Banks face forex glut as manufacturers grapple with naira scarcity

By FELIX OLOYEDE
Despite claims of excess foreign currency in hitherto stingy bank vaults, bank customers, especially manufacturers are still having a hard time accessing foreign exchange.

While retail customers asking for basic travel allowance (BTA) and personal travel allowance (PTA) are finding it easier to lay hands on dollars and other foreign currencies, dollar-strapped manufacturers have had a terrible time meeting their foreign currency needs.

A number of executives of manufacturing companies who spoke to Business Hallmark claimed that Letters of Credit (LCs) they had submitted several months ago are yet to be funded by their banks.

Dr Frank Jacobs, president, Manufacturers Association of Nigeria (MAN) and proprietor, Jacobs Wines Limited, told Business Hallmark in a telephone interview that many of their members have huge backlogs of unfunded LCs pending with banks.

“They are making an effort, but it not still far from adequate. Many members are still having problems accessing foreign exchange from the official market.

“May be it would get better somewhere down the line, but at the moment, a truck load of bunched and warehoused LC’s constitute formidable towers in banking halls, we are still patiently waiting to see improvements,” the MAN boss explained.

After the release of its new foreign exchange guidelines on February 20, 2017, the Central Bank of Nigeria (CBN) mandated all local banks to sell foreign exchange (forex) to customers who need it for Personal Transport Allowance (PTA), Business Travel Allowance (BTA), school fees and medical fees abroad, the bank has so far injected about $2 billion into the interbank market.

The CBN noted that the volatility in the country’s forex market was caused by liquidity tightness at the retail end of the market worsened by activities of currency speculators; the bank, therefore, decided to increase forex supply to this end of the market to reduce volatility and ease the pressure on the naira.

The CBN on Friday released a further $100 million to authorised dealers in the interbank market, which caused the naira to appreciate 1.26 percent, closing the week N311.38 against the dollar at the interbank market.

The dollar which exchanged for N520 at the parallel market on the day the apex bank issued the new forex guideline, was sold for N450/$ at the close of work on Friday, making a 1.1 percent gaining from the previous day.

Mr. Hamma Kwajaffa, Director-General, Nigerian Textile Manufacturers’ Association (NTMA)  also told Business Hallmark that a lot of companies who have put in their Letters of Credit have not received cash backings.

“Manufacturers in the country are still having hard times accessing forex from the official market,” he affirmed.

Reiterating this position, Dr. Abdul-Alimi Bello, Kaduna Chamber of Commerce, Industry, Mines and Agriculture (KADCCIMA) said banks were still telling manufacturers that they don’t have forex.

He asserted, “The real sector is not enjoying from the foreign exchange surplus they claimed they have.”

Mr Dungor Nwike, an economist with The Lagos Chamber of Commerce and Industry (LCCI), speaking to Business Hallmark in his office, said the latest forex guideline did not take the productive segment of the economy into cognizance, hence, manufacturers would continue to face challenges  accessing forex from the official market.

According to him, the new forex guideline only took care of those who demand forex for PTA, BTA, school and medical fees.

Mr Isaac Okorafor, Acting Director, Corporate Communications of the CBN in an exclusive with Business Hallmark, said retail auction or wholesale auction are targeted at manufacturing by way of raw materials, plant and machinery and agriculture, among  others.

“For some days now we have not sold much to those asking for invisibles because that segment is being sufficiently served.

We are now focusing on those who have opened LCs. And we will continue to supply the market as we plan to steadily sustain the supply in the coming days,” he forward stated.

The apex bank had on March 3 issued a directive to authorized forex dealers to open teller point for FX transactions in all locations in order to ensure access to foreign exchange by their customers and other users, without any hindrance.

“Banks are mandated to process and meet the demand for Travel Allowances (PTA/BTA) by end-users within 24 hours of such application, as long as the end users meet basic requirements already outlined in earlier directives,” the circular stated.

It also gave commercial banks 48 hours to process and meet forex demands for school fees and medical Bills.

A banker with one of the tier one bank in Lagos who did not want his name mentioned in print, said unless the CBN unbanned the 41 items it listed as not valid for forex in the interbank market, manufacturers in the country would continue to encounter serious challenge sourcing forex, because most of the items are inputs for the products of these manufacturers.

He advised the apex bank to unbanned the 41 items and allow market forces determine the value of the naira. This he said would help sanitize the country’s foreign exchange market.

The CBN had on June 23, 2015 listed 41 items which are not valid to access forex from the interbank market, which subsequently caused uproar in the organized private sector with many claimed some of the items were intermediate goods for their products.

Consequently, many factories shut down production, while those in operation laid off substantial number of their workforce.

A recent report from the National Bureau of Statistics showed that over 3.67 million Nigerians lost their jobs in 2016.