The Manufacturers Association of Nigeria (MAN) has raised serious concerns over what it describes as “unwholesome treatment” of manufacturers by certain commercial banks in handling foreign exchange (FX) forward contracts. This issue comes at a time when the Naira continues to weaken, recently falling to N1250 to the US dollar in the parallel market, worsening the plight of Nigerian businesses dependent on foreign currency.
FX forward contracts are crucial financial instruments used by businesses to hedge against exchange rate volatility by locking in a future currency exchange rate. This mechanism is vital for manufacturers who rely on importing raw materials, machinery, and equipment unavailable locally. However, MAN’s Director General, Segun Ajayi-Kadir, revealed that manufacturers are increasingly facing severe challenges due to banks’ restrictive practices.
In a statement issued on May 25, 2025, Ajayi-Kadir expressed frustration over the growing number of manufacturers whose FX forward obligations are being mishandled by banks, resulting in undue bottlenecks. These include illegal freezing of corporate and personal bank accounts, and stringent procedural demands far beyond Central Bank of Nigeria (CBN) guidelines.
“These actions by some banks are causing a significant slowdown in production across various manufacturing sub-sectors, which could threaten the sustainability of Nigerian manufacturing companies,” Ajayi-Kadir warned. He cited an ongoing dispute between KAM Industries Nigeria Limited — a prominent steel manufacturer — and a major commercial bank as one of many examples of this problematic trend.
Ajayi-Kadir clarified the industry’s stance on FX forward settlements, emphasizing that manufacturers fulfill their obligations once the local currency equivalent is remitted to the CBN by banks. According to him, any subsequent delays or complications originating from banks’ handling of the FX allocation are not the responsibility of the manufacturers.
“Commercial banks receive Naira payments either through direct customer remittances or credit facilities to secure FX for raw material imports. Once these funds are sent to the CBN, the manufacturers’ part of the transaction is complete,” he explained. “Therefore, manufacturers should not be penalized for delays or complications occurring after this point.”
MAN has appealed to the CBN to intervene promptly by directing commercial banks to lift freezes on manufacturers’ accounts linked to FX forward disputes. Moreover, the association urged the apex bank to expedite the redemption of unsettled FX forward contracts, which have been pending for an extended period.
“This is not just about safeguarding manufacturers but ensuring broader economic development, job security, and the viability of businesses that drive Nigeria’s industrial growth,” Ajayi-Kadir concluded.
The manufacturing sector is a cornerstone of Nigeria’s economic diversification efforts, providing jobs and reducing dependence on oil revenues. However, FX scarcity, coupled with inconsistent banking practices, threatens this progress. The sharp depreciation of the Naira in the parallel market further exacerbates the cost pressures on manufacturers, increasing the risk of production shutdowns and potential layoffs.
Analysts warn that failure to resolve FX forward disputes swiftly could lead to reduced foreign investment and a worsening trade deficit as manufacturers struggle to import essential inputs.
The parallel market Naira exchange rate surged to N1250/$, reflecting persistent foreign exchange shortages and market uncertainties. This gap between the official and parallel rates undermines confidence in the financial system and raises the cost of importing critical raw materials, pushing manufacturers toward distress.
The Manufacturers Association of Nigeria’s call for a fairer and more transparent FX forward process is timely and critical. Immediate regulatory action is essential to protect manufacturers from punitive bank practices and to stabilize the sector amid ongoing currency volatility. Resolving FX forward contract issues will bolster Nigeria’s industrial base, support economic recovery, and ensure the manufacturing sector remains a key engine of growth.