With time running out and hope of local manufacturers waning, the Manufacturers Association of Nigeria (MAN) has petitioned President Bola Tinubu to urgently direct the Central Bank of Nigeria (CBN) to clear the outstanding $2.4 billion obligations on forward contracts.

This is to support the manufacturers’ quest to combat high production costs and low consumer demand currently confronting them.

The Director-General of MAN, Mr. Segun Ajayi-Kadir, who made this known to New Telegraph in an interview in Lagos, said that there was little hope of meeting financial obligations as scheduled following the inability of the apex bank not to honour $2.4 billion worth of forward contracts from the backlog of $7 billion.

He said that due to numerous challenges, such as high production costs and low consumer demand currently confronting manufacturers, there was little hope of meeting financial obligations in both short and long term, saying the issue is not only choking the country’s manufacturing sector activities, but also causing massive disruptions.

Ajayi-Kadir said: “As a result, rescheduled loans often come with higher interest rates. The immediate implication of this is the declining contribution of the sector to the overall economy.

“The erosion of trust among foreign suppliers and financial institutions, triggered by businesses’ inability to honour their initially issued letters of credit, has further compounded the challenges of foreign financial flows and investment in the country.

All these adversely affect the business operations and the Nigerian economy at large.” He continued: “The Manufacturers Association of Nigeria (MAN) has done a detailed analysis outlining the far-reaching consequences on the manufacturing sector.

MAN implores the CBN to give serious and expedited consideration to the imperative of the sanctity of contracts, explore avenues to resolve outstanding obligations, and prioritize the interests of businesses that have acted in good faith.

“Reneging on these legally binding contracts potentially undermine the CBN’s credibility and may damage investor confidence. The resulting financial strain on manufacturing businesses has led to widespread closures, job losses, and economic turmoil.

“The manufacturing sector has borne the brunt of this crisis, with a staggering 108.7 per cent increase in job losses in 2023 alone.”

According to him, “to prevent further damage, MAN urges 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 prioritising the survival of the manufacturing sector, the government can mitigate the negative impacts of this crisis and foster economic recovery.”

The MAN DG stated: “In conclusion, the continued non-redemption of the $2.4 billion forward contracts poses a grave threat to the survival of some Nigerian manufacturing companies and jeopardises the livelihoods of thousands of workers.

“As companies grapple with the inability to fulfill their offshore obligations due to the CBN’s nondelivery of dollars, many face the grim prospect of downsising or shutting down operations completely. This gloomy scenario is avoidable and the time to end the impasse is now.”

While speaking more on the implication for the manufacturing sector, the economic analyst stressed that the decline in the real growth of the manufacturing sector was a clear indication of the detrimental impact of the prevailing macroeconomic policies.

“This is further evidenced by the significant drop in nominal growth from 36.59 per cent to 32.97 per cent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies,” Ajayi-Kadir said, adding that “it is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.”

The MAN helmsman posited that agriculture played a crucial role in fueling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials.

However, both the agricultural and manufacturing sectors failed to rank among the top five growing sectors during the latest Q3’24 GDP report release by NBS, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries.

He pointed out that the limited growth in these sectors would lead to deteriorating state of the agricultural sector and increased costs for local raw materials, high cost of living, characterised by high unemployment and inflation among others.

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