The Impact of Economic Challenges on Nigerian Manufacturers and Nigerians in the UK

The Impact of Economic Challenges on Nigerian Manufacturers and Nigerians in the UK

Introduction:

The economic challenges faced by Nigeria and Nigerians living in the UK have significant impacts on different aspects of their lives. Nigerian manufacturers are grappling with a slump in the value of the Naira, leading to a surge in the cost of raw material imports. At the same time, Nigerians in the UK face financial strains due to various factors such as taxes, living expenses, and loan repayments. This article explores the common points between these two situations and sheds light on the broader implications of these challenges.

The Forex Shortage and High Cost of Production:

According to reports, the forex shortage in Nigeria has resulted in a staggering N8 trillion worth of raw material imports for manufacturers. Cane sugar from Brazil, milk preparations from Ireland, odiferous substances from Ireland and Swaziland, and lubricating oils from The Netherlands are among the major raw materials imported. The shortage of forex has led to a significant increase in the cost of imported inputs, consequently driving up the overall cost of production. This poses a severe challenge for manufacturers as they struggle to maintain competitive pricing and profitability.

The Impact of Government's Forex Shortage:

The Nigerian government's inability to meet the demand for forex in the economy exacerbates the challenges faced by manufacturers. The primary source of forex inflow into the country is crude oil proceeds, but Nigeria has been unable to meet the OPEC export quota. As a result, manufacturers can only source about 5% of their forex needs from banks. This situation further restricts their ability to import necessary raw materials, hindering their production capabilities and stifling economic growth.

The Need for Balanced Trade:

A former president of the Manufacturers Association of Nigeria (MAN), Mansur Ahmed, highlighted the importance of balancing imports and exports. He argued that while importing raw materials for production purposes may not be detrimental to the local economy, it is crucial for Nigeria to equally export raw materials to offset the forex spent on imports. Achieving a trade balance would not only reduce reliance on forex but also stimulate domestic production and enhance the country's export capabilities.

Financial Strains Faced by Nigerians in the UK:

On the other side of the globe, Nigerians residing in the UK are grappling with their own economic challenges. Life in the UK has historically been difficult, with recent factors like Brexit and the COVID-19 pandemic further exacerbating the situation. The growing population in the country has also led to increased financial burdens on individuals. Taxes, including income tax, National Insurance, and pension deductions, significantly impact the take-home pay of Nigerians. Additionally, expenses such as rent, council tax, loan repayments, and vehicle insurance further strain their financial resources.

Reasons Behind Financial Strains in the UK:

The UK's taxation system plays a significant role in the financial constraints faced by Nigerians living there. Income tax deductions, National Insurance contributions, and pension deductions can reduce a person's net pay by a substantial amount. For instance, an individual earning a gross salary of £3,000 may end up with a net pay of only £2,300 after deductions. This reduction in income significantly impacts their ability to meet daily expenses and save for the future.

Conclusion:

The economic challenges faced by Nigerian manufacturers and Nigerians in the UK share common themes of financial strain and limited resources. The forex shortage in Nigeria affects manufacturers' ability to import raw materials, leading to increased production costs. Conversely, Nigerians living in the UK experience financial constraints due to taxes, living expenses, and loan repayments. To overcome these challenges, it is essential for the Nigerian government to address the forex shortage and promote balanced trade. Additionally, individuals in the UK can benefit from financial planning, including budgeting, saving, and exploring opportunities for tax deductions, to alleviate their financial burdens.

Actionable Advice:

• 1. Nigerian Manufacturers: Seek alternative sources of raw materials within the country and explore opportunities for local production to reduce reliance on expensive imports.

• 2. Nigerians in the UK: Prioritize financial planning by creating a budget, exploring tax deductions, and actively seeking ways to reduce expenses to improve financial stability.

• 3. Nigerian Government: Implement policies to promote a balanced trade system by encouraging exports of raw materials to offset the forex spent on imports and support local industries.

By addressing these challenges and taking proactive measures, both Nigerian manufacturers and Nigerians in the UK can navigate the economic difficulties they face and work towards a more prosperous future.