Home Forex Blinken nudges Nigeria on foreign exchange access for US businesses

Blinken nudges Nigeria on foreign exchange access for US businesses

by admin

A day after meeting President Bola Tinubu in the capital Abuja, Blinken toured the commercial metropolis Lagos where he visited a complex of IT startups and inaugurated a new US space showcasing American technology.

Blinken’s motorcade passed through the teeming streets of the city of more than 20 million before entering the sparkling complex of 21st Century Technologies, where he was shown Nigerian innovations in software and virtual reality.

Hailing Nigerian ingenuity, Blinken said the US had a growing interest “in working with Nigeria, investing in Nigeria, partnering with Nigeria”.

But he added: “There are challenges that still need to be met to make sure this is the most inviting business environment possible.”

He said he spoke to Nigerian leaders about issues “including the ability to repatriate capital, including the ongoing challenge of rooting out corruption”.

Returning funds

Foreign businesses in Nigeria require permission from the central bank to return funds to their home countries.

While the central bank has assured investors, businesses have complained about long delays in recent years as Nigeria’s foreign reserves dwindle as a result of a drop in global oil prices and Nigeria’s own crude production.

Foreign airlines, for example, have been complaining about the slow pace of resolving access to millions of dollars in profits they say are caught in Nigeria.

In Abuja on Tuesday, Blinken also publicly raised the funds repatriation issue but praised economic reforms promised by Tinubu, who was elected last year.

“I know that President Tinubu is focused on these challenges, and we also welcome his very bold economic reforms to unify the currency and fuel subsidies,” Blinken told reporters at the presidential palace in Abuja.

“We also recognise that, in the short term, these reforms have created pain for vulnerable communities,” he said.

Opportunity in reform?

As access to forex becomes increasingly difficult, Nigerian manufacturers are investing billions of naira in backward integration projects, sourcing raw materials locally, and reducing their exposure to imports.

The challenges are essentially macroeconomic challenges, it’s affecting the multinational as much as it is affecting the indigenous investors

Many are setting up farms, plantations and processing plants in rural communities where they harvest or process raw products into semi-finished inputs for use at factories.

While several manufacturers are improving their local input sourcing, they are also empowering rural communities, says Otunba Francis Meshioye, president of the Manufacturers Association of Nigeria (MAN).

As a result, local raw materials sourcing increased to 55.3% in the first half of 2023, up from 48% recorded in the corresponding half of 2022, shows data from the MAN.

Multinationals withdraw

But Nigeria’s macroeconomic challenges are mostly responsible for the recent wave of multinational companies winding up their operations in the country, analysts have said.

At least five companies announced they are shutting down all or part of their manufacturing in Nigeria in 2023, mostly citing the foreign exchange crisis which had led to extremely high operational costs.

“The challenges are essentially macroeconomic challenges, it’s affecting the multinational as much as it is affecting the indigenous investors,” Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, tells The Africa Report.

“But the truth is that the degree of impact varies from sector to sector and from company to company. The higher the level of foreign exchange exposure of any business, the higher the impact. The higher the exposure to energy consumption, the higher the impact.”

Shutting down

Last March, Unilever Nigeria announced it was shuttering the manufacturing of its skin-cleansing brands. The British multinational company said the decision was part of the company’s aim to make its operation in Nigeria competitive and profitable.

In July, another British company, GlaxoSmithKline Nigeria Plc, said it was stopping its manufacturing operations in Nigeria. The company said it would appoint third-party distributors to sell its drugs and vaccines in the country.

Barely four months later, another multinational, the French pharmaceutical company, Sanofi, also said it would appoint a third party distributor for its products, after announcing its exit from Nigeria.

– With AFP

Understand Africa’s tomorrow… today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

You may also like

Leave a Comment