By Merit Ibe
The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to urgently intervene in the ongoing crisis surrounding unsettled foreign exchange (forex) forward contracts, by directing commercial banks to unfreeze the accounts of manufacturers unjustly caught in the web of unresolved transactions.
Expressing deep concern, MAN decried the increasingly harsh treatment meted out to its members by certain commercial banks over unmet forex forward obligations, an issue the association says manufacturers neither caused nor should be punished for.
In a statement, Segun Ajayi-Kadir, Director General of MAN, highlighted the centrality of forex access to the survival and productivity of Nigeria’s manufacturing sector, noting that manufacturers depend heavily on foreign exchange for the importation of raw materials, machinery, and essential production inputs not available locally.
However, Ajayi-Kadir disclosed that recent developments have revealed a troubling pattern of heavy-handed actions by banks, which threaten to cripple manufacturing operations across the country.
“Recently, our members have reported significant unwarranted complexities and undue highhandedness by the banks. Many have faced stringent requirements that are not aligned with the CBN guidelines, resulting in unnecessary bottlenecks and illegal freezing of their corporate and personal bank accounts, with negative impact on production, which could threaten the sustainability of manufacturing operations,” he said.
He cited the case of KAM Industries Nigeria Limited, a prominent steel manufacturer and a MAN member, which is currently embroiled in a forex forward-related dispute with one of Nigeria’s commercial banks.
“This rather unfortunate treatment of private business is only the reported one, and there are several others undergoing similar harrowing experiences. This should stop in the interest of economic development of Nigeria, job security and business sustainability,” Ajayi-Kadir stressed.
Seeking to clarify the obligations of manufacturers in the forex forward process, MAN explained that the process typically begins with manufacturers making naira payments to commercial banks, either through direct remittances or via credit facilities. The banks, in turn, remit the funds to the CBN for the procurement of foreign exchange.
“As it is the norm, commercial banks receive payments in Naira either through direct remittance from their customers or credit facility for the purpose of securing FX for raw-material importation. Upon receipt of these funds or grant of credit facility, the banks then remit the Naira to the Central Bank on behalf of their customers. And from that point, the funds are deemed to be held by the apex bank, thereby completing the customers’ obligations,” the MAN DG explained.
Ajayi-Kadir emphasized that once the banks remit the funds to the CBN, manufacturers should be absolved of further liability or complications.
“Our members have played their part and the commercial banks should play their own part. Our members should not be harassed by the banks. The banks should show understanding and be supportive as we all seek a solution to this rather unfortunate and unexpected impasse,” he said.
“As the innocent one and quite evidently the weakest and most vulnerable in the tripod, it is unconscionable that manufacturers are bearing the brunt.”
He therefore called on the CBN to step in with decisive action: “The Central Bank of Nigeria should direct the concerned commercial banks to immediately unfreeze the accounts of innocent manufacturers in relation to the vexed issue of forex forwards.”
In addition to calling for the release of frozen accounts, MAN also urged the apex bank to accelerate the redemption of outstanding forex forward obligations to bring an end to the longstanding stalemate.
“We reiterate the readiness of MAN to engage with the banks and other stakeholders to co-create the solutions that will facilitate the timely resolution of the long-drawn impasse. Commercial banks and manufacturers should be partners that collaborate to build shared prosperity for the nation, not adversaries,” Ajayi-Kadir stated.
He reaffirmed the association’s commitment to protecting the interests of manufacturers and fostering constructive dialogue.
“We remain open to foster dialogue between the commercial banks and affected members of the association. This is with a view to ending the forex forward imbroglio which has brought untold hardship on manufacturers and could potentially trigger a slide towards de-industrialization of the country.”