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Mixed reactions trail unbanning of 43 items

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Appetite for all things foreign to blame for naira collapse, $98bn spent on medical tourism, others in 10 years - CBN 

Adebayo Obajemu

Two weeks ago, the Central Bank of Nigeria announced the unbanning of 43 items from accessing forex. In reversing the policy, the CBN explained that the change to the market policy will boost liquidity in the market, promising to intervene from time to time to ease challenges until liquidity improves.

“Importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEM/FPC/GEN/01/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market,” the apex bank said two Thursdays ago.

Giving further hope, the statement said consultation was ongoing with market participants to achieve the goal of unifying the forex rates. It promised to continue to set much priority on orderliness and professional conduct by all participants in the Nigerian Foreign Exchange Market to ensure market forces determine exchange rates on a Willing Buyer- Willing Seller principle.

“As market liquidity improves, these CBN interventions will gradually decrease,” the CBN said.

The move came eight years after the apex bank banned the 43 items from accessing forex .
The Manufacturers Association of Nigeria (MAN) and others have decried the reversal of the policy, while others like the association of freight forwarders and agents have welcomed the move.

The 43 items on the list include rice, cement, toothpicks, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry including chicken, eggs and turkey, soap and cosmetics, tomatoes/tomato pastes, milk, maize and tinned fish in sauce (gelsha/sardines).

Others are enamelware, steel drums, steel pipes, wire rods (deformed and not deformed), iron rods and reinforcing bars, wire mesh, steel balls, security and razor wire, wood particle boards and panels, wood fiber boards and panels, plywood boards and panels, wooden doors, furniture, glass and glassware, kitchen utensils, tableware, tiles – vitrified and ceramic; textiles, woven fabrics and clothes.

Last week, the Manufacturers Association of Nigeria (MAN) urged the federal government to urgently restore the ban on the 43 to avert looming job crisis, insecurity and economic contraction.

Speaking on the matter on a live programme last week, Lekan Adewoye, the Vice Chairman of Basic Metal, Iron and Steel Products sector of MAN, said the development was a setback for manufacturers. He stressed that the new policy would hasten the collapse of several industries without much ado.

Adewoye stated that: “The news came as a surprise to manufacturers, who are still struggling to stay in business. CBN did not ban the importation of these items in 2015, the apex bank only put a restriction on the importation of these items.

“For items that can be produced in Nigeria, such manufacturers ought to be encouraged. This directive will further kill the manufacturing industry that is already struggling to survive.

“The problem is about policy somersaults. Some of our members, who have outrightly invested in backward integration, will now start to regret this move because everyone, who can assess forex will claim to be an importer, forcing sincere manufacturers to close shop, thus increasing the number of jobless persons.

“Nigerian manufacturers don’t really have any competitive advantage over those in other developing countries, at best, what you have is competitive parity, because something has to be an advantage if your competitors don’t have it. And the little incentive that the government has provided, is now being removed by the directive of the Central Bank of Nigeria.”

Temitope Ogunyemi, an analyst said he was not convinced the unbanning will ease the forex debacle, “because the allocation of forex should be for the importation of raw materials and machinery. As a nation, we have to be very careful because forex may be wrongly used for the importation of unnecessary things. I know many non-manufacturers had invested sourced foreign currencies on the importation of gift items. I want to charge the government to ensure that manufacturers did not hold the short end of the stick that could lead to factory closure and loss of jobs.”

Dr. Mohammed Hassan, a political economist, said the decision has the capacity to compound forex crisis. “What the government has done is to increase demand without a commensurate boost in supply. You know when you lift the ban, you are increasing the demand. At face value, I can say they are increasing the demand but I need to understand the motivation. What they should be focusing on primarily is to boost supply. Supply has to increase, oil theft should be minimized and money from oil revenue should be used to boost the economy.

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Dr. Ayorinde Osibolu, an entrepreneur told Business Hallmark that the “policy is ill-timed and will have a negative impact for import substitution and local manufacturing. Its immediate impact will be to reduce the premium between the official and the parallel market. It will not ease the present forex crisis. Rather, the official exchange rate will further rise to meet the parallel market rate.”

In his own take, Olufemi Akeju stated that “This is a critical issue that must be well thought of before implementation because I believe that liberalization should give room for all in participating in the foreign exchange market without discrimination. So, you liberalise the source of supply but you have not liberalised the demand end of the market and you still want to hold on to the list of 43 banned items. The idea is for a unified exchange rate. If you are still saying that some products are legitimate items and are eligible while some legitimate items are not eligible, then you are pushing some transactions outside that market. So, you are not going to have a unified exchange rate. If you liberalise, it is not your business who I sell to or what person who bought uses it for as long as it is not contraband. The CBN is still holding to the past and the new regime will ensure that the past becomes the past if we want to enjoy the benefits of unification. You must liberalise both ends of the market. You must liberalise the supply end and the demand end. You can’t exclude any legitimate transaction; you can’t exclude any legitimate agents, who have been licensed by the government.

Dr. Olufemi Omoyele of the Osun State University’s Entrepreneurship Centre, noted that there was need for the government to have a rethink. He averred that in reversing the policy, the CBN had argued that the change to the market policy will boost liquidity in the market, “but recall that forex squeeze got worse in eight years of the ban. And the naira’s plummeting accelerated since June this year when newly inaugurated President Bola Tinubu triggered a unification of the multiple exchange rates. At the weekend, the naira exchanged at N1,050 to US$1”, he said.

However, there are some, who welcomed the development on the ground that while the ban lasted many businesses could not secure forex for essential raw materials, machinery, and parts. SMEs report closures and layoffs and even the big corporations have taken hits.
Director, Center for Economic Policy Analysis and Research, University of Lagos, Prof. Ndubisi Nwokoma seemed to agree with Omoyele. Nwokoma insisted the reversal of the policy will definitely accelerate worsening forex crisis.

He said what the development meant is the spurring on of increasing demand without a commensurate boost in supply.

“You know when you lift the ban, you are increasing the demand. At face value, I can say they are increasing the demand but I need to understand the motivation.

“What they should be focusing on primarily is to boost supply. Supply has to increase, oil theft should be minimised, money from oil revenue.”
Yet, its on record that the Organized Private Sector ( OPS) fought endlessly for the lifting of the ban on direct forex sales for the 43 items. These include rice, cement, palm oil products, vegetable oils, processed meat, steel drums and pipes, tinned fish, wheelbarrows, vegetables, soap and cosmetics, cellophane wrappers, tomatoes, and tomato paste.

For them, the ban was not really required . The Manufacturers Association of Nigeria once stated that about 200 of its members were negatively affected while it lasted. It said it was ill-advised because some of the items are raw materials that are not locally available. Operators argued that the ban accentuated distortions in the forex market and contributed to the persistent divergence in rates between the official Importers and Exporters Window and the parallel market.

The Centre for Promotion of Free Enterprise added that the blacklisting conflicted with the prevailing trade policy as the items were not under import prohibition at the time the ban was imposed. Many see the positive effects of the unbanning.

Isaac Abiodun, an economist, said it was a move “to gradually improve confidence in the forex market, which had been weighed down by long-dragging illiquidity and unorthodox policies. We can recall that the ban was instituted due to a material plunge in forex inflows. Thus, to forestall the re-occurrence of the underlying drivers of dollar demand management and unorthodox forex policies in Nigeria, the supply of forex will have to improve sooner rather than later. To improve forex supply, the CBN and fiscal authorities may have to evaluate the possibility of raising dollar facilities.”

The Maritime Researchers and Authors Association of Nigeria (MARASSON) on its own commended the government for the unbanning of the 43 items denied access to forex for eight years. It said 70 percent of agents and freight forwarders lost jobs to CBN’s ban on 43 items.
The researchers also stated that all the shipping companies, bonded and seaport terminals operating in the country were forced to downsize, with shippers and consolidators struggling for survival.

The lifting of this ban will generate more revenue to the Federal Government, create more job opportunities, open up local and international trades, keep more industries busy, and help in healing the wounds of the past eight years,” he said.

But the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, sees a ray of hope in the development, saying the decision to reverse the forex exclusion policy on the 43 items was a good step in the right direction, adding that it was part of the policy normalisation process.
Yusuf said Emefiele policy on the 43 items was in the first place one of the several drivers of distortions in the forex market.

“The exclusion of the items also contributed to the persistent divergence in rates between the official window and the parallel market. The exclusion was also in conflict with extant trade policy as the items were not under import prohibition in the first place. It was an example of lack of policy coordination under the previous administration,” he said.

The former Director General of the Lagos Chamber of Commerce and Industry (LCCI) said the new directive will also improve transparency and disclosures in foreign exchange transactions while urging fiscal authorities to “continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principle.
On its own, the National Association of Government Approved Freight Forwarders (NAGAFF) last week called on the Federal Government to release import goods under the 43 items unbanned by the CBN that were seized by the Nigeria Customs Service (NCS).

The founder of NAGAFF, Dr. Boniface Aniebonam, made the appeal in an open letter to the leadership of the Nigeria Customs Service (NCS) and Minister of Finance on the matter of lifting forex restrictions on 43 trade items.

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