The Nigerian industrial sector accessed $4.4 billion from the Central Bank of Nigeria (CBN) to fund their import bills between January and June 2022, accounting for almost half of the total amount disbursed by the apex bank to seven sectors in the same period.


    This is according to data on the sectoral utilization of foreign exchange by the CBN, seen by Nairametrics.


    Meanwhile, major industrial companies in the Nigerian economy have bemoaned the scarcity of FX. Due to this challenge, the three quoted cement manufacturers in the country recorded over N78 billion in foreign exchange losses between January and September 2022.



    Insight into the CBN data: The apex bank intervened with a sum of $8.89 billion to seven sectors of the economy in the first half of the year to fund their import obligations. This is 55.4% higher than the $5.72 billion disbursed in the corresponding period of 2021.

    • The industrial sector received the giant share, accounting for 49.9% of the total amount at $4.44 billion. The amount received by companies in the industrial sector in the review period is 95.5% higher than the $2.27 billion received in H1 2021.
    • Manufactured products followed with $1.86 billion, representing 20.93%, while companies involved in food production having received a sum of $1.21 billion accounted for 13.56% of the total sum.
    • Others on the list include the oil sector ($700.6 million), minerals ($291.7 million), and transportation ($274.1 million), while the agricultural sector received the least at $121.17 million.



    Breakdown of Companies’ FX losses: According to data extracted and analysed by Nairalytics – the research arm of Nairametrics, Dangote Cement, BUA Cement, and Lafarge Africa posted cumulative forex losses of N78.62 billion in the first nine months under review.

    • In contrast to the comparable period of 2021, where they recorded an aggregate loss of N9.84 billion, it increased by a whopping 699.1% year-on-year.
    • BUA Cement recorded the highest increase from N295 million to N5.26 billion. On the other hand, Dangote Cement recorded the biggest loss at N72.39 billion compared to N8.32 billion in the previous year.
    • Meanwhile, Lafarge Africa was able to print a lower FX loss compared to the previous year, recording a 21% decline from N1.22 billion recorded in the first nine months of 2021 to N967.29 million in the period under review.


    Why the losses: The Nigerian exchange rate market has been affected by high volatility caused by the crunch in FX supply amidst persistent high demand for the greenbacks.

    • While the increase can be traced to Nigerians’ move to hedge against inflation, other factors also contributed to the volatility. These factors include increased demand due to the ‘JAPA’ syndrome, strengthening of the US dollar against emerging currencies, decline in crude export earnings, and global inflation, etc. Businesses in Nigeria continue to be impacted by the sustained volatile exchange rate.
    • BUA Cement noted that the huge increase in its FX loss is due to the wide margin between the auction bid and the I&E rates. As you may know, the CBN has been facing a dilemma in the form of a shortage in foreign inflows, with FPIs and FDIs at record lows.
    • During its nine-month result presentation, Dangote Cement explained that the increase in its exchange losses was due to the depreciation of the currencies in some Pan-African countries.


    Nigeria’s foreign reserve has lost over $3.2 billion year-to-date to the constant intervention by the CBN in the Investors and Exporters window, which has kept the exchange rate in a managed floating state. The CBN said it supplied $7.74 billion to the I&E, SME, and Invisibles between January and June 2022.


    How the naira fared: The exchange rates between the naira and other major currencies have been on a downturn since the start of the year, especially the US dollar. At the official Investors and Exporters window, the exchange rate has depreciated from an average of N416/$1 recorded last year to over N440 to a dollar.

    • Similarly, the naira has grown weaker in the black market, hitting a record low of N900/$ last month. As of Tuesday, 15th November 2022, the US dollar traded at an average of N800, representing a 29.4% depreciation compared to N595/$ recorded at the beginning of the year.
    • The exchange rate at the cryptocurrency P2P exchange market has also behaved in the same direction as the black market, currently trading at an average of N795/$1.


    How companies source FX: Due to the inability to get sufficient FX through the official market, manufacturing companies operating in Nigeria are now creative in sourcing foreign exchange to meet their import bills.


    While some companies have been able to generate dollar receipts by exporting their goods to other countries, many have been forced to source for dollars at the parallel market at a higher rate. Unfortunately, this has driven operating costs upward, leading to either a decline in their margins or an increase in selling prices.


    Meanwhile, the CBN has increased FX sales to the I&E window and businesses since it discontinued the sale of forex to Bureau De Change operators in July 2021. 

    However, the supply is not enough to meet the demand of the companies, thus causing them to incur additional FX costs. During its Q3 result presentation, BUA Cement alluded to sourcing for FX from other channels at higher rates.




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