With the sustained decline in the nation’s foreign reserves in the past months, some experts have advised Nigerian business owners, particularly the raw-materials-import-dependent ones, to begin to explore opportunities for local sourcing of some of their essential inputs as a strategic step towards sustaining their operations and growing in the post-pandemic era.
The advice was expressed in the Nigeria Economic Review Update 17 report recently published by the Centre for the Study of the Economies of Africa (CSEA) and sourced by Daily Trust.
In addition to locally sourcing their essential raw materials, the researchers also noted that since the naira exchange rate might continue to depreciate in the face of the lingering COVID-19 scourge and dwindling forex inflows, there was the need for manufacturers to leverage on the opportunities availed by the pandemic such as credit facilities and import duty exemptions for specific goods to boost their capacity.
They projected that given the sharp fall in oil price, as well as the decline in Nigeria’s oil production and the attendant reduction in forex inflows, the naira exchange rates against other foreign currencies might dip further in the months ahead.
The analysts stated that: “Going forward, given the sharp fall in oil price, as well as the decline in oil production, the reduction in inflows is expected to continue. Furthermore, the downward revision of the exchange rate from N305:$1 to N360:$1 would require additional drawdowns on the reserves. The exchange rate may continue to depreciate in the face of a continuous decline in forex earnings.
“Firms should leverage on the opportunities provided as a result of the pandemic such as credit facilities and import duty exemptions for specific goods to boost their capacity and embark on an import-substitution drive in order to complement the current supply of foreign exchange,” they added.
It would be recalled that the national foreign reserves depleted by 5%, from US$35.1 billion to US$33.4 billion between March and April 2020, which is the lowest level since January 2018.