The Central Bank of Nigeria, on Thursday, declared that importers of 43 items previously restricted from accessing foreign exchange at the official window are now allowed to purchase FX in the Nigerian foreign exchange market going forward.
The apex bank in June 2015 had initially included 41 items to the list of commodities which were not-valid to purchase FX from the market, citing the need to conserve the scarce forex and encourage domestic production for self-sufficiency and exports. The list was thereafter expanded to 43 items.
Some of the items listed then as not-fit-for forex included rice, cement, margarine, palm kernel products and vegetable oil, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, private airplanes, tinned fish in sauce, roofing sheets, wheelbarrows, head pans, among others.
However, in its latest statement, the CBN Director, Corporate Communications, Isa AbdulMumin, said the apex bank would continue to promote orderliness and professional conduct by all participants in the FX market segment to ensure that market forces determine exchange rates on a Willing Buyer – Willing Seller principle.
He stressed that the prevailing FX rates should be referenced from platforms such as the CBN website, FMDQ and other recognised or appointed trading systems to promote price discovery, transparency and credibility in the FX rates.
The CBN director further emphasized that as part of its responsibility to ensure price stability, the bank would boost liquidity in the FX market by interventions from time to time, stating however, that as market liquidity improves, these interventions would gradually decrease.
AbdulMumin said the CBN remained committed to accelerating efforts to clear the FX backlog with existing participants and intensify dialogue with stakeholders to address the issue.
“Lifting the ban on importation of toothpicks, cement and other agricultural products that we can produce at home is a disastrous economic strategy”
He added that the CBN had set the attainment of a single FX market as one of its goals, adding that consultation was ongoing with market participants to achieve the objective.
The FX market has undergone a series of reforms since President Bola Tinubu assumed office in May.
In June, the CBN directed the banks to remove the cap on the investors and exporters’ (I & E) window of the forex market to allow for the free-float of the naira exchange rate.
At the behest of Tinubu, the apex bank had announced the abolishment of segmentation in the FX market and collapsed all rates into the Investors and Exporters (I&E) window.
The move had put an end to the multiple exchange system leading to the floating of the naira.
The CBN further announced the re-introduction of the “Willing Buyer, Willing Seller” model at the I&E Window as well as the cessation of the RT200 Rebate and Naira4Dollar Remittance Schemes, with effect from June 30.
Consequently, the International Monetary Fund has applauded the move by the CBN for lifting the ban on 43 items it had earlier restricted from access to forex.
The IMF Africa Department Director, Abebe Selassie disclosed this during a press briefing on the Sub-Saharan Africa Regional Economic Outlook on Friday at the World Bank Group/International Monetary Fund Meeting in Marrakech, Morocco.
This is even as it said, the recent reforms by the President Bola Tinubu-led administration are not enough to solve the plethora of challenges the country is facing, saying, it is not aware of any discussions around restructuring Nigeria’s debt.
Nigeria is currently battling with foreign exchange crisis, overwhelming debt servicing burden, low revenue, rising inflation amongst other issues, a situation the IMF said can be resolved by making the reforms that are being undertaken by the government support each other.
In 2022, Nigeria spent 96 per cent of its revenue on debt servicing; still in the first six months of 2023, debt serving gulped N2.34 trillion.
As a way out, the IMF director said the Nigerian government must back the fuel subsidy removal and naira unification policies with an effective policy to ramp up revenue.
However, it is our point that the lifting of the forex ban will expand the nation’s import bill, worsen the pressure on the local currency and deplete the CBN’s foreign reserve as more dollars would be needed to import the items.
Nigeria’s foreign exchange reserves dropped to $33.23 billion at the end of the third quarter of 2023.
The reserve suffered a drop of over $500 million in the first week of September.
Between 2015 and half year 2017, the restriction on certain items led to a 65 per cent drop in the country’s monthly import bill, from an average of $5.5 billion to $1.9 billion.
According to official documents, rice import to Nigeria fell by 99 percent to about 784 metric tonnes since the implementation of the figure.
Most economic watchers believe that with the new development, the value of the naira will depreciate beyond the current $1/N1050.
Operators in the manufacturing sector believe that the development will compound the many challenges facing the sector, including the unrelenting increase in production costs.
The implication is a possible loss of more jobs as local manufacturers would be forced to compete with imported products – which are mostly cheaper.
Another fear is that lifting the ban would make Nigeria a dumping ground for foreign manufacturers of the products through neighbouring countries, especially as the operationalisation of the African Continental Free Trade Agreement takes full effect.
The Nigerian manufacturing sector suffered a 4.1 per cent decline in capacity utilisation in the second half of 2022, according to the H2 2022 bi-annual economic review of the Manufacturers Association of Nigeria.
Lifting the ban on importation of toothpicks, cement and other agricultural products that we can produce at home is a disastrous economic strategy.
Nigeria’s scarce forex should be used to support local production not importation.
