challenge for Nigerian manufactures in the African Continental Free Trade Area (AfCFTA).

The illiquidity and access to foreign exchange have frustrated the Nigerian economy and investors even in the aviation sector are planning to exit the country.

Manufactures get less than 30 per cent of the forex they need for operations from the CBN and resort to the black market where they source dollar at about N700 for a dollar.

In Bakare-Okeowo’s company, she said on Arise Tv on Tuesday that “90 per cent of papers” used are imported thereby jerking up the cost of production due to the foreign exchange woes.

She said, “The Nigerian manufacturing sector is healthy and fragile at the same time. When I say healthy, yes, it is a big market, the market is there and when it comes to being fragile, there are lots of problems that we are facing in the manufacturing sector.

“It is a big problem (foreign exchange). We are surviving with the combination of the CBN window and also the black market because you need to meet deadlines of payment. For integrity sake, you need to build integrity in the market and that is why you must pay as at when due. And you have to rely back on the black market to cover up.”

Nigeria became the 34th African country to ratify the AfCFTA on December 5, 2020, after president Muhammadu Buhari in July 2019 had signed the agreement establishing the bloc.

The bloc is a $3.4trn economy and Africa’s most populous nation hopes the AfCFTA would usher in a new era for manufacturers.

Bakare-Okeowo said, “The disparity in the rate is a serious problem in the sense that the market too, they are not even ready to absorb this increment. The government just has to sort this gap out. Making it a single exchange rate and apart from that, if they now make it a single exchange rate of N700, we don’t want that. We want it to be reasonable.

“Moreover, now that we are going into AfCFTA, we have now other African countries that are competing with us. Yes. we are a giant of Africa, but we need to stay at that level being the giant or else, other ECOWAS countries will sell cheaper than Nigeria.

“I’m encouraged, but too discouraged by the AfCFTA because of the pricing. Are we able to compete? We can compete quality wise, because we do fantastic and quality products across the Nigerian manufacturing sector. But when it comes to being competitive in the market, we are not there, because the cost of manufacturing is getting higher every day.”

According to her, the cost of diesel and power is “causing a serious headache” for manufacturers as it is a factor driving high production cost.

She added, “The power is not there for crying out loud. Apart from that, look at the gap of diesel from N300 to now N700 or N800. It is almost three times the price and everybody wants to run a business profitably.

“A lot of business both corporate and individual, are not ready to accept that cost. There is no room to pass these costs and that is why you see a lot of factories closing down every day. There is no way we can pass all the cost to the consumers and it will get to a stage that customers will stop buying. When they stop buying, the factory is closed down.”