Experts Insist On Review Of Forex Policy


Experts have maintained that the Central Bank of Nigeria’s foreign ex- change policy for imported goods will have harmful effects on the manufacturing sector and the Nigerian economy as a whole if not reviewed.

Uba Group

According to them, some businesses are already experiencing hard times and may fold up due to the restriction of 41 imported goods from accessing foreign exchange.

Economist and financial analyst, Sir Henry Boyo, sees the policy as rather inequitable because it fails to recognise products that utilise the greatest amount of foreign exchange the country needs.

He told The Point that the policy was not sufficient to enhance the value of the naira even though “it is a good idea.”

According to him, it will be sensible to identify those materials or products that bring foreign exchange more than the others.

He said, “If the purpose of the policy is to conserve foreign exchange, it is best to identify the materials or a product that consumes the most foreign exchange and insist that the import of that item should be treated independently from government’s foreign exchange. So long as the importers of these 41 items cannot start producing some of these things locally; if there is a demand for them which will need to be imported, we import them at a price that is almost about 25 per cent more foreign ex- change than earlier utilised.

“And this can only trigger an inflationary spiral which will also equally damage the value of static incomes in the economy. Either way, the government and the economy will lose even though on percentage.”

The Lagos Chamber of Commerce and Industry has also disap- proved of the apex bank’s policy, saying it will serve as a disincentive to the Nigerian manufacturing sector and the economy.

The Director-General, LCCI, Mr Muda Yusuf, in a statement, said that the policy would serve as a disincentive to the Nigerian manufacturing sector and the economy.

According to him, the restricted items are critical elements of the manufacturing process of many firms, across different sectors of the Nigerian economy.

“The policy means that manufacturers who require any of the 41 restricted items as inputs and raw materials for their production may have to simply shut their operations once their existing stock is exhausted. The LCCI understands the CBN’s constraints and circumstances, as it drew up this policy.

“It, however, appears as if the formulation of the policy has suffered from the CBN’s limited understanding of the manufacturing process of many of the sectors affected by this policy.’’

The CBN had on June 23 said that it was imperative to exclude importers of some goods from accessing foreign exchange, noting that the directive was aimed at encouraging local production of the items.

Flexible Exchange Rate

Meanwhile, two members of Nigeria’s Monetary Policy Committee criticised the Central Bank of Nigeria’s attempts to prop up the naira by restricting access to dollars, while others said the regulator should allow a more flex- ible exchange rate.

A professor at the University of Nigeria, Nsukka, Chibuike Uche, questioned the legality of the CBN’s June decision to stop importers of around 40 items, including rice, furniture and toothpicks, accessing official foreign exchange markets.

A lecture at the Lagos Business School, Dr. Doyin Salami said the measure would slow economic growth and that foreign investors were confused by the central bank’s attempts to defend the naira since March.

Investors are “baffled by the CBN’s expressed unwillingness to countenance any further currency adjustments and market liberali- sations,” Salami said at an MPC meeting attended by all 12 members on July 23 and 24, according to a statement published on the central bank’s website on Friday. “The credibility that CBN has carefully cultivated, if not lost, is most certainly undermined.”


The naira plummeted by 21 percent to a record low of 206.32 per dollar between the end of June and February 12 as the price of oil, Nigeria’s main export, crashed. CBN Governor Godwin Emefiele reacted by introducing trading curbs and bans on purchases of dollars to stem the rout. The currency has since been mostly flat in the interbank market, averaging N198.94 since the end of February.

Bloomberg reports that the controls have left the naira overvalued and out of sync with the cur-rencies of other major commodity exporters, according to bond and stock investors including Ashmore Group Plc and Investec Asset Management. The devaluation of the currency of fellow oil producer Kazakhstan on August 20 increased pressure on Nigeria to weaken the naira, according to Yvonne Mhango, an economist in Johannesburg at Renaissance Capital.

‘Not Convinced’

“The denial of foreign exchange to businesses that engage in legitimate economic activities is confounding,” Uche said in his personal statement. “I am not convinced the CBN has the legal powers to deny the allocation of foreign exchange to legitimate businesses.”

Deputy Governors Sarah Alade and Joseph Nnanna said the central bank needed to inject more li- quidity into the foreign exchange market and allow the currency to trade more freely.

Emefiele has repeatedly said the regulator will meet legitimate demand for foreign exchange and that its restrictions are aimed at speculators.

“The short-term growth prospect of the Nigerian economy is stronger following our recent strategy of re- stricting frivolous demand,” he said in his statement.

Nigeria’s growth fell to 2.4 per cent on an annualised basis in the second quarter, compared with 6.5 per cent in the same period of 2014. The central bank’s restrictions probably contributed to the slowdown by making it difficult for manufacturers to buy the i ported goods they need to oper- ate, RenCap’s Mhango said in a note on Friday.