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Boom for manufacturers, grain merchants as naira devaluation boosts export

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FG to regulate price of imported food items

Nigerian grain merchants and manufactures of goods have continued to benefit from the slide in the value of the naira, Business Hallmark investigation has revealed.

Nigerian products, especially, farm produce and manufactured consumer goods, findings revealed, have become attractive to foreign merchants from neighbouring West African countries due to their lower selling prices, compared to what is obtained in their own countries.

While the value of the nation’s currency, the Naira, has continued on a free fall, the currencies of most West African countries have remained largely stable.

As a result, when traders and buyers from the West African coasts on buying trips to Nigeria convert their currencies to naira, they get more value for their money in naira, which they use to mop up Nigerian goods that are cheaper than in other African countries.

It would be recalled that the nation’s currency started its free fall in June 2023 after the new administration of President Bola Tinubu decided to unify the multiple foreign exchange rate windows he inherited from his predecessors.

For instance, when the Central Bank of Nigeria (CBN) announced the unification of the FX windows on Tuesday, June 13, 2023, $1 was exchanged for N471.67 at the Investors and Exporters (I&E) window. The following day, June 14, 2023, naira lost almost half of its value in the official market, falling to N664.04 per dollar from the N471.67 per dollar it exchanged a day earlier.

At the close of trading on the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, June 14, 2024, a dollar was exchanged for N1,482.77.

BH research of FX transactions between the naira and other African currencies revealed that on June 13, 2023, when the CBN unified its multiple FX windows, 1 CFA franc used to transact trade in eight West African countries and six Central African countries, exchanged for N0.7592 (approximately 76 kobo).

However, during trading on Friday, June 14, 2024, 1 CFA reached a high of N2.46 kobo, before closing at N2.45 kobo. This figure represents over 300 percent devaluation of the naira against the CFA franc.

This means that citizens of the fourteen African countries using CFA franc that have been largely fixed for decades, namely Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo, which make up the West African Economic and Monetary Union (WAEMU) and Cameroon, Central Africa, Congo, Gabon, Equatorial Guinea and Chad, which form the Economic and Monetary Community of Central African States (CEMAC), get more than three times in value for every CFA franc they exchange for one naira, when they visit Nigeria for business.

Likewise, the currencies of neighbouring Anglophone countries like Ghana, Liberia and Sierra Leone have remained stable compared to the naira. For instance, a naira that exchanged for N35.676 for 1 Cedi in June 2023, closed at N99.37/0.009508 GH¢ on June 14, 2024.

This figure also represents a little below 300 percent in the depreciation of the value of the naira against the Ghanaian Cedi.

According to Dr. Peju Beckley, a development economist, while farm products and manufactured goods in neighbouring West African countries have remained largely expensive to their citizens, Nigerian products have become cheaper owing to the wide difference between their currencies.

“Let me break it down in a simple manner for those that don’t understand. It is like bringing one US dollar, which is not that significant in America to Nigeria, where you get over N1,400 in exchange for.

“And it is a two-way traffic. Both the citizens of West African nations, as well as Nigerian producers and merchants are benefiting from the crash in the value of the naira.

“By taking a product produced in Nigeria, let say for N500 to Benin Republic, you get, at least, 300 percent (N1,500) in value at the current exchange rates.

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“On the other hands, because the currencies of our neighbours have more value than the naira, they get more value for every penny exchanged for a naira”, said Dr. Beckley.

Some traders of northern extraction at the Ile-Epo and Mile 12 fruits and commodities markets in Ketu, who normally bring in grains like beans, maize, sorghum, millet, yam, dried fish, vegetables like pepper, tomato and onions from large grain markets in the North like the Dawanau International Grains Market in Kano, Mararaba Market in Nasarawa, FCT, Pambegua Grain Market, Kaduna, Chake Market, Katsina, Baga Fish Market in Borno, Jingir Grain Market, Plateau and many others, confided in our correspondent that they prefer to export their goods to neighbouring West African countries and earn CFA franc, which has more value, instead of selling in Nigeria.

“To many of us in the North, who cannot afford to go to Europe and America, CFA franc is our own dollar and a store of value.

“As you can see, this small basket of tomatoes, which goes for N42,000 in Lagos, will be quickly snapped up in Niger and Chad for 22,000 to 25,000 CFA francs, which is about N66,000 to N75,000.

“Apart from residents of major cities like Lagos, Abuja and Port Harcourt, who can afford it, most Nigerians don’t have the ability to do so. So, merchants prefer to sell their excess goods, which can not come down to Lagos to Chad and Niger, where they will get more value for them”, disclosed Shehu Danladi, a grains merchant from Kano.

BH also learnt from sources that the draining of Nigeria’s manufactured goods and grains to neighbouring countries like Ghana, Benin, Togo, Niger, Chad and Cameroon have more than tripled in the last six months.

Like their counterparts from the northern parts of the country, it was gathered that produce and grains merchants from the South are also exporting cash crops products such as cassava, maize, coffee, palm products, fruits like Mango, pineapple, banana, plantain, oranges and avocado pear to neighbouring West African countries like Ghana, Togo and Benin Republic in their resolve to earn more revenue.

Apart from grains and produce merchants, BH findings revealed that Nigerian manufacturers are also benefiting from the crash in the value of the naira. According to a recent report by the National Bureau of Statistics (NBS), some of Nigeria’s largest manufacturers, including Dangote Cement Plc, Okomu Oil Palm Plc, Nestlé Nigeria Plc and Unilever Nigeria Plc, reported a huge leap in exports to other African countries, spurred by the devaluation of the nation’s currency.

The NBS report showed that the combined revenue from exports of the four biggest publicly-listed manufacturers surged by 201.1 percent in the first quarter of 2024, the highest in ten years.

This is an appreciation of N258.8 billion from the N128.6 billion the companies earned in the first quarter of 2023. The NBS report also shows that Nigeria’s trade with other African nations rose by 39.5 percent to N3.71 trillion in 2023, the highest in four years, from N2.66 trillion recorded in 2022.

According to sources in the listed firms, Nigeria’s weaker currency provided the much needed incentive to boost their competitiveness in the regional market through the establishment of subsidiaries and depots in selected African countries, as well as exporting products and services that are in high demand.

Speaking on his firm’s surge in exports revenue, the Chief Executive Officer of Dangote Cement, Arvind Pathak, claimed that the performance was a true reflection of Dangote Cement Plc aggressive expansion of its presence into regional markets.

“During the quarter, we intensified our emphasis on exports, dispatching seven ships from Nigeria to Ghana and Cameroon.

“As a result, our Nigerian exports surged by 87.2 percent, reflecting our commitment to expanding our presence in regional markets and capitalising on our export-to-import strategy”, the Dangote Cement CEO stated.

Also speaking, the Managing Director of Wemy Industries Limited, manufacturers of medical, hygiene and sanitary products such as baby and adult diapers, sanitary pads, syringes and body lotions, Chief Paul Odunaiya, said the company decided to take advantage of the nation’s weak currency to boost exports.

“To make it easy to export to some countries, we needed to open up depots as subsidiaries to enable the easy flow of goods and distribution into some countries; especially the smaller countries”, Odunaiya added.

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