How naira scarcity took a toll on manufacturing businesses- MAN
The Manufacturing Association of Nigeria (MAN) is bemoaning the negative impact of the naira redesign and cash withdrawal limits imposed the Central Bank of Nigeria (CBN), saying that the unpopular policy of the apex bank almost crippled the nation’s manufacturing industry subsector.
MAN said in its MAN CEO Confidence Index(MCCI) for the second quarter released on Wednesday, the crisis instigated by the CBN policy nearly crippled manufacturing companies with about 20% and 30% decrease in sales for consumer goods and cement respectively.
Said MAN “Sequel to the naira redesign and the new cash withdrawal limits by the Central Bank of Nigeria, the scarcity of both old and new naira notes across all banking halls and electronic payment channels in the country meted severe hardship on manufacturers.
“ The prolonged crisis nearly crippled manufacturing companies with about 20% and 30% decrease in sales for consumer goods and cement respectively.
“The crisis impacted negatively on the manufacturers by directly limiting their working capital, thus halting their daily business operations. In addition, the naira scarcity crushed the consumer patronage of manufacturing firms and resultantly escalated their volume of inventories, especially for retail goods.
“By exposing the highly cash-based distributive trade sector to great risk, the economic crisis had severe consequences on the manufacturing value chain and cost of logistics.
“The substantial reduction in money velocity left opportunity for speculation and ignited the creation of a naira black market that compounded the woes of manufacturers already plagued by insufficient forex.
“The naira scarcity clearly wiped out numerous small and medium manufacturing businesses whose transactions were cash-based, especially those within the agro-allied industries who regularly deal with local farmers in remote towns where no formal banking is in sight. More unfortunately, the exorbitant POS charges on such cash constrained the operations of resilient manufacturing SMEs and worsened their cost of doing business.
“The country’s transition to a cashless economy requires no urgency or policy aggressiveness considering that a lot of progress has already been made. A comparative analysis of the country’s cashless status has shown that while the ratio of cash to GDP in Europe, U.S. and South Africa are respectively about 10%, 6% and 3.5%, Nigeria’s ratio is impressively below 1.5%.
“Therefore, achieving a full cashless economy should not be the pressing issue when there are tougher challenges of insecurity, exchange rate volatility, skyrocketing inflation, energy disruption, over bloated fiscal debt, dwindling foreign reserves, business collapses and daily divestments.”
