By Obinna Chima
The dogged implementation of the foreign exchange (FX) restriction on certain items has led to a 65 per cent drop in the countryâ€™s monthly import bill, from an average of $5.5 billion to $1.9 billion as of half year 2017, Central Bank of Nigeria Governor, Mr. Godwin Emefiele, has disclosed.Â
Emefiele, who said this in a keynote address he delivered at the 2017 annual dinner of the Chartered Institute of Bankers of Nigeria (CIBN) that took place in LagosÂ FridayÂ Â night, also noted the accretion of the nation’s foreign reservesÂ Â and hinted on the coming of monetary easing .
The governor expressed optimism that with the aggressive development finance interventions by the CBN, the nationâ€™s import bill would reduce further.
The Central Bank had, in June 2015, classified 41 items as â€œNot Valid for Foreign Exchangeâ€, on grounds that they could be produced in Nigeria, rather than deplete the countryâ€™s reserves on their importation. Some of the affected items include rice, cement, margarine, palm kernel, palm oil products, vegetable oils, meat and processed meat products, vegetables and process vegetable products, poultry, tomatoes/tomato paste, soap and cosmetics and clothes. Other items include Indian incense, tinned fish in sauce, cold rolled steel sheets, galvanised steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes/containers, enamelware, steel drums and pipes, wire mesh, steel nails, wood particle boards and panels.
In 2016, the first year of implentation of the forex restriction, the countryâ€™s import bill fell to $2.1 billion.
Â In his address titled â€œPolicy Options for Sustaining Nigeriaâ€™s Economic Upturnâ€, Emefiele said the FX restriction had also resulted in spectacular improvement in domestic production of most of the items that were barred from accessing the greenback.
He pointed out that local manufacturers in the country have continued to report major boosts in their revenue and proï¬t due to the central bankâ€™s policy.Â
The CBN governor added: â€œThis policy (FX restriction) has even freed Nigeria from a perennially embarrassing import: toothpicks. Baton Nigeria has also taken advantage of the policy and is now producing high quality, competitive toothpicks that is 25 percent cheaper than their Chinese competition.Â
â€œAs most of you may know, Unilever moved its blue band production facility to Ghana some years ago, which means that we must import this product from that country, with scarce FX.Â
â€œBut as part of the gains from our policy and in line with an agreement we reached with Unilever, the company will be commissioning a new Blue Band Factory in Agbara, Ogun State early next month.Â
â€œWe have also seen a sharp drop in imports of rice from several countries. To give one example, data from the Thailandâ€™s Rice Exporters Association indicate that in 2012, about 1.2 million Metric Tonnes of rice was exported to Nigeria.Â
â€œHowever, in 2016, which was the ï¬rst full year of implementation of our policy, rice exports to Nigeria had fallen by 99 percent to only 784 metric tonnes.â€
â€œThis signiï¬cant reduction in imports of rice from Thailand, according to him, represented a saving of over US$600 million to Nigeria in 2016 alone.Â
â€œIt is heart-warming to note that this fall in imports have been largely ï¬lled by a boost in local rice production. For example, employees at Labana Rice Mills in Kebbi State are trying to keep pace with demand, processing 320 tonnes of a rice a day, a 250 per cent increase from the previous year.Â
â€œFrom Kano, UMZA rice has expanded its milling capacity substantially to the extent that with the recent bumper paddy harvest, the company today takes delivery of over 100 trucks of paddy rice daily.Â
â€œThese are clearly veriï¬able successes of governmentâ€™s attempts to create jobs locally, improve the wealth of our rural population, improve industrial capacities and ultimately attain economic growth in Nigeria,â€ he added.
After ï¬ve quarters of continuous contraction of its Gross Domestic Product (GDP), the Nigerian economy recorded a positive growth of 0.55 percent in the second quarter of 2017.
Also, from a peak of 18.72 percent in January 2017, headline inï¬‚ation recorded eight straight months of disinï¬‚ation, with the rate declining to 15.98 in September.Â
In the same vein, the nation has recorded signiï¬cant appreciation of the naira from over N500 to a dollar, to about N360 to a dollar.Â
â€œWe, as resilient people and responsible organisation, have collectively surmounted the worst and have hurdled the unwelcome recessionâ€ Emefiele said, adding, â€œwe are delighted that the economy has turned a corner with our worst days clearly behind usâ€.
The CBN governor also pointed out that since the establishment of the Investorsâ€™ and Exportersâ€™ (I&E) FX Window, the country has recorded about US$10 billion in autonomous inï¬‚ows through the window alone. This, he said reï¬‚ected the effect of the increased transparency which that window accorded the FX market and its benign impact of improving investor conï¬dence and business sentiments.
â€œOur reserves have recovered signiï¬cantly from a low of just over US$23 billion in October 2016 to over US$34.3 billion as of November 3, 2017.
â€œThe accretion in reserves does not only reï¬‚ect increased inï¬‚ow but also our shrewd FX demand management strategy.Â Â
â€œWhen we introduced a policy restricting 41 items from our FX markets, we were called all manners of names. Today, among the beneï¬t of that policy is the considerable decline in our import bills,â€ he enthused.Â
Commenting on his outlook for interest rate, Emefiele disclosed that the central bankâ€™s Monetary Policy Committee (MPC) which holds it last meeting for the year next week, may begin to see strong justiï¬cation for easing of monetary policy. This, he stressed might further accelerate Nigeriaâ€™s economic recovery process.Â
According to the CBN governor: â€œMonetary policy stance could change when the underlying fundamentals become supportive.â€
Â While stating that over the last 12 months Nigeriaâ€™s FX reserves has grown by over $11 billion, from about $23 billion in October 2016 to $34.112 billion as of last Thursday, Emefiele also expressed belief â€œthat, if we remain resolute with our efforts, policies and actions we can attain an FX reserve position of about US$40 billion by end 2018.â€
He anticipated a return to very low double digit or high single digit inflation levels next year.Â
He, however warned policymakers in the country not to become complacent nor over-conï¬dent, stressing the need for all to continue to work to improve and sustain the pace of recovery.Â
â€œFor one, our import bill may have fallen but our manufacturing and agriculture sectors still have a long way to go if we must attain self-sufï¬ciency in those sectors.Â
â€œWe must not be quick to discard the restrictive measures which aided our recovery simply because the metrics have improved,â€ he said.
He said the central bank would continue to ï¬ne-tune its policies and strategies based on its understanding of evolving developments and supported by in-house technical analysis and simulations.Â
According to him, the central bank would remain proactive in ensuring that the welfare of Nigerians is optimised at any point in time.Â
â€œAs the sentiments improve in the macroeconomy and supported by proactive monetary, trade, industrial and ï¬scal policies, I expect a continued uptick in GDP growth with a positive spill-over to improved unemployment rate.Â
â€œAs policies to strengthen the agricultural and industrial sectors become more emergent, growth in these sectors will rise, further bolstering overall economy.
â€œAs we entrench and sustain the transparency in the FX market, as FX reserves accretion continues, and market conï¬dence and improved sentiments remain, I expect that the exchange rate will not only be stable but would begin to appreciate against major currencies.Â
â€œThe adverse competitiveness outcome which such appreciation may entail would be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined.â€Â
He stressed the need for a re-doubling of the strong policy coordination, collaboration and cooperation between the monetary and fiscal authorities, which according to him, â€œï¬‚ourished during the very difï¬cult times.â€
Â â€œTo sustain our recovery the need is greater now than ever for a robust policy coordination between the key aspects of economic policymaking space.Â
â€œIn Nigeria, this would include ï¬scal, monetary, exchange, and trade policies, which must be targeted at protecting farmers to boost agricultural outputs, support local companies and enhance manufacturing and industrial capacities, with a view to diversifying the economy away from oil and fossil fuels.Â
â€œWhile we still have much work to do, I am delighted that some of the pains that were associated with some of the CBNâ€™s policies have become major gains in our economy.Â
â€œWe have seen many manufacturers bounce back from near comatose to running shifts.Â
â€œWe have seen many farmers smiling to the bank and going back to their farmlands in due seasons.”