The Employers of labour under the aegis of the Association of Food, Beverages, and Tobacco Employers have lamented that the foreign exchange losses incurred as a result of naira devaluation have made it impossible for its members to secure funding for their businesses.
This was disclosed by the President of the association, Chinedum Okereke at the recently held 45th Annual General Meeting of the association in Lagos.
Okereke said that businesses were still struggling with the effects of the COVID-19 pandemic when the federal government introduced the economic policies which had adverse effects on businesses.
He explained that one of the implications of the naira devaluation was a massive loss in foreign exchange of businesses which has made it impossible for its members to access funding.
He said, “Businesses were still struggling to recover from the effect of the COVID-19 pandemic and some other developments on the economic scene, when the removal of subsidy on Premium Motor Spirit and the floating of the Nigerian currency, the Naira was announced resulting in its massive devaluation, the implication of which was significant foreign exchange losses for businesses, causing many to experience negative capital thus making it difficult for them to secure funding, as financial institutions and investor were and are still hesitant to lend or invest in Companies with such negative capital.
“In summary, these developments manifested in a loss of investments and investors’ confidence in the economy, resulting in reduced foreign investments. It also resulted in the closure of businesses and the exit of some big multinational companies from Nigeria.”
Although the International Monetary Fund and the World Bank had emphasized the removal of fuel subsidies and the floating of the naira would lead to broad-based economic growth and stability in the long term, the association president said some analysts believed that regardless of the intended ultimate benefits of the action, introducing these economic measures at the same time was inappropriate.
“The depreciation of the Naira resulted in high cost of production and other aspects of operations, reduced volumes, reduced sales and by implications reduced income/revenue in real value terms, job losses, soaring unemployment rates, and increase in the illicit production and consumption of sub-standard goods particularly in our sector. The health implications of these are better imagined than experienced,” AFBTE president lamented.
In addition, Okereke noted that the federal government aims to increase and expand its tax nets to raise revenue contributed to the spiralling operating cost of businesses.
He said, “In addition to the foregoing, the Central Bank of Nigeria increased the monetary policy rate (MPR) twice, the latest of which was by 400 basis points from 18,75% to 22.,75%, thus making the cost of borrowing to be astronomical.
“The other actions of Governments and their Agencies at various levels (Federal, State & Local) by way of increased heads and sometimes the quantum of taxes, charges, and levies, aimed at shoring up revenue to execute their programmes have contributed to the spiraling operating cost of member- companies.
“The unpleasant aspect in all of these is the failure of some Governments and their Agencies to engage stakeholders before imposing some of these costs on businesses.”
