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Dollar Scarcity: 40,000 Jobs Threatened, Food Prices Soar

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The difficulties in getting foreign exchange and the steep fall in the value of the naira are seriously affecting the manufacturing sector, with prices of locally made and imported food items heading northward, IFE ADEDAPO writes

The scarcity of foreign currencies in the country, especially the dollar, which has made it difficult for manufacturers of essential food items to import raw materials into the country, is threatening about 40,000 jobs.

Investigations by our correspondent showed that the high cost of importation due to unprecedented fall in the value of the naira has made importation difficult and expensive, thereby resulting in many factories operating far below their installed capacities.

It was also gathered that as a result of the currency crisis, the prices of essential food items were gradually rising as a direct consequence of the high cost of production and the imported substitutes becoming more expensive.

The naira, which has been taking a beating from the fall in global oil prices since mid-2014, tumbled to 391 against the dollar at the parallel market on Friday and has remained at the Central Bank of Nigeria-pegged 199 to $1 at the interbank market.

On January 11, the central bank stopped the sale of foreign currencies to Bureaux de Change operators as part of measures to reduce the pressure on the nation’s foreign reserves.

Since the announcement was made, the value of naira, which was 283 against the dollar at that time, has been depreciating.

Speaking with our correspondent on the effects of the falling currency on food manufacturers, the Executive Secretary, Association of Food, Beverage and Tobacco Employers, Mr. Aderemi Adegboyega, lamented that hundreds of jobs out of the 40,000 workforce in the sector had been lost already and that those still in employment were hanging on by the thread.

He said the business was no longer profitable and firms in the sector were shutting down because they could not afford to pay the salaries of workers, while producing very little.

“We need forex to buy raw materials as a lot of our companies are producing below capacity, which is a big problem. As we are not manufacturing, it means that some of our employees are going to lose their jobs. In our industry alone, we have about 40,000 jobs, and if care is not taken, there will be a lot of loss in terms of the jobs,” Adegboyega warned.

While analysing the precarious situation in the manufacturing and trade sectors, the Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said many organisations were becoming insolvent due to accumulated debts owed foreign suppliers.

Yusuf stated, “Many have slowed down their operations because of lack of forex, and many companies are not able to pay their suppliers abroad; for those who took goods on credit, the situation has created a major credibility problem for them. And because of that, some of them have lost their credit lines.

“Many foreign airlines operating in the country cannot remit proceeds to their home countries. For those who are buying and selling; if they get the money to buy, how are they going to sell? It is a very serious situation.”

Meanwhile, both local and imported food items have become expensive due to the scarcity of dollars and the restrictions placed by the CBN on importers of certain food items from assessing foreign exchange from the official source.

Investigations by our correspondent showed that the prices of packaged water, bread, imported brands of vegetable oil, rice, fish as well as ingredients for making confectioneries had been on a steady rise since the restriction of forex sale was announced in June 2015.

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Food retailers at the Ipodo Market, Ikeja, Lagos State, told our correspondent that a carton of ‘Titus’ frozen fish, which sold for N9,000 in June last year, had increased by 33 per cent to N12,000 six months after.

One of the traders, Mrs. Folashade Dasaolu, explained that the price of a carton of croaker fish, being imported from Turkey, had increased by 14 per cent from N14,000 three months ago to N16,000 presently.

“We don’t get as much quantity from our suppliers as we would like to because they have limited stock,” she added.

For imported vegetable oil, the owner of Okikiola Ventures in the same market, Mrs. Abiodun Adefolami, said that a 25-litre container of the product imported from Malaysia was now selling for N8,200 instead of the previous N6,200.

The price of a 50kg bag of rice started a steady ascent from N8,700 in August last year to peak at N10,000 in the middle of November.

Statistics obtained from Novus Agro Nigeria Commodity Index showed that the price of the product started declining when the CBN lifted the ban on rice as part of the items restricted from the official forex market.

The CBN on June 23, 2015 officially stopped the sale of dollars to the importers of 41 items, in its quest to reduce the pressure on the naira as well as preserve the country’s external reserves.

The essential food items included on the list are rice, margarine, palm kernel/palm oil/vegetable oil, meat and processed meat products, vegetable and processed vegetable products, poultry products like chicken, eggs, turkey, and tinned fish in sauce.

A bag of sachet water, which sold for N100 in Lagos in January, now sells for N150, with the manufacturers blaming the high cost of packaging materials for the price increase.

It was gathered that the rise in the price of flour from N6,500 to N7,900 for a 50kg bag; imported fat from N4,500 to N5,200; and sugar from N7,000 to N8,600 per 50kg bag, had made bakers in Lagos to increase the price of a loaf of sliced bread to N250 as against N200 previously.

However, the Chairman, Association of Master Bakers and Caterers of Nigeria, Lagos chapter, Jacob Adejorin, said despite the rise in cost of raw materials, the price of the popular ‘Agege’ brand of bread had not changed.

Adegboyega explained that some of the manufacturers had embraced the backward integration policy as directed by the Federal Government, but that it would take some time before the expected impact could be felt.

Citing examples of companies that had started backward integration, he said, “Flour Mills of Nigeria Plc has a farm that is called Suntil, where it is growing sugarcane and it will eventually be producing sugar. UAC Foods has farms somewhere where it is rearing chicken. Chi Foods also has farms where it is producing concentrates, but the fact is that all these are not enough for their production capacities.”

According to him, FrieslandCampina WAMCO has gone into partnership with herdsmen in Plateau and other states to train them on the type of cow that will produce the quality of milk the company requires and is offering them financial support.

PUNCH


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