*As Analysts Decry Frequent Depreciation Of Naira, $790m Airlines’ Ticket Revenue Trapped In Nigeria
For the Organised private sector, recent exit of some multinational companies would continue, unless growing difficult operating clime, typified by federal government’s dithering on promised reforms, rising insecurity, among others are urgently being addressed.
Similarly, covert and overt depreciation of the naira orchestrated by the Central Bank of Nigeria (CBN) and inability of foreign airlines to repatriate about $790 ticket revenue trapped in the country have left both local and foreign investors gasping for breath.
Specifically, the Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, has regretted the exit of multinational consumer goods manufacturer, Procter & Gamble from Nigeria, saying that more manufacturers may follow suit.
While commending some palliative loans for manufacturers, as announced by President Bola Tinubu in his early part of the administration, he regretted the implementation which is being delayed.
He bemoaned the current lending rate hovering between 24 to over 30 percent, adding that no entrepreneur can survive under such harsh and prohibitive business environment.
According to the Man DG, until the Federal Government takes clear redefined measures to address challenges facing manufacturers in the country, more exits will happen in the manufacturing sector.
“Obviously, we received it (P&G exit) with sadness but it is not totally unexpected and more may happen because there is no doubt that we operate in an environment that is challenged,” Ajayi-Kadir said on Channels Television’s Sunrise Daily on Monday, monitored by metrobusinessnews.com (MBN).
Similarly, the Centre for the Promotion of Private Enterprise (CPPE) has said that the recent decision by the CBN to increase the customs exchange rate from N783 to N952/$ would worsen the already prohibitive production and operating costs for businesses in the country.
Muda Yusuf, Chief Executive Officer of CPPE who stated this in a press statement said it would also inflict more pain on the citizens, erode profit margins, reduce purchasing power, and put the survival of businesses at an elevated risk.
Yusuf noted that the frequent changes in rates are also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable.
According to him, the CBN had on June 24, 2023, adjusted the exchange rate from N422.30/$ to N589/$. On July 6, it was re-adjusted to N770.88/$, and again on November 14, it was re-adjusted to N783.174/$, and now reviewed to N951.941/$.
The CEO noted that already businesses are contending with an incredibly difficult operating environment arising from severe macroeconomic headwinds.
Also, the International Air Transport Association has warned CBN that some foreign airlines may be forced to quit the Nigerian markets if nothing is done about the $790m ticket revenue currently trapped in the country.
The IATA Regional Vice President, Africa & Middle East, Kamil Alawadhi, at a media presentation with African journalists at the IATA Global Media Day in Geneva, Switzerland also said Lagos and Abuja airports had been ranked the most expensive gateways in the region despite the poor state of their infrastructure.
According to him, the Nigerian government is currently holding the highest amount of airline-trapped funds.
On blocked funds, the IATA VP listed Nigeria as the country with the highest amount of airlines’ blocked funds at $792m followed by Egypt ($348m); Algeria ($199m); AFI zone ($183m) and Ethiopia $128mn.
While Ethiopia has mapped out a strategy to defray the debt, he said that Nigeria had yet to do anything on its own.
Al-Awadhi said, “Ethiopia is seeking a way to resolve this issue even though the blocked fund is rising.
The first step for us to solve these blocked funds is for both parties to engage. If parties don’t engage, it is very difficult to move forward. I have not been able to engage with Nigeria’s CBN Governor. He said he would engage with me when he had a solution. He is not promising but I have engaged with the Aviation Minister who is very understanding, new to the position, or maybe wowed by the situation he inherited will help to resolve the matter.”
However, the Man DG emphatically posited that the issue of the country’s industrialisation lies with government which can only achieve this through conscious and deliberate policies and actions.
“Manufacturing in any economy is a strategic choice, the government has to make up its mind whether it wants its country to be an industrialised one. Once that decision is taken, you have to do all that is needed to remove the binding constraints that limits the performance of that sector, Nigeria has not done so and that is why you can see there are closures.
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“I think it is news because it is Procter and Gamble, it is news because it is GlaxoSmithKline, it is news because they have been in the country for a very long time, but they are several others that have died quietly and for reasons that are clearly avoidable.”
The MAN director general, however, said that the exit of multinationals from the country should serve as a lesson to the government, adding that it provides opportunity to promote local manufacturers more than foreign investors as that is more enduring.
“I think there is a strong lesson to be learnt there which is the fact that the big ones that are exiting are those multinationals and I think this will send a clear signal to government that regrettable as it is, it should guide future actions, we need to be strategic in what we promote.
“So, what this means is that if you have a challenged local manufacturer, he is not likely to go anywhere. That is why we are saying that foreign direct investment is excellent, it has led to phenomenal improvement in the performance of the manufacturing sector for so many economies but it should come secondary to empowering the local investor, the existing manufacturers because that is what is enduring.
“So, it is regrettable, it is not totally unexpected, and I think except we take clear redefined measures, many more will happen,” he said.
P&G recently announced its decision to shut down production lines in Nigeria and commence the exportation of its products into the country a few months after another manufacturer GlaxoSmithKline toed same line.