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Saturday, July 2, 2022

Nigeria may lose its chance of becoming a hub for AfCFTA due to currency risk, insecurity

By Oludare Mayowa

Nigeria may not be in a position to tap the gain inherent in the recently launched Africa Continental Free Trade Area (AfCFTA) to become a hub for production if the problems of insecurity and dollar shortage persist.

“More noteworthy is that if these forex challenges persist, alongside the rising insecurity levels and already weak macroeconomic environment, Nigeria could lose its chance of being a hub as the
AfCFTA progresses,” the chief executive of Financial Derivatives Company (FDC) Bismarck Rewane has said.

In its latest economic outlook, Rewane also warned that if the country failed to address the issue of security and dollar shortage, “more companies are likely to move their operations to neighboring countries.”

According to him, other African countries like Ghana and South Africa would be more enticing for business operations.

He said there is a high probability that forex rationing will increase the exchange rate pressures at the autonomous market, which could impede growth in the manufacturing sector.

The manufacturing sector, according to him, is a huge player in the government’s plan to diversify its revenue base and fasten the pace of industrialization.

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He noted that the world is fast transitioning away from oil, so this should be a wake-up call for the government to hasten its steps towards boosting the activities of other sectors that have the potential to drive economic growth.

He said the manufacturing sector contracted by 1.51 percent in the last quarter of 2020 and if the situation spirals out of control, the sector could move deeper into the negative territory.

“Because as it is, output levels would be limited by challenges in raw materials procurement.

“This would worsen the country’s already abysmal state of forex inflows. It would also frustrate and force small businesses to shut down.

He said a tough business environment will continue to encourage capital flight and loss of the much needed investment inflows.

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