Dispute Resolution and Forex Shortage in Nigeria: Challenges and Opportunities

Feranmi Olaseinde

Hatched by Feranmi Olaseinde

Sep 13, 2023

4 min read


Dispute Resolution and Forex Shortage in Nigeria: Challenges and Opportunities


In Nigeria, the most popular methods of dispute resolution are litigation and arbitration, with mediation gaining increasing traction. However, the country is grappling with a forex shortage that is affecting manufacturers and their ability to import raw materials. This article will explore the challenges faced by businesses due to the forex shortage and the potential opportunities that arise from these difficulties.

The Impact of Forex Shortage on Manufacturers:

The forex shortage in Nigeria has had a significant impact on manufacturers, particularly in terms of the cost of imported raw materials. According to a report, major raw materials imported during this time included cane sugar from Brazil, milk preparations from Ireland, mixtures of odiferous substances from Ireland and Swaziland, and lubricating oils from The Netherlands. The shortage has led to a high cost of imported inputs, resulting in an overall increase in the cost of production.

The Government's Forex Challenge:

Manufacturers have been vocal about the challenges they face due to the forex shortage. The President of the Manufacturers Association of Nigeria (MAN) highlighted the government's inability to meet the demand for forex in the economy. He explained that the major source of forex inflow into the country is crude oil proceeds, but Nigeria has not been able to meet the OPEC export quota. As a result, manufacturers can only source 5% of their forex needs from banks, severely limiting their ability to import necessary raw materials.

Import-Export Balance and Economic Impact:

While importation of raw materials for production purposes is necessary for manufacturers, it is crucial for Nigeria to equally export raw materials to other countries to balance the forex spent on imports. This would prevent further strain on the local economy and create opportunities for revenue generation. Encouraging exports could potentially alleviate the forex shortage and support local businesses by providing them with a steady flow of income.

Dispute Resolution in the Midst of Forex Scarcity:

Coming back to the issue of dispute resolution, it is interesting to note that despite the forex shortage, mediation is gaining traction as a popular method of resolving conflicts in Nigeria. This may be attributed to the cost-effectiveness and efficiency of mediation compared to litigation and arbitration. With limited access to forex, businesses are exploring alternative ways to resolve disputes and mitigate costs. Mediation offers a flexible and collaborative approach that allows parties to find mutually beneficial solutions without relying on costly court proceedings.

Opportunities for Alternative Dispute Resolution:

The forex shortage could be viewed as an opportunity for the promotion and development of alternative dispute resolution methods in Nigeria. By encouraging businesses to explore mediation and other non-adversarial processes, the country can reduce its reliance on expensive litigation and arbitration. This shift towards alternative dispute resolution could lead to more efficient and cost-effective methods of resolving conflicts, benefiting both businesses and the overall economy.

Actionable Advice:

  • 1. Diversify Export Markets: To balance the forex spent on imports, Nigerian businesses should explore new export markets for their raw materials and finished products. By tapping into international markets, the country can generate additional revenue and reduce its reliance on imported goods.
  • 2. Government Support for Mediation: The government should provide incentives and support for businesses to adopt mediation as a preferred method of dispute resolution. This could include training programs, tax benefits, and the establishment of mediation centers. By promoting mediation, the government can alleviate the burden on the court system and encourage more efficient resolution of disputes.
  • 3. Collaboration between Manufacturers and Government: Manufacturers and the government should work together to develop strategies for addressing the forex shortage. This could involve exploring opportunities for local production of raw materials, incentivizing local sourcing, and developing policies that support the growth of domestic industries. By collaborating, both parties can find innovative solutions to overcome the challenges posed by the forex scarcity.

In conclusion, Nigeria's forex shortage poses significant challenges for manufacturers, impacting their ability to import raw materials and increasing production costs. However, amidst these difficulties, there are opportunities to explore alternative dispute resolution methods such as mediation. By diversifying export markets, supporting mediation, and fostering collaboration between manufacturers and the government, Nigeria can navigate the forex shortage and pave the way for sustainable economic growth.

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