Mixed reactions on Thursday trailed the decision of the Central Bank of Nigeria (CBN) to lift the ban on 43 items from accessing foreign exchange.
The apex bank in a major monetary policy shift, restored the 43 items which were banned from accessing forex since June 2015 in order to, according to it, “sustain the stability of the foreign exchange market and the derivation of optimum benefits from goods and services imported into the country.”
Items on the list include rice; cement; toothpicks; margarine; palm Kernel/Palm oil products/vegetable oils; meat and processed meat products; vegetables and processed vegetable products; poultry – chicken, eggs, Turkey; Soap and cosmetics; tomatoes/tomato pastes; milk; maize and tinned fish in sauce (Gelsha)/Sardines.
Others are enamelware; steel drums; steel pipes; wire rods (deformed and not deformed); iron rods and reinforcing bars; wire mesh; steel balls; security and razor wire; wood particle boards and panels; wood fiber boards and panels; plywood boards and panels; wooden doors; furniture; glass and glassware; kitchen utensils; tableware; tiles – vitrified and ceramic; textiles; woven fabrics and clothes.
But eight years later, the Yemi Cardoso-led apex bank lifted the ban in a statement signed by director of corporate communications, Isa AbdulMumin.
The statement said, “Importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEM/FPC/GEN/01/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market.
“The CBN reiterates that the prevailing Foreign Exchange (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 statement said.
However, this was coming amidst a worsening foreign exchange crisis with increasing margin between the official and parallel markets despite the rate unification policy.
While a dollar exchanges for N770 in the Investors & Exporters (I&E) FX window, it recently climbed to over N1000 in the unrecognised parallel market.
Experts say the new policy might worsen the forex challenge as it would increase demands without commensurate boost in supply.
Director, Center for Economic Policy Analysis and Research, University of Lagos, Prof. Ndubisi Nwokoma said the decision may worsen the fx crisis.
According to him, what the government has done is to increase demand without a commensurate boost in supply.
“You know when you lift the ban, you are increasing the demand. At face value, I can say they are increasing the demand but I need to understand the motivation.
“What they should be focusing on primarily is to boost supply. Supply has to increase, oil theft should be minimised, money from oil revenue.”
But the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the decision to discontinue the forex exclusion policy on the 43 items is a move in the right direction and part of the policy normalisation process.
The economist said the exclusion of the 43 items was one of the several drivers of distortions in the forex market.
“The exclusion of the items also contributed to the persistent divergence in rates between the official window and the parallel market. The exclusion was also in conflict with extant trade policy as the items were not under import prohibition in the first place. It was an example of lack of policy coordination under the previous administration,” he said.
The former Director General of the Lagos Chamber of Commerce and Industry (LCCI) said the new directive will also improve transparency and disclosures in foreign exchange transactions while urging fiscal authorities to “continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principles.“
On his part, a finance expert and President of the Association of Capital Market Academics of Nigeria (ACMAN), Prof. Uche Uwaleke said the policy is ill timed and will have a negative impact on local manufacturing.
“Its immediate impact will be to reduce the premium between the official and the parallel market.
“But it will have negative implications for import substitution and local manufacturing. The decision to readmit 43 items is ill timed in view of the current forex shortage.
“The official exchange rate will further rise to meet the parallel market rate,” he said
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