The Central Bank of Nigeria (CBN) has disbursed $2.83 billion foreign exchange (forex) to manufacturers, but members of the Organised Private Sector (OPS), including Manufacturers’ Association of Nigeria (MAN) areclaiming that their inability to access forex has forced some members out of business. OKWY IROEGBU-CHIKEZIE writes on the manufacturers’ disagreement with the CBN.
There are rough edges in the relationship between the Central Bank of Nigeria CBN) and the Organised Private Sector (OPS). The bone of contention is the management of forex exchange (forex) by the former.
The apex bank announced last Thursday that it disbursed $2.83 billion for utilisation in the critical sectors of the economy between December, last year and January.
CBN spokesman Isaac Okoroafor listed manufacturing, raw materials and agriculture among others as beneficiaries of the disbursements, targeted at strengthening the economy.
But the OPS faulted the CBN claim, describing it as bogus. The OPS insisted that manufacturers could not have been the sole beneficiary of the $2.83 billion, if indeed such funds were disbursed.
The other sectors of the economy must have been major partakers in the largesse, the OPS said.
In the breakdown, Okoroafor said the CBN released $609 million and $228 million for raw materials in December and January. Manufacturers got $53 million and $71 million during the same period. The CBN spokesman said the forex utilisation indicated that $1.839 billion and $0.989 billion respectively, were extended to critical sectors.
Forex allocations have been marred with alleged irregularities. Only prominent manufacturers allegedly have access to forex. Thousands of thousands were forced to shut down their businesses and relocate to neighbouring countries.
The OPS, especially the Manufacturers’ Association of Nigeria (MAN), has been critical of the forex policy and the ban on 41 items classified as raw materials that could be sources locally. Such policies, MAN said, was not only hurting its members but the economy.
Other hurdles being faced by the manufactures include: power instability, security challenges and multiple taxation, all of which it said pushed up production costs in the country.
A tomato puree manufacturer, Erisco Foods Limited, cried out last year under what it called ‘unfriendly’ forex policy by the CBN and inclement business environment. The Chief Executive Officer of the company, Chief Eric Umeofia, told a news conference in Lagos that he was relocating the manufacturing segment of his business to China, from where he will import finished products for sale in Nigeria.
He explained that his decision to close the Nigerian manufacturing plant was taken after the expiration of a 30-day ultimatum given by the management of the company to the Federal Government to compel the CBN to make available enough forex to aid the importation of raw materials and other requisite equipment to keep manufacturing plants running on profit.
The CBN, however, accused the Erisco Foods’s chief of cheap blackmail. It said Umeofia was raising a false alarm.
Investigations by The Nation showed that contrary to the claim that Erisco Foods did not receive support from the Federal Government, the company got support of about N3 billion from the Commercial Agriculture Credit Scheme (CACS) between 2014 and 2016.
His allegation that NAFDAC, SON, the Ministry of Industry, Trade & Investment and the CBN were frustrating has also been faulted.
The Nation learnt the Erisco Foods got N500 million in January 2014 for the importation and installation of four additional tomato processing lines to its existing three lines and to stockpile raw materials for operational efficiency.
The intervention fund with 32-month tenor was sourced through Stanbic IBTC Bank, a document showed. Also, in May 2014, it received another N400 million as working capital and for the purchase of diesel, gas, payment of salaries and local raw materials including sugar, salt, potassium, solvent, cartons and other packaging materials.
The document also showed that Erisco Foods was reported to have received additional N300 million. Also in December 2014, the company allegedly received N800 for the procurement of raw materials. The facilities had a separate tenor of 36 months.
In April, last year, Erisco Food got N1 billion to finance the procurement of processing machinery for fresh tomatoes into concentrate. The fund, with 84-month tenor, was sourced from Keystone Bank Limited.
The document reads: “The N2 billion facilities given to the company were intended for capital importation, while the extra N1 billion was advanced to the company on the company on the premise that it was going to be used for the purposes of starting primary production through backward integration, using locally produced tomatoes from indigenous farmers.
“As at today, this has not been achieved. Erisco is only importing and packaging tomato paste concentrates into final products.”
A source at one of the Participating Financial Institutions (PFIs) through which the CBN disbursed the funds to beneficiaries, confirmed the disbursement of facilities to companies, including Erisco, between between June 2014 and April 2016.
A CBN source, who pleaded for anonymity, said the apex bank does not allocate forex anymore.
The source said: “By practice, we do not join issues with individuals on matters of this nature. All I can tell you is that the CBN does not allocate foreign exchange. All business persons, manufacturers, traders, among others, are expected to approach their respective banks to bid for, and obtain foreign exchange. Whether they succeed or not is their business. No amount of blackmail through paid advertorial or sponsored reports could make the CBN change its policy.”
The claim was corroborated by a special adviser the CBN Governor on Financial Markets, Emmanuel Ukeje, on a television programme in a response to allegations that the regulator was breaching its forex administration policy.
Ukeje expained: “I want to state categorically that the CBN does not deal directly with any bank customer on any foreign exchange transaction. These transactions are purely between the deposit money banks and their customers.”
The source urged forex applicant to follow the due process instead of deploying blackmail and other unethical schemes in their ploy to win public empathy.
Umeofia, who criticised the CBN and other government agencies for not supporting his business, blamed the government for lack of clear policies towards manufacturing, high interest rates and allowing the importation of tomato paste.
MAN President Dr. Frank Udemba Jacobs faulted the CBN position on the controversial $2.83 billion allocation. In a chat, Jacobs said it was incorrect for the CBN to claim to have allocated such funds to manufacturers.
According to him, the regulator ought to have explained how the $2.83 billion was shared to beneficiaries in the past two months.
Round tripping claims
Responding to the accusation of round tripping levelled against some manufacturers and how the association can monitor the ultilisation of the forex allocated to them, the MAN president described the allegation as baseless.
He wondered how manufacturers, who do not have enough forex for the importation of raw materials and machinery, could be accused of round tripping.
Jacobs said: “Any trader with connection can claim to be a manufacturer and have access to forex when the real manufacturers are starved of it. The government should therefore do more work in this area to identify those who are really into manufacturing from traders.”
On why the naira value continued to nosedive, the MAN chief blamed the free fall of the local currency against the dollar on CBN failure to adequately fund forex. He described the liquidity in the forex market as very low.
Jacobs declined to comment on Erisco Foods’ allegation against the CBN, saying that he could not speak for any of the parties. He, however, noted that the apex bank claimed to have given the company some funds for the importation of raw materials and equipment for their local production.
The Director-General of the Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf argued that the CBN should be blamed for the alleged round tripping by ‘manufacturers’. According to him, the regulator incentivised the illegality, thus making it attractive for those who may be engaged in it.
Yusuf said: “The black market rate for the dollar as at today (weekend) is N507 to a dollar. What the bank should do is to close the gap with the official rate which hovers around N300 to make round tripping unattractive if indeed it is happening. The disparity between the official and black market rate created incentive for round tripping.
“Anybody can claim to be a manufacturer. What the CBN should do is to allow the market to determine the rate and value of the naira. Some government policies are also hurting the economy. For instance, people should be allowed to bring in their forex freely without restrictions.
The government has placed a lot of hurdles on the path of portfolio investors and Foreign Direct Investment (FDI). There is no way we can come out of the economic problems behooving the nation except there is a review of some of these hurtful policies.”