Unpaid $2.4bn ‘Invalid’ FX forwards threaten Nigerian manufacturing sector, jobs – Manufacturers’ Association

The Manufacturers Association of Nigeria (MAN) has warned about the detrimental impact of unpaid foreign exchange (FX) forwards, amounting to $2.4 billion, on the nation’s manufacturing sector.

In a statement on Friday, the association said that the Central Bank of Nigeria’s (CBN) failure to pay the forwards is jeopardising the survival of many manufacturing companies and putting thousands of jobs at risk.

MAN’s Director General, Segun Ajayi-Kadir, in the statement highlighted the urgency of the situation saying the non-payment of FX forwards has inflicted severe financial damage on businesses, with losses exceeding N1.5 trillion.

According to him, this has exacerbated the economic woes of manufacturers, many of whom are facing bankruptcy due to the added financial strain.

In 2022 and 2023, various Nigerian companies and small to medium-sized enterprises (SMEs) entered into FX forward contracts with the CBN.

In February, the CBN announced that a Deloitte audit found $2.4 billion of the $7 billion in FX claims, which have pressured the naira and unsettled the currency market, to be invalid.

“We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there, and the infractions on that ranged from so many things, for example, not having valid import documents and, in some cases, entities that do not exist.

“There were account parties who had asked for foreign exchange and got more than they asked for. There were some who didn’t even ask for any and got. So there were whole loads of infractions there,” Mr Cardoso said at the time.

Mr Ajayi-Kadir said the delay in the payment has had a cascading effect on the manufacturing sector, including a dramatic 108.7 per cent increase in job losses over the past year and the closure of numerous small and medium-sized enterprises (SMEs).

He said the unsettled FX forwards have led to increased production costs, as manufacturers are burdened with higher interest rates on loans and unfavourable exchange rate differentials. These financial pressures have significantly impacted businesses’ ability to maintain operations and meet their financial obligations, potentially resulting in losses of up to N2.4 trillion.

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The association urged the CBN to honour its obligations and collaborate with the Federal Ministry of Finance and the private sector to devise a sustainable solution.

Mr Ajayi-Kadir stressed that resolving this crisis is crucial for the survival of the manufacturing sector and for mitigating broader economic impacts.

“The current situation has disrupted supply chains, hampered productivity, and threatened job security.

“With high production costs and diminished consumer demand, many businesses are struggling to manage their financial obligations, leading to loan rescheduling and increased interest rates,” he said.

MAN called for an immediate and comprehensive resolution to the unsettled FX forwards to prevent further damage to the sector and support economic recovery.