MAN to CBN: Stop banks from freezing manufacturers’ accounts, resolve unsettled FX forwards

The Manufacturers Association of Nigeria (MAN) has decried the “unfair treatment” of manufacturers by some commercial banks over the disputed $2.4 billion foreign exchange (FX) forward obligations.

In a statement on Thursday, Segun Ajayi-Kadir, director-general of MAN, asked the Central Bank of Nigeria (CBN) for a speedy and lasting solution to the issue.

As a vital sector of the economy, he said manufacturers rely heavily on access to FX for the importation of essential raw materials, machinery, and equipment not locally available.

Ajayi-Kadir said recent developments show a “troubling trend” among banks that is “highly detrimental” to industries reliant on FX.

The director-general, lamenting the situation, said industries are bearing the brunt of a problem they did not create.

“Recently, our members have reported significant unwarranted complexities and undue highhandedness by the banks,” he said.

“Many have faced stringent requirements not aligned with CBN’s guidelines, resulting in unnecessary bottlenecks and illegal freezing of their corporate and personal bank accounts.

“This has [a] negative impact on production, which could threaten the sustainability of manufacturing operations.”

Ajayi-Kadir cited the ongoing dispute between KAM Industries Nigeria Ltd., a leading steel manufacturer in West Africa, and a Nigerian commercial bank as an example of the “unfortunate” treatment of private businesses, noting that several others are undergoing similar experiences.

‘COMMERCIAL BANKS SHOULD PLAY THEIR PARTS’

He clarified that commercial banks typically receive naira payments from customers or grant credit facilities to secure FX for raw material importation, which they then remit to the CBN on behalf of their customers.

“At that point, the funds are deemed to be held by the apex bank, thereby completing the customers’ obligations. Given this background, MAN asserts that its members are not liable for delays or complications arising after the remittance of funds to the CBN by commercial banks,” the director-general said.

“Our members have played their part and the commercial banks should play their own part and manufacturers should not be harassed by banks.”

Ajayi-Kadir further asked the CBN to direct the concerned commercial banks to immediately unfreeze the accounts of “innocent” manufacturers in relation to the “vexed issue of foreign exchange forwards and speed up the long overdue redemption of unsettled foreign exchange forward, as a lasting solution to the dilemma”.

He reiterated the association’s readiness to engage with banks and other stakeholders to co-create the solutions that would facilitate the timely resolution of the impasse.

In March 2024, the CBN announced that all valid FX backlogs owed to various sectors had been settled, fulfilling a pledge by Olayemi Cardoso, the CBN governor,  to address an inherited backlog of $7 billion in outstanding liabilities.

However, the apex bank said about $2.4 billion of the sum was invalid following an enquiry into the transactions.

Following pressure MAN, the CBN said it was looking into the FX re-validation exercise to ascertain complaints of manufacturers and importers over the $2.4 billion FX claims.

In January, the regulator said the verification process of the $2.4 billion disputed FX backlog was in its final stage, noting that valid transactions will soon be paid.