FULL LIST: CBN Lifts FX Restrictions on Importation of Rice, Cement, Palm Oil, 40 Other Items
The Central Bank of Nigeria (CBN) yesterday, declared that importers of 43 items previously restricted from accessing foreign exchange (FX) at the official window are now allowed to purchase FX in the Nigerian foreign exchange market going forward.The development came just as the CBN Governor, Mr. Olayemi Cardoso, has emphasised that the apex bank does not have a magic want to address the myraid of challenges facing the Nigerian economy.
The apex bank in June 2015, had initially included 41 items to the list of commodities which were not-valid to purchase FX from the market, citing the need to conserve the scarce forex and encourage domestic production for self-sufficiency and exports. The list was thereafter expanded to 43 items.Some of the items listed then as not-fit-for forex included rice, cement, margarine, palm kernel products and vegetable oil, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, private airplanes, tinned fish in sauce, roofing sheets wheelbarrows, head pans, among others.However, in it’s latest statement, the CBN Director, Corporate Communications, Dr. Isa AbdulMumin, said the central bank would continue to promote orderliness and professional conduct by all participants in the FX market segment to ensure that market forces determine exchange rates on a Willing Buyer – Willing Seller principle.
He stressed that the prevailing FX rates should be referenced from platforms such as the CBN website, FMDQ, and other recognised or appointed trading systems to promote price discovery, transparency, and credibility in the FX rates.The CBN director further emphasised that as part of its responsibility to ensure price stability, the bank would boost liquidity in the FX market by interventions from time to time, stating however, that as market liquidity improves, these interventions would gradually decrease.AbdulMumin, said the CBN remained committed to accelerating efforts to clear the FX backlog with existing participants and intensify dialogue with stakeholders to address the issue.
He added that the CBN had set the attainment of a single FX market as one of its goals, adding that consultation was ongoing with market participants to achieve the objective.The FX market has undergone a series of reforms since President Bola Tinubu assumed office in May.In June, the CBN directed the banks to remove the cap on the investors and exporters’ (I & E) window of the forex market to allow for the free-float of the naira exchange rate.At the behest of Tinubu, the apex bank had announced the abolishment of segmentation in the FX market and collapsed all rates into the Investors and Exporters (I&E) window.The move had put an end to the multiple exchange system leading to the floating of the naira.The central bank further announced the re-introduction of the “Willing Buyer, Willing Seller” model at the I&E Window as well as the cessation of the RT200 Rebate and Naira4Dollar Remittance Schemes, with effect from June 30.
Cardoso: CBN Does Not Have Magic Wand to Address Nigeria’s Challenges
Meanwhile, Cardoso, has emphasised that the apex bank does not have a magic want to address the myriad of challenges facing the Nigerian economy.Cardoso, whose nomination was confirmed by the Senate few weeks ago, however, reiterated the preparedness of the apex bank under his leadership to ensure improved monetary policy interventions and advisory functions.In a document obtained from the CBN yesterday, Cardoso noted that in line with the President Bola Tinubu’s economic policies, a refocused CBN would play a pivotal role in supporting economic growth.“It must be emphasised that CBN does not have a magic wand that can be waved at the current economic challenges.“The problems facing the bank are large and complex. However, with focused leadership and sustained reforms, it is expected that over time, the country will see gains open economic spaces, attract new investments, create employment, and give our hardworking and talented compatriots opportunity for a more prosperous future,” he explained.
According to Cardoso, key factors the central bank under his leadership would be to support the fiscal authorities to achieve a $1 trillion GDP within eight years, moderating inflation, increasing foreign reserves, and the capacity to rebound quickly from economic downturns.In addition, he said the central bank would shift from direct development financing to advisory roles that supports economic growth, promoting specialised institutions and financial products, facilitating new regulatory frameworks, expanding financial inclusion, and de-risking instruments to attract private sector investment.On how a refocused CBN could support economic growth, the CBN governor said: “The economic policy proposals of the administration identifies a set of fiscal reforms and growth targets that will achieve $1 trillion Gross Domestic Product (GDP) within eight years. “In reviewing selected BRICS (Brazil, Russia, India, China and South Africa) and the MINT (Mexico, Indonesia, Nigeria and Turkey) countries, with large populations and similar developmental characteristics as Nigeria, it is interesting to identify macroeconomic indices that point to Nigeria’s economic trajectory, given the faithful implementation of the proposed economic reforms. “In economies bigger than $1 trillion, these indicators include moderate inflation, sizable foreign reserves, and the capacity to quickly rebound from a cyclical economic downturn.”Given these, Cardoso noted that a refocused CBN would “better serve the country through monetary policy interventions and advisory roles that sustain implementation of the administration’s fiscal proposals.”He added: “Much has been made of past CBN forays into development financing, such that the lines between monetary policy and fiscal intervention have blurred.
“In refocusing the CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth.“These advisory roles could include, for instance: Act as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy.“Facilitate new regulatory frameworks to unlock dormant capital in land and property holdings. Accelerate access to consumer credit and expand financial inclusion to the masses.“De-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies.“These verticals have huge demand patterns, with the potential for high local inputs and value retention, and can be the basis for rapid industrialisation and exercise CBN’s convening power to bring key multilateral and international stakeholder participation in government and private sector initiatives.”According to Cardoso, the CBN is currently facing a range of challenges, including issues related to corporate governance, diminished institutional autonomy, the need to refocus on core functions, discontinuation of unconventional monetary policies, tackling unorthodox use of Ways and Means spending, addressing the backlog of foreign exchange demand, clarifying fiscal and monetary relationships, managing inflation and ensuring price stability.
He listed other challenges to include enhancing access to the foreign exchange market, evaluating interest rate realignment and assessing the stability of the current financial system, with a proactive approach to monitoring the expanding use of electronic payment systems by Fintech and Telcos.He stated that in assessing challenges currently facing the country’s central bank, preliminary questions are presently being raised to address failure in corporate governance at the apex bank, just as he stressed the need to rebuild confidence in the bank and autonomy and integrity of CBNIn terms of refocusing the CBN back to it’s core functions, Cardoso noted that, “what needs to be in place is to revert to evidence-based Monetary policies, discontinuation of unorthodox monetary policies and foreign currency management.”
He added: “Unorthodox use of Ways and Means spending: What controls can CBN develop to enforce statutory limits in the use of Ways and Means of financing public sector deficit?“Backlog of FX demand: How much of the backlog is real versus speculative/ hoarding and are there creative financing options for clearing the short to medium term backlog.”He further raised some posers on the issue of lack of clarity in fiscal and monetary relationships, “where are the delineations, and what should be the limits in CBN’s fiscal side interventions Inflation and price stability? What are the causes, and what is CBN’s proposed response to address inflation and price stability issues?“Access to FX market and FX price discovery: What mechanisms exist to address FX rate unification under a willing buyer and willing seller arrangement?“What should be the role of the central bank in the FX market. Is there a need for interest rate realignment to money supply, inflation, and market realities?“Current Financial System Stability: What is the current state of the financial system? “Are CBN surveillance frameworks being updated proactively to track the expanding use of electronic payment systems by Fintech and Telcos?”
Naira Depreciates on Parallel Market, I& E Window
The naira depreciated further on both the parallel market and the official I&E window yesterday, closing at N1050/$1 and N759.20/$1, respectively.On the parallel market, the naira/dollar exchange rate was N1050/$1, a decline from the N1030/$1 reported on Wednesday.On the other hand, on the official I&E window, it closed at N759.20/$1, reflecting a decrease from the N776.80/$1 recorded on Wednesday. However, the official I&E window reported a daily volume turnover of $407.66 million, which was an increase compared to the previous day’s turnover of $29.06 million.
CPPE Hails CBN’s Decision to End Exclusion of 43 Items from FX Market
The Centre for the Promotion of Private Enterprise (CPPE) has welcomed the decision of the CBN to discontinue the policy to exclude 43 items from accessing foreign exchange from the official market.The Founder of the CPPE, Dr. Muda Yusuf, yesterday described the termination of the policy as a move in the right direction.Yusuf said: “It is part of the policy normalisation process.“The exclusion of the 43 items was 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 that the new directive would also improve transparency and disclosures in foriegn exchange transactions. He advised the CBN to avoid market suppression tendencies, especially outside the I and E window. “All policy impediments to forex inflows should be removed,” he said , adding that the “fiscal authorities should continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principles. “We need to worry about the risk of import surge. There is also need to upscale the use of fiscal policy measures to boost domestic production and productivity.”
