Managing Director and CEO of NECIT Nigeria Limited, makers of Climax Lubricants, Dr. Emmanuel Iheagwazi, has called on the federal government to act quickly to prevent his company, which employs a large number of people, from having to close.
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At a time when Nigeria is experiencing its worst economic downturn, with double-digit inflation and widespread unemployment as a result of industry and corporate bodies continuing to slash staffing to reduce overhead.
Iheagwazi issued a clear appeal for FG to step in and help settle its foreign exchange debt with the banks, pointing out that more than 2,500 of its workers could lose their jobs if the company’s closure results from the current dispute with the banks it borrowed money from.
He explained that many manufacturing firms had declared huge losses in their latest financial results, and many had shut down or scaled back their operations due to the overbearing policies of regulatory agencies.
He noted that the Central Bank of Nigeria and the Manufacturers Association of Nigeria are aware of the challenges faced by key industry players. He added that just 40% of the raw materials needed to make lubricants were obtained locally, meaning that the other 60% had to be imported.
This is where the banks usually take advantage of the company by charging exorbitant fees that are out of date. He revealed that the company had taken out loans from various banks denominated in dollars between 2020 and 2021 in order to import roughly 60% of the lubricant raw materials they source from overseas at an interest rate of 130%.
The company then imported the goods, paid duties on them, sold them, and paid the interest charges incurred by the banks. However, the company was taken aback when, as a result of the naira’s devaluation, banks returned a few months ago to inform the company that they were owed a total of approximately N45 billion in loans for deals they believed to have been finalised more than three years prior.
Iheagwazi claimed that the banks went on to say that the extraordinary increase in the amount of outstanding that the banks demanded in the wake of the FX crisis was necessary because the Central Bank of Nigeria had not liquidated the Letters of Credit prior to the Naira’s floating. “Our Company has been in operation since 1999,” he stated.
Our primary focus is on producing lubricants, and we employ about 2,500 people directly and indirectly. Employees, both direct and indirect, will be impacted if the company fails. “As I already mentioned, we owe no bank money. The sums stated by the banks from which we obtained loans because of the depreciation of the naira represent our indebtedness.130% cash back was given to them for those transactions.
Although the money was taken by another bank, we only owe one bank. “We are in court right now to discuss this matter. We’ve been raising our voices for a while now, and we’ve written to the CBN Governor, the President, every bank, and the Manufacturing Association of Nigeria, or MAN.
The government’s assurance of ease of doing business, which promoted regional manufacturing, is why we got into this industry. At first, everything went smoothly, and banks supported businesses. But now, they’ve changed their minds and are impeding our operations. These acts are damaging to the sector, and the government must step in. “We cannot sit down and fold our arms,” he declared.
We are speaking up so that others are aware of what we are going through. The government’s claimed ease of doing business is no longer true. Numerous rules from regulatory bodies, problems with taxes that affect our output, double-digit loans from commercial banks, and increased tariffs that have impacted profitability Seyi Okunuga, the financial controller for the company, also spoke and stated: “One big problem is the macroeconomic policies affecting our business, especially with relation to importation.
“We are highly dependent on imported raw materials for production, as the Managing Director indicated, which increases our need for foreign exchange (FX). Since Europe, Asia, and the United States account for over 60% of our raw material supply, we always require FX to keep our business running.
“The issue we have is that, even if the banks gave naira insurance for these transactions at the time, transactions that were completed between 2020 and 2021 are still unresolved in their records. To offset processing costs, we would have given between 430 and 450 naira for every dollar, for example, if the official exchange rate was 380 naira to the dollar.
Since banks are the only organisations authorised to request foreign exchange directly from the Central Bank of Nigeria (CBN), we anticipated that these Letters of Credit (LCs) would be settled in 90 to 180 days. Nevertheless, the money has stayed in the banks’ accounts, benefiting the banks but hurting us.
Consequently, even though the initial transactions have remained unresolved for years, the banks are now requesting that we give them an extra 45 billion naira.
“It is ridiculous to expect us to offer such an enormous cash, given the present valuation of our property, which is around 3.5 billion naira.
We have expressed our concerns to the Manufacturing Association of Nigeria (MAN) and regulatory bodies. They are attempting to resolve these problems and requesting help from the president.
