Nigeria's manufacturing sector hit hard by forex crisis

Nigeria's manufacturing sector has been facing significant challenges due to the country's foreign exchange crisis, with a contraction of 3% in the second quarter. Ugochukwu Iretuku, Acting Head of Institutional Banking at Diamond Bank, shed light on the plight of manufacturers in the country. The sector continues to grapple with the dependency on imported raw materials, leading to production shutdowns by major conglomerates. The lack of local inputs and limited access to foreign exchange exacerbate the situation, hindering growth and innovation. Despite efforts to promote local production through backward integration, the need for machinery and equipment reliant on foreign exchange proves to be a barrier. The Central Bank of Nigeria's allocation of 60% of foreign exchange to priority sectors, including manufacturing, aims to alleviate the challenges. However, the limited supply of foreign exchange in the market poses a hindrance to the sector's recovery. In light of the central bank's decision to raise rates to attract foreign investors, there are concerns about the impact on local manufacturers. The high interest rates may further strain the sector, making it difficult for manufacturers to expand or invest in new projects. The government and the central bank need to find a balance between attracting foreign investment and supporting the growth of the local manufacturing industry to ensure its sustainability and competitiveness in the global market. The manufacturing sector is crucial for Nigeria's economic development and job creation, and concerted efforts are required to address the current challenges and create a conducive environment for growth.