CBN’s new FX policy frustrates Nigerian manufacturers, exporters

NIGERIAN manufacturers and exporters say they are frustrated by the Central Bank of Nigeria (CBN)’s new foreign exchange (FX) policy which mandates them to submit their proceeds for conversion at the NAFEX rate.

The NAFEX rate is the Financial Markets Dealers Quotations (FMDQ) reference rate for FX activities in the Investors & Exporters FX Window.

In simple terms, it is regarded as the official foreign exchange rate for the Nigerian economy and hovers between N410 and N420 per dollar.

The CBN had mandated exporters to repatriate the dollars from their exporting activities and submit them to their banks for conversion at the NAFEX or official rate.


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The problem, however, is that many manufacturers and exporters buy their raw materials with dollars sourced from the parallel market at between N499/$ and N503/$,   but they are being asked to repatriate dollars and receive at N410- 420 for one dollar.

This means that each manufacturer will be underpaid by at least N79 or as much as N93 on a dollar. An exporter transacting a business of $100,000 loses at least N7.9 million or as much as N9.3 million.

President of Lagos Chamber of Commerce and Industry (LCCI)  Toki Mabogunje said feedback from  members of the chamber revealed that exporters were still not getting a fair deal out of their proceeds “based on the CBN’s directive that mandated exporters to submit their export proceeds for conversion at the NAFEX rate, which is far less than the open market rate.”

Toki Mabogunje, President of Lagos Chamber of Commerce and Industry

“While we appreciate CBN’s resolve in managing the country’s forex resources, the policy threatens the sustainability of export business in Nigeria. This policy is inconsistent with efforts aimed at boosting local production as well as non-oil export earnings,” she said in an emailed statement to The ICIR.

This is not the first time the CBN would be toeing this line. In the heat of 2015/16 FX scarcity, the CBN made a pronouncement that hindered exporters’ access to their proceeds. This led to diversion of proceeds by exporters, worsening an already bad situation.

This reporter found in 2016 that exporters would earn FX, buy products with their dollars and import them to avoid depositing them at banks.

Exporters are currently agitating, saying that the policy is not justifiable, given that the Federal Government has failed to support them via the Export Expansion Grant (EEG) but is now requiring them to receive payment for their products below the market price. In Nigeria, market rate is the parallel market rate, which is N499/$ and N503/$.

Manufacturers only get five to 10 per cent of their dollar needs at the CBN or NAFEX rate due to FX scarcity but get 90 to 95 per cent of their needs through the parallel market or their own proceeds.

Ede Dafinone, Chairman of the Manufacturers Association of Nigeria Export Group.

“Exporters are complaining for visible reasons,” Chairman of the Manufacturers Association of Nigeria Export Group (MANEG) Ede Dafinone told The ICIR.

“Exporters buy raw materials at the market rate and produce to sell in the global market. It shortchanges them when they have to take their proceeds at the NAFEX rate,” he said.

The value of non-oil exports has been below $4 billion in the last eight years, according to The ICIR‘s checks.  In the first quarter of 2021, non-oil export stood at N978 billion, which was just 33.62 per cent of total export  (N2.907 trillion ) within the period.  In broad terms, the N978  billion was just 10.02 per cent of the total trade transactions over the period.

Exporters say the issue could hurt  Nigeria’s export volumes and value, leading to further declines in export earnings.

A head of export in a multinational company based in Agbara, Ogun State, said the best way to do this was first to support exporters with a grant.

“Exporters are bringing in dollars into a dollar-strapped economy. If I were in charge of the Nigerian economy, I would support them before coming up with a policy that will hurt them,” the export officer, who said he was not speaking for his company, noted.

“It has been like this since 2015.   I understand that the CBN represents the monetary side of the economy while the Finance Ministry and co represent the fiscal side, but what is happening now is that there is no harmony between them, which is why each does something without consulting the other,” the official further said.

According to President of the Manufacturers Association of Nigeria (MAN) Mansur Ahmed, due to the impact of the pandemic and oil price vicissitudes,  policies guiding the FX accessibility had been reformed, leading to constrained capacity utilisation and productivity in the sector.

“The FOREX guidelines and policies have a significant impact on the sector. Now, FOREX access in the sector is given based on some metrics, including type of company, the amount being requested for, what you are spending it on, source of the FOREX, among other things.

“Presently, a significant amount of FOREX is not being met, and on the average, it is over 40 per cent, which means that manufacturers cannot get the funds they require to give their operations a full capacity,” Mansur said at the 48th anniversary of the association in Lagos.

Issues are sometimes bigger than CBN

Due to dwindling dollar inflows into Nigeria since 2014, the CBN has been managing the FX market to ensure proper allocation to critical sectors of the economy. In 2016, the apex bank mandated banks to allocate 60 per cent of FX to manufacturers.

But the policy was later changed, which did not augur well with manufacturers. The CBN subsequently forced exporters to repatriate their proceeds but limited their access to their greenbacks.

The CBN has  since created the Investors and Exporters (I&E) Window and NAFEX, but there is still the parallel market and what some analysts call ‘the black market window.’

Some analysts say the CBN is only trying to manage a  bad situation, saying that they should not just take the blame alone.



    Founder and Managing director of Cowry Assets Management Limited Johnson Chukwu told The ICIR that the major problem was that Nigeria did not have multiple sources of foreign exchange.

    “We do not have multiple supply sources of the foreign exchange. What we have is a monopoly supply from the oil sector. Our FX earning source is from the sale of crude. The Central Bank is the recipient of the proceeds from the sale of crude,” he said.

    Putting Chukwu’s position in context, Nigeria has been an import-dependent economy for over 30 years as non-oil exports have hovered between three and 10 per cent in over 20 years.

    Former Director-General of the LCCI noted that there was a need to harmonise the fiscal and monetary policies to achieve set economic targets in Africa’s most populous nation.

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