Manufacturers in Nigeria have devised ways to access foreign exchange given the perennial scarcity of forex in the official Central Bank window, otherwise called the I&E Window.
NewsBeatng reports that the I&E FX Window is the market trading segment for investors, exporters, and end Users that allows for FX trades to be made at a market-determined exchange rate.
It is right to note that the challenges with meeting the growing demand for forex have forced manufacturers to rely on a combination of creative ways to access the forex that they need.
It was gathered that some of the manufacturers get their forex through a combination of official and unofficial means often times at risk of receiving illicit global money flows.
The current dollar scarcity being experienced in the country started in early 2020, a few weeks into the pandemic and months after the apex bank withdrew its OMO policy of giving out high-interest rates in exchange for foreign portfolio inflows.
The first wave of official confirmation came from members of the Manufacturers Association of Nigeria (MAN) who in 2020, raised the alarm that they experienced difficulty obtaining forex “for five weeks due to lack of Central Bank’s interventions.”
The scarcity was confirmed at the time by FBNQuest in a note on May 7, when it said, “There is an estimated $1 billion backlog of unmet dollar demand.”
While some complained of access to forex others who were able to access revealed it cost a bit more to buy when compared to the official market price.
Unilever, an FMCG company, revealed that the time that it bought dollars at 9 percent above market rates. It is now three years since then and the disparity between the official and parallel market rates have only widened currently by as much as 70% in price differentials.Manufacturers get creative
To meet their demand, manufacturers have gotten creative by leveraging on sourcing from the official window (when available), black market, dollar receipts, import substitutions, related parties, or by reducing imports of raw materials inputs.
Manufacturers, such as cement companies, BUA tend to rely on the CBN window primarily for the purchase of spare parts.
“For the rest of our operations such as the purchase of spare parts or new equipment, we rely on sourcing FX from the CBN, using the I&E window”, its CEO, Yusuf Binji, revealed in the company’s 2021 Annual Report and Accounts.
But while large corporations like BUA and Dangote can still access forex from the official window it hardly meets their demand requiring that they will rely on other sources to meet their demand. Smaller businesses are not anywhere close to securing forex from the official window.
Most manufacturers however admit to obtaining forex from the black market despite the about N300 difference between the official market and the black market.
