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‘How CBN’s lifting of restrictions on 43 items will affect economy’


‘How CBN’s lifting of restrictions on 43 items will affect economy’

Experts and Organised Private Sector (OPS) operators yesterday hailed the decision of the Central Bank of Nigeria (CBN) to lift foreign exchange (Forex) restrictions on the importation of 43 items.

They said the move would create jobs and strengthen the economy.

The apex bank explained that with the move, importers of rice, maize and wheelbarrows were now free to buy foreign currencies for their transactions.

The restriction was placed eight years ago.

Those who gave the CBN thumb up for the decision are the Chief Executive, the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf; National President, Oil Palm Growers Association of Nigeria (OPGAN), Joe Onyiuke; Managing Director, Spectra Foods Ltd., Duro Kuteyi; and an investment firm, CardinalStone.

They advised importers of the 43 items to deploy the forex sourced by them to importation of raw materials and equipment rather than finished products.

This, according to them, will create jobs for Nigerians and strengthen the economy.

Yusuf said the decision was ”part of the policy normalisation process” of the CBN, adding that it would improve transparency and erase distortions in foreign exchange transactions.

According to Yusuf, the exclusion of the 43 items underscored the distortion in the forex market that also contributed to persistent divergence in rates between the official window and the parallel market.

His words: “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 a lack of policy coordination under the previous administration.

“However, the CBN should avoid market suppression tendencies, especially outside the I & E window. All policy impediments to forex inflows should be removed.”

The CPPE boss also charged the 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.

He said: “We need to worry about the risk of import surge. There is also a need to upscale the use of fiscal policy measures to boost domestic production and productivity.”

Onyiuke said the government must find a way of protecting the local economy, insisting that its primary duty is to ensure that “we must produce locally.”

He said although it was early in the day to know the extent or implication of the reversal, the government must support the people.

Onyiuke added: “It’s not negotiable. The government has a duty to protect its local businesses, no matter what happens. The government has a duty to tackle the menace of forex, but you have to stabilise the Naira first. From there, you have to walk backwards. It’s a war that the country must fight to stabilise the currency.”

Kuteyi, an industrialist, said the allocation of forex should be for the importation of raw materials and machinery.

Noting that forex may be wrongly used for the importation of “unnecessary things,” he said many non-manufacturers had invested sourced foreign currencies on the importation of gift items .

Kutyei therefore, enjoined the government to ensure that manufacturers did not hold the short end of the stick that could lead to factory closure and loss of jobs.

CardinalStone said in a statement that the move was probably aimed at reinforcing confidence in the forex market.

The statement reads: “To our mind, this is a move to gradually improve confidence in the FX market, which has been weighed down by long-dragging illiquidity and unorthodox policies.

“We recall that the lifted ban was instituted due to a material plunge in FX inflows. Thus, to forestall the re-occurrence of the underlying drivers of dollar demand management and unorthodox FX policies in Nigeria, the supply of FX will have to improve sooner rather than later.”

The company, however, advised the CBN and fiscal authorities to evaluate the possibility of raising dollar facilities through Diaspora bonds, Eurobonds or concessionary loans from bilateral and multilateral institutions, and asset sales or partial sales.

According to CardinalStone, doing so would improve forex supply.

It added: “Curbing oil thefts, enhancing domestic oil production efficiency, and issuing new oil mining licenses are potential short-to-medium solutions.

ÿþ”In all, we believe that the efficacy of the new policy is likely to be subject to the extent of improvement in forex supply at the I & E window. This view considers the anticipated increase in FX demand at this window following the lifting of the ban.”

The CBN, in a statement by its Director, Corporate Communications, Isa AbdulMumin, said importers who were previously restricted from purchasing foreign exchange for 43 specific items, as outlined in the 2015 Circular referenced as TED/FEFPC/GEN/O1/010, were now allowed to participate in the Nigerian foreign exchange market.

He added that the CBN was not only working to address the existing backlog of foreign exchange transactions but was discussing with various stakeholders to find solutions and facilitate the clearance of forex backlog.

A long-term goal of the CBN, he explained, is to establish a unified foreign exchange market, by simplifying and streamlining the FX market.

The statement reads: “The Central Bank of Nigeria (CBN) will continue to promote orderliness and professional conduct by all participants in the Nigerian Foreign Exchange Market to ensure market forces determine exchange rates on a Willing Buyer – Willing Seller principle.

”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.

“As part of its responsibility to ensure price stability, the CBN will boost liquidity in the Nigerian Foreign Exchange Market by interventions from time to time. As market liquidity improves, these CBN interventions will gradually decrease.

“Importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEFPC/GEN/O1/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market.

“The CBN is committed to accelerating efforts to clear the FX backlog with existing participants and will continue dialogue with stakeholders to address the issue.”

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