CBN defends selective Forex restriction, says Nigeria’s economic fundamentals remain strong

The Central Bank of Nigeria (CBN) has defended its decision to stop the use of foreign exchange for the importation of certain goods.

This is contained in a statement signed by the CBN Director of Corporate Communications, Ibrahim Mu’azu, in Abuja on Friday.

The statement, which was made available to the Newsmen, said the CBN took the decision because it was important and the right thing to do.

The statement, which was in reply to “The Economist Magazine’s article of July 4, titled Toothpick Alert”, sought to further explain the CBN’s policy of restricted importation.

The article ignored some salient points, which made up part of the reasons that informed the decision of the apex bank, the statement said.

“First, the article seems to ignore the fact that the exchange rate is simply a price that is essentially determined by the forces of supply and demand.

“The CBN believes that the 48 per cent decline in oil prices may not be transitory and made bold policy changes including closure of the subsidised Official FX Window.

“This resulted in 22 per cent depreciation in the currency, the Naira.

“This is because the Nigerian economy is heavily dependent on imports and the exchange rate pass-through to inflation is high, we believe that this adjustment is optimal at this time.’’

It stated that many other issues had to be considered.

“Contrary to the article’s argument, adjustments to a sharp decline in supply of U.S. Dollars cannot all be borne by an indeterminate depreciation, without considering the full impact on the Nigerian economy.

“The demand side also has to be considered, not just in response to the pressure on the Naira, but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for citizens.

According to the statement, CBN believes that Nigeria cannot attain its full potential by importing anything and everything, saying the trend has weakened the operating capacities of Nigeria’s industries.