The Naira recovery at the black market

05 April 2015, lagos – Nigeria’s economy may experience investments inflow in 2015 as the local currency appreciates by over seven percent. The battered Naira, which sold for between 228 and 230 to a dollar at Bureau de Change (BDC) weeks to the just concluded presidential election, has appreciated to about 208 -211 to the dollar. Though the inter-bank rate still stands at 197, experts are of the opinion that the exchange rate at BDC can go below 200, as many individuals who stockpiled dollars during the presidential campaigns are already selling it after the poll.
In the same vein, the Acting President, Association of Bureau de Change Operators of Nigeria, Alhaji Aminu Gwadabe, said he was expecting the Naira to appreciate further following the peaceful conclusion of the presidential election, which allays the fear and uncertainty in the financial market.

He added, “I think the trend would continue for the Naira to appreciate further from 211 to 197 currently at the interbank market rate because a peaceful economic environment is what we are witnessing as aftermath of the presidential poll”.

It could be recalled that weeks to the presidential election, the economy witnessed huge investments outflow, as foreign investors pulled N846.53 billion from Nigerian Stock Exchange (NSE). Within the same period, another investments outflow hit Nigeria, as investors withdrew N4.9trillion from the economy.

Speaking, the Chairman Toiletries and Cosmetics (T&C) group of the Manufacturers Association of Nigeria (MAN) Mr. Ikpong Umoh, explained that the tension and speculation experienced in the country before the presidential election worsen devaluation of the Naira.

He said, “Already the declining oil prices and devaluation of Naira brought crisis into the economic system. So, the tension of what happens and who wins in the presidential poll made the situation worse, as many people were afraid that the economy may collapse completely. Aside from high exchange rate, many investors withdrew their money and investments from Nigeria because they were afraid of losing their investments. With the peaceful outcome of the presidential poll, we expect that in the next four years, the economy would be stabled.

On what would be the prospect for manufacturing sector, he explained, “Those of us manufacturers are still facing challenges because the raw materials we use for production are imported, as such, they are tied to dollars. Some of us have loans to pay in dollars, so we are calling on government to support manufacturers, especially producers of toiletries and cosmetics products. We are also appealing to government to check the activities of regulatory agencies as they are killing Small and Medium Enterprises (SMEs) with multiple taxes”.

He went on, “Recently, government launched the Development Bank of Nigeria (DBN) in order to create a platform for Macro, Small and Medium Enterprises (MSMEs) to access loans. The effort of government in salvaging the financial needs of MSMEs through establishment of DBN is a good initiative but may be counterproductive, as the regulatory agencies are waiting to ambush the MSMEs with their regulatory requirements to collect their own “share of the National cake” or embark on a clandestine mission for some bigger companies and multinationals to introduce tougher entry regulations to discourage MSMEs from partaking in similar ventures that compete with their products in the market.

“In implementing this new plan of re-invigorating MSMEs, government needs to identify and remove numerous obstacles that can stand in the way of establishing new MSMSEs, stabilising and expanding existing ones. Government should protect MSMEs by ensuring that similar regulatory frameworks, either from the State or Federal agencies are streamlined to make compliance affordable. The agencies should be adequately funded by tax payers money as it is the standard practice globally,so that their drive for revenue generation does not adversely work against SMEs. Where fees are to be charged, only nominal fee of not more than N2,500 should be allowed.

Government should establish and enforce anti-trust laws to prevent surreptitious manipulation of regulatory framework and market –space definition to rope in the MSMSE and force their early exit from the market where they are already proactive.

“Government policies in attracting Foreign Direct Investments (FDI) have also added to the problems of cosmetics and other MSMEs. This is especially evident in the Global listing incentive given to foreign investors in the supermarket chains. This incentive permits them to import into the country their wares to fill the shelves despite the fact that most of the products found in these supermarkets are already being made by some MSMEs. The owners of such supermarkets preferentially import products from their home country instead of patronising local suppliers. While a handful of jobs are created for Nigerians, Multiple stream of jobs are created for their home country labour force along every aspect of the value chain.

“Our government needs to review this Global Listing policy with a view to changing the shelve-display equation to favour indigenous manufacturers. We must encourage patronage of locally made goods to ease out importation that have local substitutes. Imposition of heavy taxes and fines as well as quantity allocations are legitimate instruments used by all liberalised economies to protect their local industries. America used it against importation and dumping of Steel from China.

Nigeria can adopt these measures to check the activities of the supermarkets. If this is done as part of the steps to ensure the success of the DBN, the beneficiaries of loans would have a ready market. Therefore, the percentage of locally manufactured products in the supermarkets can progressively increase from near zero to 50 percent this year and 80 percent by 2016.

“MSMEs has contributed immensely to job creation with over 32million people benefiting from this sector, However, the establishment of DBN would bring about a robust finance backing for MSMEs. The institution plans to offer loans to about 20,000 MSMES within its first year of operation and its billed to start full operations in 9months time. Therefore, I would say this is a giant step towards the growth and development of MSMEs and would like all members of the T&C group of MAN to take advantage of this initiative to develop and stabilise their operations.

While, we applaud the efforts of government in this direction, we want to point out that T& C group is not only faced with the issue of funding alone but also with issues that appear subtle but devastating in short term and long term effect. Such issues include multiple regulations from government agencies such as NAFDAC, SON ,LASEPA,NESREA ,WEIGHTS &MEASURES among many others that are supposed to render social services and draw their funding from taxpayers money inform of budget allocations.

“These agencies have accused the government of starving them of funds and therefore have to resort to “self-help “ with their Internally generated revenue and taxation driven regulations. The attitude of these agencies were majorly responsible for the colossal failure of previous efforts to re-invigorate MSMEs.

MSMEs are forced to comply with double and sometimes multiple regulations. As such, they end up paying money to these agencies for certifications and permits. The process of compliance gulps man-hour, management time and un-receipted sums of money ,all of which constitute a big drain on the meager resources of MSMEs.

It should be noted that while the large companies and multinationals can meet and surpass some of these regulatory requirements, the MSMEs are disproportionately disadvantaged and endangered in trying to meet some or all of these requirements. Some MSMEs in cosmetics, soaps and beverage industry are closing shops in the process of struggling to meet some of these excruciating regulatory conditions of regulatory agencies.”

– Vanguard

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