Inside a moribund textile company in Kaduna
backward integration exercise in some of the nation’s productive sector has hit 53.1 per cent following the restriction of some items from accessing foreign exchange at the official window of the Central Bank Nigeria (CBN) in 2016 as well as subsequent forex intervention for local manufacturers in terms of raw materials import.
According to statistics from local operators, even though 2016 was a challenging year for operations, it marked a growth in local substitution that may positively affect reduction in the nation’s food import bill.
Already, operators in the conglomerates sector have intensified alternative sourcing for critical raw materials for milk, sorghum, tomato, apparels, leather and wood.
Local producers claimed that local raw-materials utilisation increased across sectoral groups like textile, wearing apparel, carpet, leather and leather footwear; pulp, paper & paper products, printing, publishing & packaging; chemical & pharmaceuticals; domestic & industrial plastics, rubber & foam; electrical & electronics; and motor vehicle & miscellaneous assembly groups; and to some extent basic metal, iron & steel and fabricated metal group.
Import substitution has remained one of Federal Government’s primary focus areas, with agriculture serving as a potential catalyst.
In Q1 2017, crop production remained the largest contributor to agriculture GDP, accounting for 87 per cent of the total, while livestock farming accounted for just nine per cent.
Based on CBN data, importation of food products accounted for 8.9 per cent of forex utilisation in Q1 2017 compared with 9.5 per cent recorded in the previous quarter.
The latest inflation report also points towards a reduction in imported food items as the impact of the CBN’s stepped up forex interventions on parallel market rates has been a contributing factor to the latest decline in imported food price inflation, which slowed to 14.2per cent year-on-year in June from above 21.0 per cent throughout Q4 2016.
The Manufacturers Association of Nigeria (MAN) described the intervention of the Central Bank of Nigeria (CBN) by the way of preferential foreign exchange allocation to the sector as the turning point in the second half of 2016 for local producers as capacity utilisation rose above 50 per cent.
According to MAN, the preferential forex allocation was able to support the various investments already made locally for the development of raw materials and resurged manufacturing production to a large extent.
Latest report from MAN on activities in the industry in the second half of 2016 showed that the intervention was responsible for the production momentum gained in the economy during the period.
The association however sought the sustenance of priority forex allocation for raw materials, spare parts and machinery to the industrial sector so as to improve production as well as the need for government to intensify efforts at further diversifying the economy away from oil and expedite the resumption and implementation of the Export Expansion Grant (EEG) to catalyze non-oil export forex earnings.
However, notwithstanding the leeway gained in the second half of the year, it is very important for the government to continue to address the multifarious economic challenges, especially the manufacturing sector.
“Government needs to establish a manufacturing development bank in the country to cater for the credit needs of the manufacturing sector
specially; upscale access to the various development funds created by the CBN such as the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the N300 billion Real Sector Support Facility (RSSF) through relaxing stringent conditions that denies manufacturers access to these funding windows”, MAN said.
On her part, the Managing Director, Psaltry International Company Limited, Mrs. Yemisi Iranloye, said her company’s processing plant has an installed capacity of 50
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Title :
‘LOCAL SUBSTITUTION AVERAGES 53% ON CBN’S RESTRICTION POLICY, INTERVENTION’
Description : Inside a moribund textile company in Kaduna backward integration exercise in some of the nation’s productive sector has hit 53.1 per cent fo...
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