FX restriction on 41 items: Time for honest conversation
By AMECHI OGBONNA
Although the recent decision by the Central Bank of Nigeria ( CBN) to bar banks and
bureau de changes from extending foreign exchange to importers of 41 restricted items
may be considered an unpopular policy by stakeholders in the import sector, it is by all
intent, one of the most strategic steps so far taken by the management of the apex
bank in the bid to halt the massive erosion of the nation’s foreign reserves now
hovering around $29billion.
The development is coming at about the same time lessons of the Eurozone countries
are steering us in the face as they were to resolve their issues with Greece over its
default in repaying the $1.6billion debt owed the International Monetary Fund (IMF).
The reason for Greece is inability to honour its obligation cannot be separated by
government’s inactions in handling its prolonged economic challenges over the years.
Today that government is being forced to implement far more reaching policies
including capital controls where citizens are now compelled to withdraw a maximum
limit of 60 Euros per day to run their homes.
With crude now selling at less than 50 per cent of its peak since the second half of last
year, Nigeria appears from all indications to be in the same mess Greece found itself
years ago before the whole process later snowballed into full blown recession.
It therefore means that for the monetary and government to forestall a repeat of the
Greece Disease in today’s Nigeria, there may be need for some drastic measures which
may be considered harsh by some people but which would certainly be in the best
interest of the country.
One of such policies could be the recent decision by the Central Bank of Nigeria (CBN)
to suspend foreign currency funding for about 41 imported items considered a source of
strain on the already dwindling foreign reserves stock.
The items include, vegetable oil , metal boxes, galvanised steel cement, margarine,
palm kernel, poultry products (chicken, eggs and turkey), Indian incense, tinned fish in
sauce (Geisha, Sardines), cold rolled steel sheets, roofing sheets, wheelbarrows, head
pans and containers, and enamelware.
Others are cosmetics, soap, plastic and rubber products, steel drum, steel pipes, wire
mesh, steel nails, wire rods, security wire, wood particle and board, wood fibre boards
and panel, plywood board and panel, wooden doors, toothpicks, glass and glassware,
kitchen utensils, tableware, tiles and wooden fabrics CBN had earlier released a list of
the 41 restricted items in its circular, saying that the implementation of the policy
would go a long way to conserve the nation’s hard earned foreign exchange and boost
production activities in the country. Already, President Muhammadu Buhari and indeed
the 36 state governors are aware of the dire straits the Nigerian economy has
cascaded to and are ready to support patriotic initiatives that would move the country
forward.
But while speaking in Abuja, during a press conference to clarify issues raised by the
circular, the CBN governor, Mr Godwin Emefiele, disclosed that although the apex bank
does not have the power to ban importation outrightly, it would no longer make
available foreign exchange to importers of those products.
He noted “Four years ago, Nigeria had four rice mills. Today, Nigeria has 30 if not more
rice mills. This happened because of the efforts of the Federal Ministry of Agriculture,
the banks and the CBN, trying to redirect peoples’ focus that we need to increase the
production of rice. And indeed, we have achieved great mileage in this direction.
Only last week, I met the Governor of Kebbi State and he lamented the unfortunate
situation in his state which is a major rice belt in Nigeria where people, our own
farmers who have committed their sweat to produce rice have produced paddy. We
have paddy glut in Kebbi State today.
As I speak with you the government has spent its own money buying close to 200,000
tons of paddy rice from farmers.
Aside from that, Kebbi State Government has purchased close to 800,000 tons of paddy
and yet we patronize imported rice. Those rice that are imported into Nigeria are not
less than seven years old on the shelves and yet we have rice that is produced today in
the country and we are running away from them.
For the avoidance of doubt, please note that the importation of these items are not
banned, thus importers desirous of importing these items shall do so using their funds
without any recourse to the Nigerian foreign exchange market.
The implementation of the policy will help conserve foreign reserves as well as
facilitate the resuscitation of domestic industries and improve employment generation.”
Emefiele promised to deal decisively with any Deposit Money Banks or Bureau de
Change operators who make available Foreign Exchange to the importers.
“I am not saying importers should not import any of the prohibited items, what I am
saying is that the importers will not be able to access Foreign Exchange from our
markets, which are the CBN, banks and Bureau de Change. If we find any of our
market operators flouting this order, we know how to deal with them” the governor
said.
According to him, the era of unbridled importation of all unnecessary items that have
now turned the country into a dumping ground was over in Nigeria as the country
cannot achieve the much desire greatness by simply importing everything it needs.
“Time is ripe for honest conversation. Central Bank in developing countries can’t
concentrate on price and monetary stability alone, what we are doing is to identify
productive sector and channel money there” he said.
Although CBN would no longer provide foreign exchange to import items that can be
produced locally, he said that the bank will increase credit allocation to the productive
sectors of the economy to reduce import bill.
“We are spending huge money importing things we can produce locally, it is affecting
our Foreign Reserves. Nigeria spends N1,3 trillion on average annually to import
consumable goods such as rice, oil, etc which can be produced locally. It is not
necessary how much that we save, it is by the fact that we are saying that it is
shameful. Even if it is $1 that we spent in importing toothpick, I am saying that it is
shameful that we have to import toothpick. I am saying that it is shameful for us to
import fish in sauce, canned fish in sauce into the country and sardine. I am saying
that for instance, before I was born, palm kernel was taken out of this country to
Malaysia and today we go to that country and import palm oil, it is shameful. It is
shameful that items that we used to produce in this country we now begin to import
them into this country. It is shameful, and I think we need to stop it. That is what we
are saying. Current situation calls for self sufficiency. Through this policy, we can
conserve foreign exchange and provide jobs for our people, we will look for areas
where we can provide catalytic role, this we are resolved to do” he reiterated.
Reacting to the CBN policy, a former chairman of Manufacturing Association of Nigeria
(MAN) in Anambra State, Enugu and Ebonyi States, Dr. Chike Obidigbo, called on the
Federal Government to address holistically the problems of indigenous manufacturers
by providing the enabling environment including stable power supply, security of lives
and property to the citizens.
Dr. Obidigbo who is the chairman of Hardis Group of Companies said that the latest
ban on about 41 items by the Central Bank of Nigeria (CBN), merely scratches the
problem of indigenous manufacturers, rather than solving them, urging the apex bank to
take more decisive actions to salvage the economy.
The industrialist agreed that the ban may help in reducing the pressure on Nigeria’s
N29 billion foreign reserves but may not comprehensively address the problem of local
manufacturers.
He said “the ban CBN is imposing is okay but it would be most beneficial if the
pressure also goes to the government to provide us with electricity, security of lives
and property. If the government can provide these things and enforce the ban, then
manufacturers could breathe a sigh of relief.”
According to the Head of Research at Sterling Capital, Sewa Wusu, the market is
expecting a lot from the Central bank in terms of exchange rate policy, stressing that
the apprehension that the CBN may devalue again has been going on and we cannot
rule that out because the reserve is under pressure and there is need to do just that.
‘We see this move as a confirmation that the supply of foregn exchange is extremely
tight.says Yvonne Mhango, Renaissance Capital, economist for sub Saharan Africa.
On his part, Angus Downie at the Economic Research of Ecobank said the policy shows
the difficulty the CBN is facing managing foreign exchange reserves of the country and
which points to possibly greater exchange rate policies to come.
Meanwhile in what appears to be an attempt to derail the policy, the Central Bank of
Nigeria (CBN) has alerted Nigerians that those offended by its recent policy of
restricting foreign currency to importers of 41 blacklist items have resorted to exporting
hard currency across the nation’s borders with neigbhouring countries. However, in a
statement in Abuja Thursday, CBN said large quantum of cash are now being
transported through the borders following its foreign exchange denial to importers of
restricted products.
But it however, said that it is collaborating with relevant agencies to ensure that the
culprits are apprehended.
“The apex bank has noted the unwholesome practice of movements of huge foreign
currency cash across Nigerian borders by individuals and corporate bodies without
compliance to extant law of declaration to the appropriate authorities. The bank is
already collaborating with other relevant agencies of government to ensure compliance
to the provisions of the law” the statement, noted.
It reminded the Bureau de Change operators that they are not allowed to sell more
than $5000.00 to any individual customers for Business Travel/Personal Travel
Allowance, monthly mortgage payment, School fees abroad, credit card paympayent, Utility
bills, Life insurance premium payment.
“The bank however, stated that the BDCs are only authorized to deal in foreign
currency cash and to sell not more than US$5000.00 to an individual customer and
strictly for the following transactions: (i)Business Travel/Personal Travel Allowance; (ii)
Monthly mortgage payment; (iii) School fees abroad; (iv) Credit card payment; (v)
Utility bills vi) Life insurance premium payment” it noted, insisting that the BDCs are
not authorized to fund import transactions in any form whatsoever.
“For the avoidance of doubt, the Central of Nigeria has directed that BDCs are not
authorized to fund import transactions in any form whatsoever, either by cash or wire
transfer. Accordingly, authorized dealers are hereby barred from effecting wire
transfers from the account of http://sunnewsonline.com/new/fx-restriction-on-41-items-time-for-honest-conversation/ BDCs’ customers henceforth” it said.