The Governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso, has made it clear that there was no explicit prohibition on the importation or sale of the 43 items in Nigeria.
Mr. Cardoso presented this clarification during the 58th Annual Bankers’ Dinner, organized by the Chartered Institute of Bankers of Nigeria on Friday in Lagos.
However, he went on to explain that the apex bank had instituted limitations on accessing foreign exchange for the importation of these items.
Mr. Cardoso stressed that the matter of trade policy, particularly the importation and sale of the 43 items, falls squarely within the jurisdiction of fiscal authorities, not the CBN.
According to him, this distinction is significant because it clarifies that the CBN’s decision to lift foreign exchange restrictions on these items was not intended to encroach upon the responsibilities of other government agencies.
A circular published by the CBN in June 2015 delineated a list of imported goods and services that would not be eligible for foreign exchange in the Nigerian currency market.
The initial list comprised 41 items but underwent an update to include two more.
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The CBN, as of October 12, 2023, made an announcement stating the removal of the ban on providing foreign exchange for the importation of rice, vegetable oil, poultry products, and the remaining 43 items.
Mr Cardoso said, ‘Allow me to provide further clarification on the issue of the 43 items. Firstly, it is important to note that these items were never outrightly banned by the government. The CBN had imposed restrictions on their access to foreign exchange in the official market.’
‘However, these restrictions resulted in increased demand for foreign exchange in the parallel market, leading to the depreciation of the exchange rate in that segment of the Nigerian foreign exchange market and widening the premium between the parallel and official market.’
Studies, as pointed out by Mr. Cardoso, revealed a 51.0 percent increase in trade evasion among importers accessing the foreign exchange market during the period of restriction on the 43 items.
This, as he explained, led to a revenue dip of approximately $1.4 billion, averaging around $275 million per year from 2015 to 2019.
Furthermore, he noted that income derived from tariffs on goods saw a reduction from a peak of approximately $920 million in 2011 to about $250 million in 2017.
He noted, ‘In 2019, the actual tariff on goods stood at $320 million, but counterfactual evidence suggests that as much as $680 million could have been earned in the same year.’
He added that evidence had shown that foreign exchange restrictions had an adverse impact on Nigerian households and contributed to inflationary pressures.
The reduction of 50.0 percent in trade restrictions and levies on rice, sugar, and wheat, as stated by Mr. Cardoso, had a limited impact, resulting in a modest 0.8 percent improvement in welfare and a mere 0.4 percent reduction in extreme poverty.
Adding more context, he went on to explain that the advantages of trade gains for the general population were minimal, as the average industry in Nigeria faces a 13.7 percent increase in input costs.
As per the CBN, this move is expected to enhance liquidity in the Nigerian foreign exchange market, with intermittent interventions planned. The frequency of interventions will decrease as liquidity improves.
On a different note, Prof. Akpan Ekpo, a former CBN Director, commented that the central bank made a considerable mistake by opening up the foreign exchange market.
He said, ‘It is an error because the dollar, pound and euro is not our money, we only get dollars when we sell oil mainly. Our economy is not productive and we don’t have firms that manufacture non-oil goods services, export them and earn forex. So, our naira is not convertible, in that case every country like ours will have what they called managed float.’
‘So when you come and put in more dollars because you have got more forex, these are very short term measures, they are not sustainable, so the problem is a supply and access problem.’