Forex restriction on 41 items boosts local production - THE NATION
By: COLLINS NWEZE
Restriction of 41 items from the official foreign exchange window is one of the toughest decisions taken by the Central Bank of Nigeria (CBN) to ensure that local industries are protected from importation of goods and services that can be produced locally. The policy, which is part of the CBN’s plans to find a solution to the forex crisis, has boosted local production of many items, writes COLLINS NWEZE.
Taking bold decisions demands courage and foresight.
The Central Bank of Nigeria’s (CBN’s) restriction of 41 items from accessing foreign exchange (forex) from official windows was one of such policies.
More than two years after the policy shift, its objectives such as encouraging local production of the affected items and boosting local industries suffocated by the importation of competing products are being realised.
The policy implementation was part of the home-grown solutions introduced by CBN Governor Godwin Emefiele to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segments of the economy.
The policy implies that those who import these items can no longer buy foreign currency from the official window to pay overseas’ suppliers. Rather, they will have to source forex from the parallel market or Bureaux De Change (BDCs) to pay for their imports.
Emefiele said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.
For instance, over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, Small and Medium Enterprises (SMEs) and other manufacturers in the agriculture value-chain. The regulator said the apex bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the Federal Government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.
Speaking on the 41 items, Emefiele said: “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country? “When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share.
“So, there is the need for us to say at this time when there is a scarcity of forex, it should be set aside for the import of items we cannot produce in this country.”
The CBN boss’ logic is that when items, such as palm oil, are imported, the local producers are made poorer. “When we import rice, we impoverish the rice producers in Abakaliki, Kebbi, Sokoto, Katsina and other parts of the country. We need to look at that very seriously because God has blessed this country, with good climate, good weather, which should be taken advantage of. Since we can produce these things, let’s use them to feed our people so that we can save foreign exchange for the country,” he said
Emefiele said he was satisfied with the outcome of the policy, adding that more time was needed to evaluate its success. The CBN governor said the policy could be reviewed when it was concluded that local manufacturers of the restricted items had become very competitive. Emefiele clarified further: “My view would be that if you have forex, you should devote it for the import of items that are important and can’t be produced in the country. “If you have excess forex, save it or create reserves. My view, which is the view of government, is that there are certain items that we can produce locally.
“But by importing some of these items, you impoverish the people. How can we create jobs for our people by living like that! Donald Trump is the president of the largest economy in the world. When he was campaigning, he said everything must be about America and he takes the interest of Americans first into consideration and by doing that, you create wealth for your people.
“I got engaged with some of these people where Nigeria imports from and I said to them: You want us to import fish from you, please tell me, what can you import from Nigeria, and he said nothing. I feel that is not a good answer from a colleague in the financial sector. So, that is the reason why you have to be smart to tell yourself that I can produce it and because I can produce it, I have to produce it and use it to feed my people and save the country foreign exchange.”
The CBN boss disclosed that government policy on support for local production was gaining ground and attracting the interest of multinational companies who were already investing in rice production.
“We have seen multinationals coming to say they want to join in palm oil production. For instance, go to Cross River State, PZ Wilmar has been cultivating 58,000 hectares of palm plantation; Presco, Okomu are all doing something. So, if a PZ Wilmar needs foreign exchange because there is a little gap, I will not mind giving them because I have seen the interest they have shown cultivating more land.
“We have seen people like Coscharis who hitherto had been in automobile imports, has acquired thousands of hectares of land in Anambra trying to grow rice. We were there last year and this year we would be there again to see what they have done.
President, Association of Bureau De Change of Nigeria (ABCON), Aminu Gwadabe said some of the steps taken by the CBN has helped the market witness the absence of spurious demand and illegitimate forex transactions.
Sub-Saharan Africa Economist at Renaissance Capital and co-Author of the Fastest Billion Yvonne Mhango said the CBN has shown absolute commitment to dealing with dwindling fortune of the naira.
“While Nigeria cannot do much to influence the oil price, the combination of measures sends a powerful signal to all stakeholders on the CBN’s intent to do what it can to preserve macroeconomic stability,” she said.
The CBN said part of its mandate would continue to act as financial catalyst in targeted sectors of the economy with humongous potential for creating jobs, reducing the country’s import bills in a very significant manner.
It said monetary policy alone cannot fully achieve the objective of macro-economic development through real sector financing.