The Manufacturers Association of Nigeria has said that its members have lost at least N1.5tn in the last six months to forex-related transactions.

The Director-General of MAN, Segun Ajayi-Kadir, made the disclosure to The PUNCH in an exclusive interview on Monday.

The revelation came amid dissent by manufacturers that contrary to claims made by the Central Bank of Nigeria that all valid forex requests had been cleared, several manufacturers still have pending dollar requests, some of which have been left unattended for an extended period.

Two weeks ago, the CBN announced it had successfully cleared all valid foreign exchange backlogs, effectively eliminating a legacy burden.

The announcement was made by the bank’s Acting Director of Corporate Communications, Sidi Ali, in a statement made available to The PUNCH.

The bank said it completed the payment of $7bn, resolving obligations to bank customers, thereby clearing the residual balance of the FX backlog.

The statement partly read, “The Central Bank of Nigeria has announced that all valid foreign exchange backlogs have now been settled, fulfilling a key pledge of the CBN Governor, Mr Olayemi Cardoso, to process an inherited backlog of $7bn in claims.

“Clearance of the foreign exchange transactions backlog is part of the overall strategy detailed in last month’s Monetary Policy Committee meeting to stabilise the exchange rate and thereby curb imported inflation, spurring confidence in the banking system and the economy.”

However, in an exclusive interview with The PUNCH, the President of the Manufacturers Association of Nigeria, Francis Meshioye, said the forex requests by his members were yet to be cleared.

According to Meshioye, the lingering status of the forex requests by manufacturers, which remains unmet, has taken a negative toll on many businesses.

Meshioye said, “Surely not. They have not cleared it. We know there are a lot of issues surrounding forward contracts, especially forex that is due to be paid. The agreement is that the money (forex) should be paid at a future date, and the future date has passed.

“They are in arrears. This is a concern to the manufacturers because it has a lot of effects, not only on the manufacturers but the country as a whole. In the first instance, you will lose your credibility.”

To address the issue, a stakeholder meeting comprising NACCIMA, MAN, the affected banks and customers was convened by the Minister of Industry Trade and Investment at the Bank of Industry in Lagos on March 21, 2024.

The meeting, however, failed to comprehensively address the concerns of the affected businesses. The CBN, which appointed Business Management Consultant, Deloitte Nigeria to oversee the settlement of the forex backlog, said the requests that were not attended were deemed invalid.

According to Ajayi-Kadir, the N1.5tn forex-related losses incurred by the manufacturers in the last six months have revolved around interest payments that have accrued as a result of the Central Bank of Nigeria’s delay in settling outstanding forex forward contracts.

Other factors that have contributed to the loss include excess payments made for import duty assessment and the rapid depreciation of the naira during the first quarter of the year.

Ajayi-Kadir added that many manufacturers are unable to produce due to the inability to import new raw materials, having defaulted in settling their outstanding dollar debts.

He expressed regret that some of the manufacturers’ funds have been left hanging for more than 18 months, a development that has been fraught with disastrous consequences.

He said, “Within the last six months, our companies have incurred not less than N1.5tn in forex-related transaction losses. By the time our results are out for Q1, in terms of the performance of companies, this will be very clear.

 “So, you cannot imagine a situation where the CBN is completely insulated from this challenge because they have fully received the naira cover for the forward purchase. The banks are also collecting interest on their naira credit facilities to manufacturers. The corresponding bank outside the country is also earning interest on the dollar component. And, until they pay what they owe, they cannot go for fresh raw materials, because you’ll be seen as a bad customer.

“Whenever you have something like this, it affects the supply chain — productivity, your loan repayment schedule, employment target and the contribution of the sector to the GDP will be compromised. Whenever something like this happens to manufacturers, it has serious implications for the logistics value chain.

 “It impacts security and of course, the level of well-being reduces because, wherever you can, you have to pass the cost to the consuming public. That is when you are even able to produce. When the financials for the first quarter are out, you will see that it is a dire situation for the manufacturing sector.”

Speaking further, the MAN DG said that sequel to the earlier consultation held at the behest of the Federal Ministry of Trade, Industry and Investment, further consultation will be held with the National Assembly to explore a viable solution to the unsettled forex forwards.

Reacting to the claim by the apex bank that the requests which were not settled were deemed invalid, Ajayi-Kadir faulted the argument, insisting that neither the CBN nor its agent (Deloitte) had communicated to the banks the criteria through which the determinations on validity were made.

He called on the CBN to reassess the requests to avoid any possible pushback in the form of litigation on the part of the manufacturers, which may further worsen the already dire situation.

He added, “It is a very difficult situation for manufacturers. You can imagine, some of these forwards are more than two years old. The point is that some of those transactions had been concluded.

 “The raw materials had been imported, the raw materials have been used to produce goods. Those goods have been sold. The account has been closed for that financial year. So, the situation we are having now is that we are still paying interest both on the naira and the dollar debts because most manufacturers borrowed money to deposit for the forex in the first instance. When the corresponding bank of your local bank, that is the one abroad pays the dollar on your behalf, you pay interest as well.

 “So, manufacturers have continued to pay because the matter has not been fully vacated. That means that the dollar has not been fully paid back by the CBN, which is the forward nature of this transaction. The situation now is such that it undermines our capacity to operate. Most of our members who get their raw materials and use them as a basis for production to generate funds to be able to make another round of production are having it difficult. They are piling up interest rates that they are paying.”

Asked about the basis for arriving at the N1.5tn loss, Ajayi-Kadir said the losses were incurred through interest payments on unremitted dollar debts, excess payments on import duty assessment, and the depreciation of the local currency.

He lamented that the loss had put the manufacturing sector in a state of distress and that more factories may close if the situation is not resolved.

“Going to court may be a last resort, but it’s not something that I  believe is in anybody’s particular interest. You know the judicial system can. We are already saying that the forward has taken one year and a half. I don’t know how long this one is going to take, knowing that it can go through all the different layers of the judicial process.

 “So I hope that it will not get to that. I am not ruling it out, but I am saying that I am confident that it shouldn’t get to that and that we should be mindful of the implications on the national economy,” he said.