Money market

CBN forex policy responsible for declining production, says manufacturer

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DAG Motorcycles Industries Limited, producer of Bajaj motorcycles and three-wheelers in Nigeria, has blamed the foreign exchange policy of the Central Bank of Nigeria (CBN) for the termination of the services of its outsourcing contractor, Ashton Consulting Limited, noting that the forecast for the Nigerian economy for 2016 is not looking too good for the manufacturing sector of the economy.

The Company Secretary/Legal Services, DAG Motorcycles Industries Limited, Ademuyiwa Abe, explained that the situation had made the company cut back on some of its operations, maintaining that the current exchange rate is gradually killing the real sector of the economy.

Abe while addressing a press briefing, said, “We are appealing to the government to consider manufacturers in the country, the exchange rate is gradually killing our business, we import at a certain rate and by the time we want to order for more materials we find that the value would have gone up to what we cannot afford thereby increasing the cost of production.”

However, he stated that the company hopes the situation improves in order to resume talks with its contractors, saying that the situation was still under review with promises to get back on tracks with its contractors as soon as possible.

“We deeply regret the situation that forced us to disengage the services of our outsourcing contractor for our production line. We regret the situation and thank you for your understanding. We hope the situation improves and we can resume talks with our contractors,” he said.

According to him, the contractors understood the current economic situation, but stressed that the workers are creating issues with fallout to the end users of the motorcycles.

“The workers have already gone to some papers to express their grievances, so we felt we have to let the public know what really happened so that there will be no mismanagement of information. Since there was no more foreign exchange, the situation began really bad that we had no choice to tell our contractors to close down for a while and if the situation improves and CBN lifts the ban, we will call on them to recruit new or existing workforce,” he said.

In his words, “With this decision, there are bound to be reactions because we are talking about over 250 workers. During to the current economic situation, we could not continue to work with our consultants this was the reason we terminated our contract with our consultant. We believe that as things improve, definitely we will be able to get back on track again.”

Meanwhile, Abe foresees a situation whereby the common man in Nigeria will not be able to afford the end product, pointing out that with the current situation of the exchange rate, the product will be out of reach to the poor.

“We are doing all what we can to make sure that we actually remain in business. We have submitted our list to the CBN to include us in the priority list but secondly, there is a fall out consequence that may come up because the exchange rate will not be the same with what it was. Today we are looking N285 to a dollar and if we factor other costs into it, you will find out the cost of the finished product will be out of the reach of the poor,” he added.

“When you think of buying a motorcycle with almost half a million, you will either think of buying a small car to use as taxi. With the current situation, the finished product will no longer be affordable and if it is unaffordable, the market segment is out of reach because there will be no demand and the purchasing power will definitely drop, but I will like to say that when they get to the bridge they will definitely cross but I will also like to say this is a foreseeable problem likely to be encountered even if the foreign exchange is available for the manufacturing sector,” he stressed.

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