The Central Bank of Nigeria (CBN) has lifted the ban on foreign exchange transactions for 43 items that were previously restricted from accessing the official forex market. This decision, which was announced by the CBN Governor, Yemi Cardoso, on Tuesday, October 17, 2023, is expected to boost the supply and availability of dollars in the country and ease the pressure on the naira.
The CBN had imposed the forex restriction on 41 items in June 2015, and later added two more items in 2016, as part of its measures to conserve the dwindling foreign reserves and support local production of those items. Some of the affected items include rice, cement, poultry products, toothpicks, cosmetics, plastic and rubber products, among others.
The CBN’s decision to lift the ban on these items comes at a time when the country is facing a severe economic crisis, exacerbated by the COVID-19 pandemic and the decline in oil prices. The CBN said that the move was part of its efforts to ease the pressure on the foreign exchange market and improve liquidity. The CBN also said that it would continue to monitor the situation and intervene as necessary to maintain stability and support growth.
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However, the policy faced criticism from various stakeholders, who claimed that it was hurting the economy and creating opportunities for corruption and smuggling. They also pointed out that the local production capacity was not sufficient to meet the demand for these items, leading to shortages and high prices. Some of the affected importers resorted to sourcing foreign exchange from the parallel market at exorbitant rates, while others closed down their businesses or laid off workers.
However, after more than six years of implementing the policy, the CBN has decided to reverse it, citing improved macroeconomic conditions and increased forex inflows as the reasons for the policy shift. CBN governor said that the policy had achieved its objectives of reducing import dependence, enhancing domestic production capacity, creating jobs and boosting non-oil exports.
He also said that the CBN had recorded significant improvement in its foreign reserves, which rose from $29.1 billion in June 2015 to $42.3 billion as of October 2023. He attributed this to the introduction of the Investors and Exporters (I&E) window in 2017, which facilitated a more market-determined exchange rate and attracted more foreign portfolio investments into the country.
According to CBN governor, the removal of the forex restriction on the 43 items will not only increase the supply of dollars in the market, but also reduce the cost of production and ease inflationary pressures. He said that the CBN would continue to monitor the forex market and intervene as necessary to maintain stability and liquidity.
The reaction to the CBN’s announcement has been mixed, with some applauding it as a welcome development that would boost trade and investment, while others expressing skepticism about its impact and implementation. Some analysts have warned that the lifting of the ban could lead to a surge in imports and worsen the country’s trade deficit and external debt.
They have also questioned whether the CBN has enough foreign reserves to meet the increased demand for foreign exchange. Others have argued that the policy reversal is a sign of policy inconsistency and uncertainty, which could undermine investor confidence and economic recovery.
He also assured Nigerians that the CBN would sustain its support for the real sector and other strategic sectors of the economy through its various intervention funds and schemes. He urged Nigerians to take advantage of these opportunities and contribute to the economic growth and development of the country.