The difficulties in getting foreign exchange and the steep
fall in the value of the naira are seriously affecting the manufacturing
sector, with prices of locally made and imported food items heading
northward, IFE ADEDAPO writes
The scarcity of foreign currencies
in the country, especially the dollar, which has made it difficult for
manufacturers of essential food items to import raw materials into the
country, is threatening about 40,000 jobs.
Investigations by our
correspondent showed that the high cost of importation due to
unprecedented fall in the value of the naira has made importation
difficult and expensive, thereby resulting in many factories operating
far below their installed capacities.
It was also gathered that
as a result of the currency crisis, the prices of essential food items
were gradually rising as a direct consequence of the high cost of
production and the imported substitutes becoming more expensive.
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Dollar scarcity: 40,000 jobs threatened, food prices soar
February 22, 2016
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The
difficulties in getting foreign exchange and the steep fall in the
value of the naira are seriously affecting the manufacturing sector,
with prices of locally made and imported food items heading northward,
IFE ADEDAPO writes
The scarcity of foreign currencies in the
country, especially the dollar, which has made it difficult for
manufacturers of essential food items to import raw materials into the
country, is threatening about 40,000 jobs.
Investigations by our
correspondent showed that the high cost of importation due to
unprecedented fall in the value of the naira has made importation
difficult and expensive, thereby resulting in many factories operating
far below their installed capacities.
It was also gathered that
as a result of the currency crisis, the prices of essential food items
were gradually rising as a direct consequence of the high cost of
production and the imported substitutes becoming more expensive.
The
naira, which has been taking a beating from the fall in global oil
prices since mid-2014, tumbled to 391 against the dollar at the parallel
market on Friday and has remained at the Central Bank of Nigeria-pegged
199 to $1 at the interbank market.
On January 11, the central
bank stopped the sale of foreign currencies to Bureaux de Change
operators as part of measures to reduce the pressure on the nation’s
foreign reserves.
Since the announcement was made, the value of naira, which was 283 against the dollar at that time, has been depreciating.
Speaking
with our correspondent on the effects of the falling currency on food
manufacturers, the Executive Secretary, Association of Food, Beverage
and Tobacco Employers, Mr. Aderemi Adegboyega, lamented that hundreds of
jobs out of the 40,000 workforce in the sector had been lost already
and that those still in employment were hanging on by the thread.
He
said the business was no longer profitable and firms in the sector were
shutting down because they could not afford to pay the salaries of
workers, while producing very little.
“We need forex to buy raw
materials as a lot of our companies are producing below capacity, which
is a big problem. As we are not manufacturing, it means that some of our
employees are going to lose their jobs. In our industry alone, we have
about 40,000 jobs, and if care is not taken, there will be a lot of loss
in terms of the jobs,” Adegboyega warned.
While analysing the
precarious situation in the manufacturing and trade sectors, the
Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda
Yusuf, said many organisations were becoming insolvent due to
accumulated debts owed foreign suppliers.
Yusuf stated, “Many
have slowed down their operations because of lack of forex, and many
companies are not able to pay their suppliers abroad; for those who took
goods on credit, the situation has created a major credibility problem
for them. And because of that, some of them have lost their credit
lines.
“Many foreign airlines operating in the country cannot
remit proceeds to their home countries. For those who are buying and
selling; if they get the money to buy, how are they going to sell? It is
a very serious situation.”
Meanwhile, both local and imported
food items have become expensive due to the scarcity of dollars and the
restrictions placed by the CBN on importers of certain food items from
assessing foreign exchange from the official source.
Investigations
by our correspondent showed that the prices of packaged water, bread,
imported brands of vegetable oil, rice, fish as well as ingredients for
making confectioneries had been on a steady rise since the restriction
of forex sale was announced in June 2015.
Food retailers at the
Ipodo Market, Ikeja, Lagos State, told our correspondent that a carton
of ‘Titus’ frozen fish, which sold for N9,000 in June last year, had
increased by 33 per cent to N12,000 six months after.
One of the
traders, Mrs. Folashade Dasaolu, explained that the price of a carton of
croaker fish, being imported from Turkey, had increased by 14 per cent
from N14,000 three months ago to N16,000 presently.
“We don’t get as much quantity from our suppliers as we would like to because they have limited stock,” she added.
For
imported vegetable oil, the owner of Okikiola Ventures in the same
market, Mrs. Abiodun Adefolami, said that a 25-litre container of the
product imported from Malaysia was now selling for N8,200 instead of the
previous N6,200.
The price of a 50kg bag of rice started a
steady ascent from N8,700 in August last year to peak at N10,000 in the
middle of November.
Statistics obtained from Novus Agro Nigeria
Commodity Index showed that the price of the product started declining
when the CBN lifted the ban on rice as part of the items restricted from
the official forex market.
The CBN on June 23, 2015 officially
stopped the sale of dollars to the importers of 41 items, in its quest
to reduce the pressure on the naira as well as preserve the country’s
external reserves.
The essential food items included on the list
are rice, margarine, palm kernel/palm oil/vegetable oil, meat and
processed meat products, vegetable and processed vegetable products,
poultry products like chicken, eggs, turkey, and tinned fish in sauce.
A
bag of sachet water, which sold for N100 in Lagos in January, now sells
for N150, with the manufacturers blaming the high cost of packaging
materials for the price increase.
It was gathered that the rise
in the price of flour from N6,500 to N7,900 for a 50kg bag; imported fat
from N4,500 to N5,200; and sugar from N7,000 to N8,600 per 50kg bag,
had made bakers in Lagos to increase the price of a loaf of sliced bread
to N250 as against N200 previously.
However, the Chairman,
Association of Master Bakers and Caterers of Nigeria, Lagos chapter,
Jacob Adejorin, said despite the rise in cost of raw materials, the
price of the popular ‘Agege’ brand of bread had not changed.
Adegboyega
explained that some of the manufacturers had embraced the backward
integration policy as directed by the Federal Government, but that it
would take some time before the expected impact could be felt.
Citing
examples of companies that had started backward integration, he said,
“Flour Mills of Nigeria Plc has a farm that is called Suntil, where it
is growing sugarcane and it will eventually be producing sugar. UAC
Foods has farms somewhere where it is rearing chicken. Chi Foods also
has farms where it is producing concentrates, but the fact is that all
these are not enough for their production capacities.”
According
to him, FrieslandCampina WAMCO has gone into partnership with herdsmen
in Plateau and other states to train them on the type of cow that will
produce the quality of milk the company requires and is offering them
financial support.
Copyright PUNCH.
http://www.punchng.com/dollar-scarcity-40000-jobs-threatened-food-prices-soar/
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