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The Manufacturers Association of Nigeria (MAN) has said the inability  of the Central Bank of Nigeria (CBN) to honour  the lingering $2.4billion worth of forward contracts remains a great threat to the nation’s manufacturing sector, since businesses in the sector now face the grim prospects of either shutting down or downsizing their operations, due to the financial disruptions the development had caused their operations.

 

 

The apex bank recently said it would not be able to honour the legally-binding $2.4 billion worth of forward contracts, due to an ongoing investigation by the Economic and Financial Crimes Commission (EFCC) into some foreign exchange transactions.

 

However, the association, in a recent statement, signed by its Director General, Segun Ajayi-Kadir, faulted the position of the apex bank, arguing that its members continued to bear the brunt of the decision despite the fact that   no clear allegations of infractions had been communicated to any of them, nor any of them indicted for any infractions.

 

 

It disclosed that over N1. 5Trillion in forex-related transactions losses, had been incurred by companies, within the last six months, while the sector also recorded 108.7% increase in job losses in 2023 alone.

 

 

According to the association, non-fulfilment of such legally- binding obligation had  led to a cascade of negative consequences, with manufacturing concerns  been the worse hit.

 

 

Besides the over N1 5Trillion forex-related transactions losses, incurred by companies, within the last 6 months, the association argued that the  resulting exchange rate differentials and the burden of interest on loans to meet Naira deposit requirements had also been entirely transferred to manufacturers.

 

 

This, it added, had increased  production costs, impacted product prices,  disrupted manufacturing supply chains, hindered productivity, and jeopardized job security.

 

 

“Consequently, businesses are struggling to meet their loan repayments, leading to the rescheduling and restructuring of loan terms. Due to numerous challenges, such as high production costs and low consumer demand currently confronting manufacturers, there is little hope of meeting financial obligations as scheduled.

 

 

 

“As a result, these rescheduled loans often come with higher interest rates. The immediate implication of this is the declining contribution of the sector to the overall economy,” it stated.

 

 

While calling on the apex to give serious and expedited consideration to the imperative of the sanctity of contracts, and also  explore avenues to resolve outstanding obligations, the association noted that reneging on legally- binding obligations, such as that, potentially undermines the apex bank’s credibility, while also damaging investors’ confidence.

 

 

MAN, therefore, called for a  collaboration between the CBN, the Federal Ministry of Finance, and the private sector, to develop a sustainable framework for resolving outstanding forward contracts and improving foreign exchange inflows.

 

 

By prioritizing the survival of the manufacturing sector, it added, the government would be able to  mitigate the negative impacts of this crisis and foster economic recovery.