The Central Bank of Nigeria (CBN’s) foreign exchange (forex) policy, which barred importers of 41 items that can be produced locally from sourcing forex through its interbank window is taking its toll on real sector operators. But hopes that the policy may be reviewed to lessen the burden of real sector operators may have dimmed following the apex bank’s refusal to shift ground, writes Assistant Editor OKWY IROEGBU-CHIKEZIE.
Succour may be far from real sector operators particularly manufacturers who have been hoping for a review of the Central Bank of Nigeria (CBN) foreign exchange (forex) policy, which restricted certain items from accessing foreign exchange. The manufacturers may have had their hopes dashed by the apex bank as the CBN Governor Godwin Emefiele foreclosed a possible review of the policy, which manufacturers see as a disincentive to the manufacturing sector and the economy.
At the International Monetary Fund (IMF)/World Bank Group meeting in Lima Peru, Emefiele dashed manufacturers’ hopes, saying the policy was not up for review and that the apex bank would continue to deny importers access to forex to bring in goods which can be produced locally. He explained that contrary to insinuations, the finance sector regulator has not banned any goods from being imported. “We have not banned any items. What we just did was to exclude them from accessing foreign exchange; items that can be produced in the country.
“We think that because of the problems we’ve had, the drop in commodity prices and revenue accruing to the nation, and because we know that these items have been produced in large quantities in this country in the past, that provision still stands. The CBN is not reconsidering the ban, the exclusion still stands,” he stressed. The CBN chief added that since the policy came into force, he has been prompted from various quarters to even elongate the ‘excluding items’ list, but that the CBN would confine itself to the items presently in the restriction basket.
The CBN inadvertently hit the raw nerves of manufacturers when in June this year it removed 41 items from access to its foreign exchange window on grounds that they could easily be produced in Nigeria rather than spend the country’s reserves on importing them. The list included rice, cement, clothes, textiles, toothpick, poultry products, meat and processed meat, margarine, palm kernel/palm oil and vegetable oils, private airplanes/jets, tinned fish, incense and wooden doors.
Others are soaps and cosmetics, tomato/tomato paste, woven fabrics, table ware, kitchen utensils, furniture, plywood boards and panels, wood particle boards and panels, and glassware. Cold rolled steel sheets, galvanised steel sheets, wire mesh and steel nails were also on the list. The apex bank explained that the policy was aimed at encouraging local production of the items.
However, CBN’s explanation apparently did not hit the right chord in the ears of real sector operators especially manufacturers most of who felt that the policy imposed additional burden on them and the economy generally. Specifically, the manufacturers argued, for instance, that some of them who need some of the raw materials and products restricted from the forex market as their primary products in the manufacturing process are adversely affected.
In other words, manufacturers who require any of the 41 restricted items as inputs and raw materials for their production may have to simply shut their operations once their existing stock is exhausted.
As far as Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, is concerned, CBN’s understanding of the manufacturing process of many of the sectors affected by the policy was “limited.”
For LCCI and other real sector operators therefore, nothing short of a review of the policy or outright cancellation would gladden their hearts. And hopes that a review of the policy was in the offing came when Vice-President ’Yemi Osinbajo recently indicated the Federal Government’s readiness to adjust the controversial forex policy that pitched it against operators in the real sector. That was at the 43rd Annual General Meeting (AGM) of the Manufacturers Association of Nigeria (MAN) in Lagos.
The Vice President however, said the cancellation of the policy was not an option. While noting that the CBN forex policy was introduced to boost local production and protect the nation’s manufacturing sector, he however, said there could be the need to rejig the policy towards ensuring that all the associated grey areas are properly looked at and any aspect of the policy that requires amendment resolved.
Hear him: “We are going to have negotiations with the operators of the manufacturing sector to seek ways on how foreign exchange control can be eased to enable the items that are not eligible for foreign exchange to be covered.” While noting that the policy was as a result of the downturn in the economy caused by the falling oil prices, he said the nation deserved a robust foreign exchange reserve and would do everything to achieve that as a responsible government.
Osinbajo’s hint of a possible adjustment of the policy once the economy improves was no doubt, a soothing balm on manufacturers and other operators in key sectors of the economy including maritime who have been lamenting that the policy has been taking a huge toll on their businesses. For instance, the revenue generation profile of the Nigeria Customs Service (NCS) is said to have suffered because of the exclusion of some items from forex transactions.
The Apapa Area 1 Command of the NCS this week, announced a dip in its monthly revenue collection for September, collecting N23.3 billion.
The figure was far below the N30.1 billion collected in August, according to a report signed by its Area Controller, Comptroller Eporwei Edike. The N7 billion decline was blamed on the exclusion of some items from foreign exchange transactions by the CBN.
Despite this and other unintended negative consequences of the policy, the CBN said it would not shift ground. Emefiele, in defending the apex bank’s stance, argued that if there’s global economic slowdown, which has affected the growth and resilience of emerging and frontier markets, including Nigeria, and there is a drop in revenue receipts, which has impacted negatively on everyone, “There’s need for the regulator to intervene to restore stability in the exchange rate regime.”
He also said there is need to look for ingenuous ways of increasing the sources of foreign exchange, such as encouraging exporters to repatriate their proceeds and make more foreign exchange available to the real sector so as to grow the economy. He added that the reforms that commenced about two years ago, with respect to economic diversification and taxation, will be vigorously pursued with a view to increasing government’s revenue base.
