Forex Scarcity Means Business: Local Input Providers Profit From Higher Import Costs

THE Manufacturing Association of Nigeria (MAN) says that manufacturers in Nigeria are increasingly turning to local sources to meet their input needs. This has meant that the fallout from the shortage of foreign exchange, which caused importation costs to soar, has turned out to be a blessing in disguise. At least, domestic providers of raw materials have seen a rise in patronage. Plus the increased revenue that comes with it.

BusinessDay Newspaper, in reporting the success of local input suppliers in what has been a generally turbulent business environment, cites data from MAN, which indicates an upward movement in the use of local inputs by manufacturers. The report by the newspaper suggests that local input preference rose from 46.71 in 2014 to 51.88 the following year. According to the manufacturers’ banner association, its members found it difficult to source raw materials from beyond Nigeria’s borders because the foreign exchange they needed to purchase them was hard to come by. This, MAN says, encouraged producers to seek inputs from sources closer to them.

There seems to be evidence that domestic raw material suppliers have recorded substantial gains from greater local demand. Dangote Sugar, which controls over 70 percent of Nigeria’s sugar market and supplies sugar to manufacturers, has reported a profit of ₦11 billion for the first half of 2016 alone, well over half the ₦16.55 billion it says it made last year. Okomu Oil Palm, another company that provides input for local producers posted half-year sales revenue of about ₦7.5 billion, up by 51.6 percent from the same period last year.

The narrative of the FOREX crisis over the past year has largely been negative. But the earnings racked up by local input suppliers points to a silver lining, a bright spot in the pattern of events. The positive story could become more dominant as Nigerians turn inwards to find answers to the country’s present challenges.

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ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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