In a time when Nigeria is going through her roughest patch economically, inflation rising in double digit and unemployment becoming the order of the day as industries and corporate bodies continues to retrench staffers to cut down on overhead, the Managing Director and Chief Executive Officer of NECIT Nigeria Limited, manufacturers of Climax Lubricants, Dr. Emmanuel Iheagwazi have cried out to the federal government for urgent intervention to save his company with huge workforce from being forced to close down.
Iheagwazi made the clarion call on FG to intervene in resolving its foreign exchange debt with come banks, emphasizing that over 2,500 of its employees risk losing their jobs should the current face-off with the banks it took dollar loans from lead to closure of its business.
He noted that the Central Bank of Nigeria and the Manufacturers Association of Nigeria are aware of the challenges faced by key industry players, as he explained that many manufacturing firms had declared huge losses in their latest financial results while many have shut down and some have scaled down their operations due to the overbearing policies of regulatory agencies.
He further said that 40 per cent of the raw materials for lubricants were sourced locally, while the remaining 60 per cent had to be imported and that is where the banks tend to rip off the company with outrageous and backdated charges.
He disclosed that the company had taken dollar-denominated loans from some banks between 2020 and 2021 to engage in importation of about 60% of lubricant raw materials they source from abroad at an interest of 130%, imported the goods, paid duties on them, sold them and paid the bank’s interest charges in the process, but surprised that due to the devaluation of the naira banks came back few months ago to inform the company that they are indebted to the tune of about N45 billion combined in a business deal they thought to have been sealed over three years back.
Iheagwazi said the banks further explained that the Central Bank of Nigeria didn’t liquidate the Letters of Credit before the floating of the Naira which necessitated the astronomic rise in value of the outstanding being requested by the banks following the FX crisis.
He said: “Our Company has been in operation since 1999. We specialize in manufacturing lubricants and have around 2,500 direct and indirect staff. If the company collapses, both direct and indirect employees will be affected.
“As I stated earlier, we are not in debt to any bank. The amounts quoted by the banks we took loans from as our debts are due to the devaluation of the naira. “We provided 130% cash back for those transactions. We owe only one bank, but the money was seized by another bank.
“We are currently in court over this issue. We have been speaking up for some time and have written to the Presidency, the CBN Governor, all the banks, and the Manufacturing Association of Nigeria, MAN.
“We entered this business based on the ease of doing business promised by the government, which encouraged local manufacturing. Initially, things were fine, and banks acted as business enablers.
“However, they have since reversed their stance and are now obstructing our business. The government needs to intervene because these actions are detrimental to the industry.
He said: “We cannot sit down and fold our arms. That’s why we are voicing out for people to know what we are going through.
“The Ease of doing business preached by the government is no longer easy. Multiple regulations by regulatory agencies, tax-related issues impacting our production, double-digit lending by commercial banks, hiked duty which has affected profitability”
Also speaking, the company’s Financial Controller, Seyi Okunuga, said: “One major issue is the macroeconomic policies impacting our business, especially regarding importation.
“As mentioned by the Managing Director, we rely heavily on imported raw materials for production, which makes us dependent on foreign exchange (FX). About 60% of our raw materials come from Europe, Asia, and the U.S., so we need FX consistently to sustain our operations.
“The problem we face is that transactions executed since 2020 and 2021 are still unresolved in the banks’ books, despite providing naira cover for these transactions at the time. For instance, if the official exchange rate was 380 naira to the dollar, we provided around 430 to 450 naira per dollar to cover transaction charges.
“We expected these Letters of Credit (LCs) to be liquidated within 90 to 180 days, as banks are the only entities licensed to seek FX directly from the Central Bank of Nigeria (CBN).
“However, the funds have remained in the banks’ accounts, earning income for the banks but disadvantaging us. Consequently, the banks are now asking us to provide an additional 45 billion naira, although the original transactions have been unresolved for years.
“With our property currently valued at approximately 3.5 billion naira, it is unrealistic to expect us to provide such an additional sum. We have voiced our concerns to regulatory agencies and the Manufacturing Association of Nigeria (MAN). They are working on addressing these issues and engaging with the presidency for intervention.”
