* Concerns Over Christmas, Year – End Celebrations Heighten
*Tinubu Begs Multinational Coys Not To Leave Country On Account Of FX Crisis, Says ‘We Need Each Other’
John Danjuma Omachonu
From the lingering scarcity of the foreign exchange to depreciation, Nigerian businesses are continually on the brinks.
Already, President Bola Ahmed Tinubu has implored multinational companies operating in Nigeria that his administration was determined to remove all bottlenecks to the smooth running of their businesses.
Recently, they had been reports of exit of multinational companies like GSK, among others, from Nigeria, with the latest one coming from Procter & Gamble (P&G).
The world’s largest personnel care and household products company, makers of iconic brands like Pampers, Gillette among others had on Tuesday announced its plans to transition from local production to solely importing its products as it winds down its on-ground presence in Nigeria.
MetroBusinessNews (MBN) gathered hat 5hese companies are either exiting with more planning o exit because of paucity of FX and the fact that there is large amount of Backlog of FX yet to be repatriated by these companies.
Similarly, the purchasing power of consumers have continued to be eroded on daily basis, a development that has continued to heighten anxiety on the economy.
Specifically, the Nigerian Naira reached a new historical low on Friday, December 8th, 2023, closing at N1,099.05 per dollar at the official market.
This represents a significant depreciation of 23.29% compared to its previous closing rate, marking a concerning trend just 16 days to Christmas.
The development marks the first time the Naira has crossed the psychological level of N1,000/$ threshold, signifying a significant depreciation and raising concerns about its impact on the economy and businesses.
This development represents a major turning point in the history of the Naira, as it has never before reached such a low exchange rate.
This development is also likely to exacerbate existing inflationary pressures and further strain household budgets and wallets, particularly for those reliant on imported goods.
The implications for businesses, both large and small, are also significant, with potential increases in production costs and challenges in maintaining profitability.
The domestic currency depreciated by 23.29% to close at N1,099.05 to a dollar at the close of business Friday, data from the NAFEM where forex is officially traded, showed.
This represents an N255.98 loss or a 23.29% decline in the local currency compared to the N843.07 it closed on Thursday and an all-time low.
However, the naira depreciated marginally at the parallel forex market where forex is sold unofficially, the exchange rate depreciated by 0.59%, quoted at N1180/$1, while peer-to-peer traders quoted around N1193.56/$1.
More worrisome is the fact that despite recent efforts by the Central Bank of Nigeria to bolster the foreign exchange market, the Naira’s downward trajectory continues, raising anxieties over its impact on the upcoming holiday season, traditionally characterized by increased consumer spending and reliance on imported goods.
For instance, CBN has extended the timeline for the issuance of letters of credit from 24 hours to five working days as the country continues to struggle with foreign exchange scarcity.
In the approved 2020 service charter of the CBN, the timeline for the issuance and management of letters of credit was 24 hours.
However, the newly approved 2023 service charter shows that the timeline is now five working days, a development that is at variance with the ease of doing business being envisaged by the federal government to woo foreign investors. .
Similarly, CBN has extended the timeline for the registration of Form M and NXP from 24 hours to two working days.
Earlier in June 2023, the CBN announced the unification of all segments of the forex market, collapsing all windows into a single official window for FX transactions.
Although this was part of an effort to drive liquidity and stability in the forex market in Nigeria, it appears to have had a counter-effect, as it triggered further instability in the market.
The naira lost nearly a fifth of its value as it traded at N951.2/$ on the official Investor and Exporter forex window on Wednesday.
This has affected local and international trade, especially the import of goods and services in the country, with reports stating that foreign suppliers have started rejecting letters of credit from Nigerian businesses.
For the importation of visible goods, a letter of credit is a mode of payment.
As requested by the customer, the bank promises in writing to pay the exporter a certain sum within a certain time frame in return for goods, as long as the customer provides the bank with the proper paperwork.
Also, to import goods denominated in foreign currency into Nigeria through the CBN Single window, all importers are required by law to fill out Form M. All exporters are required by law to fill out the Nigeria Export Proceed Form (NXP) before sending goods outside of the country.
The current forex crisis in the country likely triggered the increase in the timelines for letters of credits, Forms M and NXP in the newly approved service charter by the Governor of the CBN, Yemi Cardoso.
According to analysts, the service charter of CBN, a prerequisite of the Business Facilitation Act 2022 that is measures the level of ease of doing business in the country is being jeopardized.
This, according to the analysts is reinforced by the rising number of multinational companies seeking delistment from the nation’s capital market on account of unfavorable business environment as well as unhealthy policies and management style at the NGX or from the economy on account of rising insecurity, heightened socio-political tension, among others
Tinubu, while receiving the visiting delegation of the management of Shell Group led by its Global Integrated Gas and Upstream Director, Ms. Zoe Yujnovich, at the State House, Abuja on Thursday expressed confidence in the potential for increased investment from Shell Petroleum Development Company of Nigeria.
In a statement signed Friday by the President’s Special Adviser on Media and Publicity, Ajuri Ngelale, Tinubu reiterated Nigeria’s longstanding ties with Shell, which dates back to the discovery of the country’s first commercial oil field in 1956, the President assured the Shell delegation of his administration’s commitment to securing and fostering both existing and new investments.
“We have made progress since our last meeting. I will continue to support and encourage you on this path.
“There is no doubt that there is a significant focus on investment in and around the continent. I am spearheading Nigeria’s global march for new investments at home.
“In view of our long-term relationship that has been established over the years, we want you to do more, and we are ready to encourage you in every way possible,” he added.
The President’s remarks followed the recent exodus of several multinational companies from the country in the past months.
It was reported earlier that the presidential candidate of the Labour Party in the last general elections, Peter Obi, decried the exit of multinational companies from Nigeria, with the latest one coming from Procter & Gamble (P&G).
The world’s largest personnel care and household products company, makers of iconic brands like Pampers, Gillette among others had on Tuesday announced its plans to transition from local production to solely importing its products as it winds down its on-ground presence in Nigeria.
Reacting to the announcement for the exit of P&G, the former governor of Anambra State said that the exit of multinational companies in Nigeria showed that the country’s medium to long-term prospects strategy was in the negative.