POLICIES initiated by the Central Bank of Nigeria (CBN) have led to worsening poverty, food inflation and foreign exchange (FX) scarcity in Africa’s most populous nation, The ICIR analysis has shown.

In the last six years, the CBN under Godwin Emefiele has excluded certain items from the official market. This means that importers of those items cannot get dollars from the official market, which is often cheaper. The items include tomatoes, milk, roofing sheets, textiles, soaps and cosmetics, among others.

In 2015, the CBN began with 41 items, but the number has since reached 45.

“For the avoidance of doubt, please note that these items are not banned, thus importers desirous of importing these items shall do so using their own funds without any recourse to the Nigerian foreign exchange markets,” said Director of Trade and Exchange Department Olakanmi Gbadamosi on June 23, 2015, when the FX restriction began as the apex bank’s policy.

But the reality on ground has been different from the CBN’s claim. Once the apex bank restricts any item from the FX market, banks stop issuing FX form known as ‘Form M’ to importers – a signal that the only way they can bring in the commodity is by seeking FX from the unpredictable and expensive parallel market. Also, the Nigeria Customs Service sometimes follows it up with either a tariff increase or other forms of restriction.

This explains why economists refer to the CBN’s FX restriction as a technical ban.

In the last two years, CBN has added milk, maize, and textiles to the growing list. Experts say the CBN’s FX restrictions have forced up prices of food items and created artificial scarcity in the economy. As of the week of July 13, 2020 when the CBN restricted maize from the FX market, a ton of the commodity was sold for N160,000, according to Afex Commodities, which provides pricing updates on food items. On June 21, 2021, a ton of maize stood at N222,690, according to Afex, representing 39 per cent increase in the price of maize in a space of 11 months.

FX restrictions and impact


Nigeria is Africa’s second largest maize producer after South Africa. The country produces 10.5 million metric tons of maize per annum with a demand of 15 million metric tons (MT), leaving a supply-demand gap of 4.5 million MT annually, according to data from the Federal Ministry of Agriculture and Rural Development, a Nigerian government’s ministry.

Analysts explain that apart from insecurity which has raised maize price, the FX restriction by the CBN has led to the scarcity of the commodity as a result of huge demand. Maize has since become more expensive as local production is not enough to satisfy demand, and importers have had to get dollars at over N400-N500/$ to bring the commodity into Nigeria. Many of the importers have been manufacturers using the commodity as a raw material.

Maize is an essential raw material that is used by the production of noodles, starch, cornflakes, sweeteners, oil, beverages, glue, industrial alcohol, and fuel ethanol. It also serves as feed for the poultry industry and for consumption.

“The rising cost of maize is threatening livelihoods of small businesses in Nigeria. It is not only poultry farmers’ investments that are threatened; the investments of other players in the value chain are also under threat, thus plunging the economy into deeper crisis,” Chairman of Poultry Association of Nigeria in Delta State Alfred Mrakpor said while talking about the impact of the restriction on the local poultry industry.

Due to this policy, maize price has risen and manufacturers have responded by increasing the price of finished products. Major noodles manufacturers have raised prices by N400 to N700 per carton since the FX restriction in 2020, according to The ICIR‘s findings.

The Lagos Chamber of Commerce and Industry (LCCI) has explained that when prices rise and income remains stable, more people would be unable to afford essential goods – and could be forced into extreme poverty.

Few weeks after, when the CBN discovered that it had shot itself in the foot, it granted waivers to four firms – Wacot Limited, Chi Farms Limited, Crown Flour Mills Limited and Premier Feeds Company Limited – for the importation of 262,000 metric tons of maize. By so doing, the bank excluded other players from getting foreign exchange at the official market to import the product. Despite CBN’s waivers to the companies, demand for maize is still far higher than supply.

The apex bank is now extending Anchor Borrowers funds to 120,000 maize farmers, Managing Director/Chief Executive Officer of Unity Bank Tomi Somefun said last month. One manufacturer explained that this decision was informed by growing scarcity and price increase of the product.

READ MORE: https://www.icirnigeria.org/how-cbn-policies-contribute-to-nigerias-rising-poverty-food-inflation-fx-scarcity/

A law should be made to mandate only economists should be made CBN governor and not Bankers

Emefiele is so horrible with his monetary policies that Nigeria is on reverse, to make matters worse Zainab Ahmed fiscal policy is even far worse