Emefiele: Forex Restriction on 41 Items Saved Nigeria’s Economy

  • Enelamah, Ezekwesili worried over rising debts

James Emejo, Kasim Sumaina in Abuja and Nume Ekeghe in Lokoja

The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, wednesday reiterated that the bank’s restriction of foreign exchange access to 41 import items, three years ago, was in national interest, explaining that it helped to save the economy from collapse.

Emefiele in a keynote address he delivered at a seminar for journalists in Lokoja with the theme: “Monetary Policy Implementation amidst Global Economic Protectionism,” said although the policy was restrictive of trade, he explained that it was necessary to protect the economy from the importation of items that could dampen the local production and economic growth.

The CBN had in July 2015, restricted 41 items, including vegetable oil, poultry products, toothpicks, cosmetics, plastic and rubber products, among others, from accessing foreign exchange from the interbank foreign exchange market. Importers of the restricted items were asked to source their forex requirements from autonomous sources.
Emefiele, who was represented by the CBN Director, Monetary Policy Department, Mr. Moses Tule, noted that in today’s world, countries have used trade protection repeatedly as a policy to resolve negative perceptions and shocks.

He said, “In other words, should Nigeria with insatiable taste for foreign goods to the detriment of the domestic economic realities (unemployment and imported inflation) throw its borders open to indiscriminate importation of goods and services.

“This was the prevailing condition in Nigeria before the introduction of restriction of official foreign exchange for the importation of 41 items.

“It was an eclectic policy carefully crafted with a view to reversing the multiple challenges of dwindling foreign reserves, contracting Gross Domestic Production -recession and an embarrassing rise in the level of unemployment confronting the economy.

“The implementation of the 41 items, in addition to the other complementary macroeconomic policies, no doubt, was effective in lifting the Nigerian economy out of recession.

“For example, the real Gross Domestic Product (GDP) grew by 1.40 per cent in the third quarter of 2017, up from 0.72 per cent, and contraction of 0.91 per cent in the second and first quarter of 2017, respectively. Also, there has been improved reserve accretion to the country’s reserve.”

The CBN governor noted that given the salutary effects on the economy; it could be argued that the “stance of classical economists that trade protectionism notwithstanding, to override the utility of selective protection in form of the 41 items to resolve the challenges facing the economy can hardly be overemphasised.”

He added, “Pragmatic economic nationalism, therefore, would ordinarily vote in favour of protecting the domestic economy, as long as it does not infringe upon the tenets of “beggar-thy-neighbour policies.”

He also said protectionism does not refer to the restriction of trade between nations, utilising means such as tariffs on imported goods, restrictive quotas, and a variety of other inhibitive government regulations, designed to discourage imports and prevent the foreign dominance of local markets.
“Protectionism directly contrasts with the system of free trade in which the trading in goods and services between or within countries flows unobstructed by trade restrictions.

“At the heart of protectionist policies is the desire to spur the domestic economy for enhanced local production and to discourage dumping in order to protect domestic industries from foreign take-over or competition,” he added.

Enelamah Decries High Interest on Nigeria’s Debt

Meanwhile, the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, has said the country’s rising debt stock should not be the source of concern to Nigerians but the attendant high interest accrual on the loans.
He said the debt to Gross Domestic Product (GDP) ratio was still under 20 percent and within a comfortable threshold.

Nigeria’s total domestic and foreign debt stock stood at N22.38 trillion and $73.21 billion respectively, as at June 30, 2018, according to the National Bureau of Statistics (NBS).
Speaking in an interview with THISDAY, against the backdrop of concerns over the country’s rising debt profile, he said the country must be careful about the sources of the borrowings with regards to high interest charges on the loans.

He said, “First in terms of actual numbers- debt as a percentage of GDP for instance, you find that Nigeria is probably still under 20 per cent, which broadly speaking will be considered acceptable compared to those of other countries.

“However, the interest on the debt is an issue- which then tells you what the real problem is. Nigeria has a revenue problem not a debt problem because debt to GDP is just under 20 per cent.

“It’s like somebody who has a mortgage on his house, the mortgage may be reasonable but if he doesn’t have a job- he had better go and get a job- he can decide to move out of the house but he has to live somewhere.

“So my view that we need to ratchet up and step up the revenue profile of the government and I will tell you why; our revenue to GDP is six percent, which is abysmally low and the reason is that unfortunately we don’t have a tax paying culture.”

He said, “A system that’s based on oil revenues that’s shared across the tiers of government is a recipe for abdication of responsibility because it looks as if the money is dropping from upstairs.
“Whereas if it’s like in other countries where the money is built up, the people actually feel that government owes them because they are now funding the government.

“And I think Nigeria should get back there which is also part of the diversification of the economy. What is clear is that the revenue from oil is not enough, which is why it’s just six percent.

“So, I do agree that we have work to do but I will say that work is to increase our revenue to GDP and certainly do it in a way that is sustainable and robust. What we have now is fragile which is basically dependent on oil revenue.”

The minister, however, disagreed with suggestions that President Muhammadu Buhari lacked a capable economic management team to turn around the fortunes of the country as his cabinet ministers appeared to be incompetent.
He insisted that Buhari had put round pegs in round roles in his choice of political appointees.

According to him, “You know what the president said is put round pegs in round holes. If you wanted to be fair to the president and the cabinet, you actually have to look at the ministers. I interact with them one by one and ask yourself honesty-these ministers, don’t they fit? My own honest assessment is that in most of the portfolios, we have round pegs in round holes.

“I can speak for myself but if you know their background, you’ll know they fit. I mean, I don’t want to start calling names but if you look at Chief Audu Ogbeh and agriculture, I mean, he is so passionate about it.

“So you can go step by step. My sense is that we actually have round pegs in round holes. However, the point I’m trying to make is that we are very quick to criticise- I have to admit that we have a long way to go but my view is that collectively as a country, we need to keep reinforcing the social contract and you’ll find that the leadership at the ministerial level will get stronger and stronger.”

Nigeria’s Rising Debt Very Scary, Says Ezekwesili

Also speaking on the economy, former Minister of Education and Senior Economic Advisor, African Economic Development Policy Initiative (AEDPI), Dr. Oby Ezekwesili, has described Nigeria’s rising debt as very scary and a source for concern.

Ezekwesili, while speaking to the press, yesterday at the sidelines of the Morocco-Nigeria Relations event with the theme: Enhancing Opportunities for Growth and Development in Abuja, stated that the country does have a debt issue.
According to her, “You can’t deal with the revenue issue in isolation from the debt issue. The truth is that you have different indicators that you use in measuring your debt sustainability. The one that the government likes, is the one that says to it that you have plenty of headroom to borrow and that’s the one that measures the percentage of the ratio to debt and the GDP.

“It has become a blunt instrument, because if you’re not with the capacity to service your debt, then you are already in crisis, you’re in trouble. You won’t even produce any additional GDP.
“Today, our GDP, our debt service to revenue is 69 per cent hovering around 70 per cent. That’s very scary, so it is something that needs to be worked on. We need to look at the kind of reforms that will enlarge the productivity of our GDP as it is and triple it as much as possible.”

Ezekwesili added, “Our own GDP is about $375 billion today, our GDP per capital is about $1,968. That of Morocco 109 billion for the GDP and 3,109 GDP per capital.

“Now, these are low levels, these are low numbers. We have the capacity to triple these GDP levels. The more that we can collaborate, the more that we can find regional integration basis, to do things with business to business, government to government and people to people. The better for the two countries.

“By so doing, it can then be the drivers of even more integration within not just our sub region but the continent, and then to look towards the rest of the world on the basis of higher productivity and competitiveness”.
The presidential candidate of the Allied Congress Party of Nigeria (ACPN), however said, “Until we are able to think in a very holistic and comprehensive way about this, we might be continuously substituting the necessary visionary reforms that we need in Key sectors of the economy for debt.”

On his part, Managing Director, OCP Policy Center, Karim El Anynaoui, said over the past three, four years, Morocco and Nigeria had deepened their relations.

He noted that there are things happening on the ground. Sighting the fertilizer sector as an example, he said that his country had been supporting the presidential fertilizer initiative in Nigeria.

According to him, “We made sure to provide appropriate, tailor made and affordable price for the farmers. So, there are things going on, and there are other sectors where discussions and potential for cooperation is ongoing, particularly in the energy sector.”