While the purchasing prices of imported products are rising through the roof, as a result of the devaluation of the naira by the Central Bank of Nigeria (CBN), the country’s exporters are finding it extremely difficult to push their goods into the international market, creating fears of unfavourable balance of trade. Rising production costs and surging expenditure on packaging, are taking big tolls on Nigerian exporters who are already battling with a number of environmental issues which make them less competitive in the international market.
Manufacturers have had production costs escalate by over 20 percent on the back of higher electricity charges and energy spend, weaker naira, rising cost of importing raw materials, due to the CBN’s closure of the official forex window and the skyrocketing cost of funds. Packaging costs have also risen by between 20 and 25 percent across industries, but it is proving difficult for exporters to shift the cost to international consumers as it is hampered by intense price competition by Asian traders.
“There is a rise in the packaging costs for exporters by over 20 percent,” Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group (MANEG), confirmed to BusinessDay. “It is now difficult for Nigerian exporters to compete with Asians whose packaging costs are cheaper. Exporters are trying to increase the competitiveness of their products by packaging them properly to meet international standards, but the rising cost in Nigeria, is making it very difficult,” Oyelola explained.
He said the current situation called for a packaging incentive or scheme for exporters. This is because manufacturers of export products have been severely affected by the CBN’s recent closure of the Retail/Wholesale Dutch Auction System (RDAS/ WDAS) window, where importers used to source foreign exchange at the official rate. Even though the CBN’s objective to bring sanity into the forex market seems noble, its effect is telling on the exporters.
Many manufacturing exporters, who source raw materials abroad, now go through the inter-bank market, where foreign currencies are more expensive. Frank S.U. Jacobs, president, Manufacturers Association of Nigeria (MAN), sees this as a key factor determining the state of the manufacturing sector and exporters.
“Given the fact that oil prices are falling, we all say there is the need to diversify the economy. But how can you diversify without manufacturing. How can you diversify the economy by doing things that will rather destroy the sector,” Jacobs queried. However, there are some analysts who say that the current situation might favour exporters who could truly raise their game.
Also, manufacturers and exporters have decried the impact of recent hike and disparity in electricity tariffs under the new Multi-Year Tariff Order (MYTO), saying that it has raised production costs and made exports more expensive. According to them, production costs had hit the rooftops, while they faced transport and logistics challenges trying to export to other economies.
