NEWS DETAIL
Manufacturer’s obligations to suppliers mount on dollar shortage
 Posted Date : 2020-11-23

Manufacturers are forced to take huge credit from suppliers as the liquidity challenges in the foreign exchange market constrain their ability to pay on cash.

Analysts say if the chunks of the payables are dollar denominated, then the entity is exposed to foreign exchange loss that could impact negatively on the bottom line (profit).

The recoveries of cash from the trade debtors or receivables are very slow due to the coronavirus pandemic that damped consumption and disrupted supply chain.

“If there is scarcity, you cannot pay your suppliers, you cannot service your offshore debt, and that creates credibility problems.  It is a major crisis”, said Muda Yusuf, head of Lagos Chamber of Commerce and Industry (LCCI).

The largest listed manufacturers collectively owe creditors or suppliers of raw materials N1.65 trillion as at September 2020, which represents a 290% increase from 2019’s N1.28 trillion.

A break per sector shows the largest listed consumer goods firms saw combined trade and other payables spike by 27.97% to N704.55 billion in September 2020 from N550.43 billion the previous year.

The industrial goods firms collectively incurred trade and account payable N583.03 billion as at September 2020, as against N424.58 billion the previous year.

Gbolahan Ologunro, equity research analyst at CSL Stock Broker Limited, said in the short term such payables could help the working capital of companies pending when the economy recovers.

 

 

                                                                            

Business Day, 11, Nov. 2020