Manufacturing companies are still reeling from the impact of the prolonged Naira crisis with many incurring 20 per cent and 30 per cent decreases in sales turnover on consumer goods and cement respectively in the second quarter of the current year.
The Manufacturers Association of Nigeria (MAN) said that “sequel to the naira redesign and the new cash withdrawal limits by the Central Bank of Nigeria (CBN), 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.”
This was contained in the Manufacturers CEOs Confidence Index (MCCI) second quarter (Q2) report.
According to the report, 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 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 an 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 group said.
It noted that the country’s transition to a cashless economy required no urgency or policy aggressiveness considering that a lot of progress had already been made, saying, “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 percent, six percent and 3.5 percent, Nigeria’s ratio is impressively below 1.5 percent.
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