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Forex crisis hampers Nigeria’s exports under African Continental Free Trade Area

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Nigerian exporters face challenges under the African Continental Free Trade Area due to the forex crisis, hindering participation in the $3.4tn platform.

 

 

Four months after Nigeria officially began participating in the African Continental Free Trade Area (AfCFTA) under the Guided Trade Initiative, local exporters are struggling with the impact of the country’s foreign exchange crisis.

This economic hurdle is significantly limiting their ability to engage fully with the trade platform, which boasts a combined Gross Domestic Product of $3.4 trillion.

 

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In July, the Federal Government, through the Nigeria AfCFTA Coordination Office, announced that 10 Nigerian companies would export homemade products to countries in East, Central, and North Africa as part of the Guided Trade Initiative.

The announcement, made by the National Coordinator of the Nigeria AfCFTA Coordination Office, Olusegun Awolowo, set the stage for a new era of trade.

He highlighted that these companies would be exporting a variety of products, including bags, smart cards, clinkers, and natural goods such as black soap and shea butter.

Some of the companies participating include Le Look Nigeria Limited, exporting bags to Kenya; Secure ID Limited, exporting smart cards to Cameroon; and Dangote, exporting clinkers to Cameroon.

Awolowo emphasised that these companies are setting a new standard for others to follow.

However, the enthusiasm surrounding Nigeria’s inaugural exports under AfCFTA has been dampened by severe logistical challenges stemming from the ongoing forex crisis.

One of the key exporters, Mrs Chinwe Ezenwa, Chief Executive Officer of Le Look Nigeria Limited, expressed concerns over the escalating cost of freight, which has drastically impacted the company’s ability to export efficiently.

“The cost of freighting has skyrocketed because of the forex situation. Every airline has increased its rates, which has made the entire export process significantly more expensive,” Ezenwa said.

She revealed that, since the launch in July, her company has only managed to export 5,000 bags to Kenya, despite an initial target of 20,000.

“These are school bags, and I should have exported more than 15,000 to 20,000 by now, but the forex challenge has held us back.”

Despite the hurdles, Ezenwa has achieved some success, establishing a warehouse in Kenya and partnering with local businesses.

She urged the government to step in and provide financial support to small and medium-sized enterprises (SMEs) through better loan facilities with lower interest rates.

“The government needs to assist SMEs with loans that can help overcome these challenges,” she suggested.

In a related development, Dr Obiora Madu, Director-General of the African Centre for Supply Chain, has criticised the slow pace of Nigeria’s export growth under AfCFTA.

According to him, Nigeria’s export issues stem not from a lack of opportunities but rather from a deficiency in export culture and knowledge among potential exporters.

“While there are opportunities, many businesses are not equipped to take advantage of them. It’s not about the lack of opportunities, but rather an absence of an export culture and knowledge,” Madu explained.

The forex crisis continues to be a major stumbling block for Nigerian exporters, limiting their capacity to engage fully in the AfCFTA and achieve the much-anticipated growth in regional trade.

The call for government intervention is growing louder, as SMEs like Le Look Nigeria Limited look for ways to scale their operations amidst financial constraints.


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