Newsfront Online …Telling the Public as it is
The recent decision by the Yemi Cardoso-led Central Bank of Nigeria (CBN) to lift foreign exchange restrictions on 43 previously banned food and non-food items sheds light on one of the fundamental leadership challenges we face – policy flip-flops and inconsistencies.
The items that were previously restricted from accessing foreign exchange included rice, cement, margarine, palm kernel, palm oil products, vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry and processed poultry products, tinned fish in sauce (Geisha)/sardine, cold-rolled steel sheets, and galvanized steel sheets.
The list also included roofing sheets, wheelbarrows, head pans, metal boxes, containers, enamelware, steel drums, steel pipes, wire rods (deformed and not deformed), iron rods, reinforcing bars, wire mesh, steel nails, security and razor fencing and poles, wood particle boards and panels, wood fiber boards and panels, plywood boards and panels, wooden doors, glass and glassware, kitchen utensils, tableware, tiles (vitrified and ceramic), gas cylinders, woven fabrics, clothes, plastic and rubber products, polypropylene granules, cellophane wrappers, bags, soap and cosmetics, tomatoes/tomato pastes, Eurobond/foreign currency bond/share purchases.
Importers of these items had been restricted from accessing foreign exchange since June 2015 when the CBN, under the leadership of Godwin Emefiele, published a circular outlining the list of items ineligible for foreign exchange in the Nigerian foreign currency market.
Pains of a volte-face
However, in a surprising turn around, the CBN recently reversed this policy. A statement signed by its director of Corporate Communication, Dr. Isa Abdulmumin, declared that importers of all the 43 previously restricted items can now purchase foreign exchange in the Nigerian Foreign Exchange Market.
This move by the CBN is sure to increase pressure on the Naira and, more worryingly, discourage local manufacturing of these items. As a nation, Nigeria has continued to rely on imports for virtually everything, and the CBN’s decision has amplified such dependency.
While some of these items are under import-restriction, most Nigerians are finding it hard to rationalize the lifting of the ban on them at a time that the nation should be prioritizing local production. Tellingly, the lifting of the ban has far-reaching implications on local production of some of the items, including rice which the CBN expended huge funds under its anchor borrowers’ programme.
Why should someone who wants to import toothpicks, vegetables and processed vegetable products, meat and processed meat products (whatever that means) be allowed to officially access the dollars? Isn’t that a clear means of weakening local production of these items? Disturbingly, this policy shift comes at a time when the Naira’s value is already under intense pressure. At the time of writing this, the Naira was trading at N1,230 to the dollar on the black market.
When the CBN announced the forex restriction in 2015, it said the move was to encourage local production, conserve scarce foreign exchange, stabilize the Naira and foster a more favorable balance of trade. However, eight years after the ban, we haven’t seen significant improvements in the local production of these restricted items. The reasons are evident, and they revolve around a dearth of robust infrastructure, deplorable state of security, ease of doing business, and tax incentives, among others. Over the past eight years, the country has grappled with increasing insecurity, deteriorating infrastructure, and challenging business conditions.
Bourgeoning import bill in the offing?
We seem to be sowing the wind, hence cannot help but reap a whirl-wind. With the removal of the forex ban, it is inevitable that Nigeria’s import bill will expand, further pressuring the Naira and depleting our foreign reserves as we require more dollars for imports. If you wonder why this should be a cause for concern, then take a look at the worrisome data. At the end of Q3 of this year, our foreign reserves witnessed a significant drop, standing at $33.23 billion after suffering a loss of over $500 million in the first week of September.
Between 2015 and the first half of 2017, the forex ban on certain items led to a 65 percent reduction in the country’s monthly import bill, from an average of $5.5 billion to $1.9 billion. The import of rice fell by over 80 percent during this period. Undoubtedly, the lifting of the restriction will radically reverse this.
It is crystal clear that the apex bank’s policy summersault will exacerbate the challenges currently being faced by manufacturers, including rising production costs since local manufacturers would be compelled to compete with cheaper imported products. This will have a far-reaching implication, potentially leading to job losses. What the nation needs at the moment is more jobs, not policies that are capable of engendering a shrinking work space!
Additionally, lifting the ban could turn Nigeria into a dumping ground for foreign goods, especially as the African Continental Free Trade Agreement (AfCFTA) takes full effect. It is disheartening that as an oil-producing nation, Nigeria relies solely on petrol import since we lack a functional refinery. With its huge population and land mass suitable for the cultivation of different crops, the nation still imports food. Indeed, our super-reliance on importation is the greatest unmaking and until we cut it down, the value of the naira will continue to decrease.
Earlier this month, the World Bank gave a frank but damning verdict about the Naira. According to the Bank, Naira and Angola’s kwanza, both of which have depreciated by nearly 40 percent, are the worst performing currencies in Africa. As you read this, the Naira is exchanging for N1,200/$ at the parallel market and goes for close to N900 at the Investors and Exporters window.
Undoubtedly, Cardoso’s decision to lift the forex restriction raises serious concerns about the impact on the Naira, local manufacturing and the nation’s economic stability. Attention is on the need to consider the long-term impacts of such policy shifts.
We cannot be lamenting over the disparity in the already widening exchange rate and yet tip-toe towards comprehensive strategies that promote local production, while ensuring a balance in our trade relationships. The CBN should take another look at the list and reinstate the ban on some of the items. Total lifting is counterproductive.
It is sad that we are witnessing this dramatic policy reversal under the same political party. This makes it imperative to ask for yet another time: what are the ruling party’s plans for the economy?
Perhaps, those who have said repeatedly that the nation is dealing with a group of people whose key concern was to wrest power without a clearly defined plan on how to use it for the common good could as well be right after all.
Way out of the quagmire
As a nation, we must deal with fiscal indiscipline and create an enabling environment that will make it easy for the private sector to do businesses with ease in spite of the challenges and, enable the nation to have enough export products. While we do that, the CBN should take another look at its decision to lift the forex restriction.
(leadership.ng)
