The Governor of the Central Bank of Nigeria, Mr Olayemi Cardoso, has clarified that the 43 items were never explicitly prohibited from importation or sale in Nigeria.
Mr Cardoso gave this clarification at the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria on Friday in Lagos.
He, however, explained that the apex bank had implemented restrictions on accessing foreign exchange for the importation of these items.
Mr Cardoso emphasised that the issue of trade policy, specifically the importation and sale of the 43 items, was primarily within the domain of the fiscal authorities, not the CBN.
The distinction, he said, was important because it clarified that the CBN’s decision to lift the foreign exchange restrictions on these items was not intended to encroach upon the responsibilities of other government agencies.
The CBN had in a circular in June 2015, published a list of imported goods and services that will not be eligible for foreign exchange in the Nigerian foreign currency market.
The list which was originally 41 was updated to include two more items.
But the CBN on October 12, 2023, announced that it had lifted the ban on the issuance of foreign exchange for the importation of rice, vegetable oil, and poultry products among other 43 items.
Mr Cardoso said, “Allow me to provide further clarification on the issue of the 43 items. Firstly, it is important to note that these items were never outrightly banned by the government. The CBN had imposed restrictions on their access to foreign exchange in the official market.
“However, these restrictions resulted in increased demand for foreign exchange in the parallel market, leading to the depreciation of the exchange rate in that segment of the Nigerian foreign exchange market and widening the premium between the parallel and official market.’’
Mr Cardoso said studies had shown that during the period when the 43 items were restricted, there was a 51.0 per cent increase in trade evasion by importers accessing the foreign exchange market.
According to him, this resulted in a revenue drop of approximately $1.4 billion, or $275 million annually, between 2015 and 2019.
He added that revenue from tariffs on goods decreased from a high of approximately $920 million in 2011 to about $250 million in 2017.
He stated, “In 2019, the actual tariff on goods stood at $320 million, but counterfactual evidence suggests that as much as $680 million could have been earned in the same year.”
He added that evidence had shown that foreign exchange restrictions had an adverse impact on Nigerian households and contributed to inflationary pressures.
Mr Cardoso said the reduction in trade restrictions and levies on rice, sugar, and wheat by 50.0 per cent had only a minimal impact on welfare, with a 0.8 per cent improvement, and a mere 0.4 per cent reduction in extreme poverty.
He further explained that the benefits of trade gains for the general population were negligible, as the average industry in Nigeria pays 13.7 per cent more for its inputs.
According to the CBN, this action will boost liquidity in the Nigerian foreign exchange market and intervene from time to time, adding that interventions will decrease as liquidity improves.
Meanwhile, a former CBN Director, Prof. Akpan Ekpo, noted that the apex bank made a big error by opening up the foreign exchange market.
He said, “It is an error because the dollar, pound and euro is not our money, we only get dollars when we sell oil mainly. Our economy is not productive and we don’t have firms that manufacture non-oil goods services, export them and earn forex. So, our naira is not convertible, in that case every country like ours will have what they called managed float.
“So when you come and put in more dollars because you have got more forex, these are very short term measures, they are not sustainable, so the problem is a supply and access problem.’’