By Bimbola Oyesola
The The Center for the Promotion of Private Enterprise (CPPE) said the shortage of foreign exchange in the country greatly jeopardizes the ability to create new jobs and retain existing ones.
Invariably, the center noted that the sharp depreciation of the exchange rate and functioning of the parallel market which exceeds 300% due to the scarcity at the official counter has worsened the profitability of investments in the first half of 2022.
According to CPPE Founder and CEO, Dr. Muda Yusuf, many businesses have suffered severe disruption due to currency liquidity issues, volatility and currency depreciation.
“These have severely affected businesses in all sectors of the economy. Operating and production costs have increased by 30 to 100% due to the exchange rate crisis,” he said. .
He noted that production has declined significantly in many industries due to difficulties in accessing raw materials due to the scarcity of foreign exchange, while many players in the economy are now resorting to the patronage of the parallel market at a cost very prohibitive, because very few accesses exist on the official window.
He said, “The dysfunctional foreign exchange policy has had a negative impact on foreign direct investment, foreign portfolio investment as well as other capital inflows into the country.
“Multiple exchange rates and the huge parallel market premium in the foreign exchange market remain major downside risks to investment growth and the attraction of foreign capital to the economy. This has continued to weaken the exchange market offer.
Yusuf lamented that the inability of foreign investors to repatriate their profits and dividends as well as their income has created considerable perception, reputational and country risk issues for the Nigerian economy.
“All of these are responsible for the sharp drop in capital imports in recent years,” he said.
He listed, among other things, the high production costs due to the high dependence of the manufacturing sector on imports of imported raw materials as implications.
of the currency crisis for investors
Others include high operating costs in virtually all sectors of the economy, weak sales and turnover due to rising prices and the effect on demand and erosion of profit margins because not all additional costs can be passed on to consumers.
According to the CPPE boss, the Nigerian economy over the past six months has been characterized by various economic vulnerabilities, which include the unprecedented spike in energy prices which has had a very significant negative effect on economic actors in all sectors, an unprecedented level of currency depreciation and volatility, an increasingly weak fiscal space, a acute shortage of foreign exchange with very profound effects on investors in all sectors, rising public debt and debt service burden, worsening security situation and high political risk due to political transition processes and activities .
Others were the growing burden of fuel subsidies, weak infrastructure, declining investor confidence and declining purchasing power.
“All of these headwinds had a devastating effect on businesses in the first half. However, the economy continues to show resilience in all of these challenging investment environments,” he said.
He said, however, that the main concerns of economic players in the first six months of the year were high and rising energy costs, “Investors in all sectors of the economy are concerned about high and rising energy costs, especially the cost of diesel which increased by more than 300%, the cost of aviation fuel which increased by another 300%, the cost of gas which increased by more than 100%.The cost of PMS is still moderately tolerable because of the subsidy scheme that is still currently provided by the government.”
On fiscal operations, Yusuf said the figures released by Finance Minister Ms. Zainab Ahmed during the presentation of the Medium Term Expenditure Framework 2023-2025 painted a grim and worrying picture of the state of finances. public, suggesting that the government is on the verge of bankruptcy.