The Manufacturers’ Association of Nigeria (MAN) has claimed that banks were harassing its members over outstanding forward foreign exchange (FX) contracts with the Central Bank of Nigeria (CBN).
According to reports by Bloomberg, members have faced penalties, including frozen accounts over the impasse, while others are constantly being harassed.
The contracts were from the Nigeria’s previous controlled FX regime, which was liberalised in June 2023, when the CBN announced a set of reforms at the FX market.
The reforms were announced after President Bola Tinubu came to power two years ago, but the Dollar backlog has taken time to pay down, contributing to the volatility of the Naira which has lost about 70 per cent of its value against the American currency.
“Our members have reported significant unwarranted complexities and undue high-handedness by the banks,” the publication reported, citing a statement.
Nigerian companies bid for Dollars via forward contracts via these banks, who then received the US currency from the CBN in exchange for the Naira. Then when the contract ends, the process is reversed.
However, the CBN hasn’t supplied the Dollars and commercial lenders now want the companies to find the Dollars elsewhere.
This is causing strain as options to buy elsewhere will see them buy at higher rate and higher demand may weaken the value of the local currency, creating more problem for manufacturers already facing a hard time.
“We reiterate our call on the Central Bank of Nigeria to speed up the long overdue redemption of the unsettled forex forward, ” MAN said. “Our members should not be harassed.”
The CBN claimed it had settled the necessary backlogs which was around $2.4 billion, claiming that an independent audit saw a lot of unfounded and unverifiable claims.
Bloomberg added that the apex bank initially disputed the claims, but later said it would investigate and settle on merit.
This development comes as manufacturers face a series of headwinds in their operations including transport and logistics, infrastructure, particularly around major ports and industrial corridors, which make the operating environment unconducive for manufacturing.
According to the Director-General of the association, Mr Segun Ajayi-Kadir, the manufacturing sector’s growth was as low as 1.40 per cent in 2023 and declined further to 1.38 per cent in 2024.
He also these challenges are evident in the sector’s capacity utilisation and its contribution to the nation’s economy, which have hovered around 5.5 per cent and 10 per cent respectively, over the past 12 months.