The Manufacturers Association of Nigeria (MAN) has disclosed that during the period of severe naira scarcity earlier this year, cement sales dropped by a substantial 30 percent.
The association also noted that the absence of cash access during this timeframe resulted in a 20 percent decline in consumer goods sales.
In a dedicated section of its Manufacturing CEOs Confidence Index, MAN highlighted the severe repercussions brought about by the naira redesign policy on the manufacturing sector.
According to the report, there is no urgency for the Central Bank of Nigeria to accelerate the nation’s transition to a cashless economy or pursue overly aggressive policies, as significant strides have already been taken in that direction.
The crisis, MAN said, impacted negatively on the manufacturers by directly limiting their working capital, thus halting their daily business operations
What the Report Reveals
In addition, the report identifies that naira scarcity had a detrimental impact on the patronage of manufacturing firms by consumers, resulting in a substantial rise in their inventory levels, particularly for retail merchandise.
The report reads in part,
- “The substantial reduction in money velocity left opportunity for speculation and ignited the creation of a naira black market that compounded the woes of manufacturers already plagued by insufficient forex.
- “The naira scarcity wiped out numerous small and medium manufacturing businesses whose transactions were cash-based, especially those within the agro-allied industries who regularly deal with local farmers in remote towns where no formal banking is in sight.
- More unfortunately, the exorbitant POS charges on such cash constrained the operations of resilient manufacturing SMEs and worsened their cost of doing business.”
Also, it was noted in the report that the economic crisis placed the cash-centric distributive trade sector in a vulnerable position, leading to significant implications for both the manufacturing value chain and the cost structure of logistics.
What You Should Know
In October 2022, Godwin Emefiele, CBN governor, announced the apex bank’s plan to redesign and circulate a new series of three banknotes out of the existing eight.
The redesigned N200, N500, and N1000 notes were due for circulation on December 15, 2022. Emefiele said the pre-existing notes would remain legal tender until January 31, 2023.
The CBN governor explained that the decision was reached due to persisting concerns with the management of currency in circulation — particularly those outside the banking system.
However, the policy was said to hurt the economy as many individuals and businesses were unable to access cash from the bank due to the deadline timeframe as well as technical glitches in digital banking operations.