Renewed Vigour to Sustain Gains of Forex Restriction

Godwin Emefiele

Obinna Chima writes on recent move by the Central Bank of Nigeria to ensure that the stability in the foreign exchange market, especially since the restriction placed on 41 items, is sustained

Nearly three years after the Central Bank of Nigeria (CBN) listed a total of 41 items as not valid for foreign exchange (forex) through the official window, some local businesses have been taking advantage of the opportunity created by the policy.

In fact, the initiative has seen a lot of retailers and hypermarkets in the country that hitherto, used to import most of the items they sell, now having more Made-in-Nigeria goods on their shelves.

For instance, the Chief Executive Officer of Blaid Farms Limited, a mechanised farm that is situated on 48-hectares of land in Abuja, Mrs. Ochuko Momoh, in a recent interview with THISDAY, stressed that the agriculture sector has the ability to transform the fortunes of the Nigerian economy.

According to Momoh, the demand from her produce has increased significantly in the past two years.
“I am getting demand for eggs and other farm produce from Lagos, Port Harcourt, Ibadan, but I can’t meet the demand. There is a lot of potential, not only for the local market, but for import as well. But there is need for appropriate government policies.

“All the crops we are cultivating are all-year production. Also, the eggs, the vegetable, lettuce, as well as our fish, are all-year round production. We don’t stop production due to seasonal effects and we harvest almost every day. So, all the crop we are doing, we have the green house and so the weather condition doesn’t affect it.
“We harvest our lettuce every 21 days and we have eight cycles in a year for the production of lettuce. This is an integrated farm and if one crop doesn’t do well, others will cover your cost of production. But we try to make sure all of them generate the expected income.”

Blaid Farms which is currently faced with the challenge of meeting the huge demand from various hypermarkets in the country, is also looking up the government and financial institutions to expand its operations.

The Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, validated Momoh’s statement on the huge demand her farm gets, when he disclosed that during his recent visit to an unnamed popular supermarket in Lagos, there was a big contrast between his visit to the shop five years ago, and his visit last month.

“What was apparent was the huge increase in the number of made in Nigerian processed goods that were being sold in this store; from locally produced rice to well packaged ready to use tomato stew, dried fruits and also cassava chips.

“As I walked round the shop I could see the huge potential of Nigerian entrepreneurs, as they developed products which could compete with their peers in other climes. I could also imagine the number of people who are being employed by these entrepreneurs to support production of these goods.

“For us to grow as a nation, we must continue to encourage these businesses as they do more than just provide goods, they help to sustain the vitality of the communities in which they live and work,” Emefiele explained.

This clearly was one of the reasons why Emefiele, last week, stated that the Bank would be collaborating with the Economic and Financial Crimes Commission (EFCC) to expose banks, importers or organisations that collude with corrupt individuals to flout its policy on the restriction of foreign exchange (forex) to 41 items.

He also warned speculators in the forex market that they would lose their shirt, saying the central bank has enough war chest to sustain the stability in the forex market.

According to him, the central bank would continue to take measures to ensure stability in the forex market.

He said additional efforts would be made to block any attempts by unscrupulous parties (both individuals and corporates) that intend to find other avenues of accessing forex, in order to import these items into Nigeria.

“The CBN’s Economic intelligence and Banking Supervision Departments will work very closely with the EFCC to expose and sanction any bank, company and or its directors or forex operator who colludes with unscrupulous individuals/companies to undermine the policy on 41 items.

“Such sanctions will include, but not limited to prohibiting all the banks in Nigeria from maintaining any bank accounts for any such institutions or persons in Nigeria.

“If you are caught as an individual or a company, we are saying that, that bank, that company and the individuals, that the central bank would prohibit all the Nigerian banks at same time, from maintaining any bank account for you,” he had warned.

He disclosed this in a keynote address he delivered at the 53rd Annual Bankers’ Dinner of the Chartered Institute of Bankers (CIBN) held in Lagos last week.

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.

Import Bill Dropping
According to Emefiele, various initiatives aimed at encouraging domestic production, have resulted in Nigeria’s monthly import bill falling significantly from $665.4 million in January 2015, to $160.4 million as at October 2018, representing a drop by 75.9 per cent and an implied savings of over US$21 billion on food imports alone over that period.

He pointed out that many entrepreneurs are now taking advantage of policies aimed at ramping local production to venture into the domestic production of the restricted items with remarkable successes and great positive impact on employment.

“The dramatic decline in our import bill and the increase in domestic production of these items attest to the efficacy of this policy.

“Most evident were the 97.3 percent cumulative reduction in monthly rice import bills, 99.6 percent in fish, 81.3 percent in milk, 63.7 per cent in sugar, and 60.5 percent in wheat.

“We are glad with the accomplishments recorded so far. Accordingly, this policy is expected to continue with vigour until the underlying imbalances within the Nigerian economy have been fully resolved.

“If we continue to support the growth of small holder farmers, as well as help to revive palm oil refineries, rice mills, cassava and tomato processing factories, you can only imagine the amount of wealth and jobs that will be created in the country.

“These could include new set of small holders farmers that will be engaged in productive activities; new logistics companies that will transport raw materials to factories, and finished goods to the market; new storage centres that will be built to store locally produced goods; additional growth for our banks and financial institutions as they will be able to provide financial services to support these new businesses; and finally, the millions of Nigerians that will be employed in factories to support processing of goods.

“If we turn a blind eye to the opportunities that are being created as a result of our policy on 41 items, we will be spelling doom for our nation. We can no longer afford to depend solely on imports given the size of our population, and the need to create jobs for our people.”

Importers of the restricted items were asked to source their forex requirements from autonomous sources.
Emefiele pointed out that given the remarkable success that had been achieved in stimulating domestic production of goods such as rice, cassava and maize, as a result of the restrictions placed on access to forex for the 41 items, the central bank intends to vigorously ensure that the policy remains in place.

Boost in Domestic Production
A research analyst at Anchoria Asset Management Limited, Mr. Adedeji Adewole, noted the increased domestic production in the country, since the restriction of access to forex placed on the 41 items.

“Apart from rice production, there has been increase in domestic production of goods such as maize and cassava. The restriction placed on the 41 items has no doubt impacted positively on the economy. So, for the agricultural sector, it was a good thing,” he said in telephone.

He, however, noted the recent increase in forex demand on the parallel market, anticipating that the new measure introduced by the central bank which takes off today would help calm the pressure in the market.

To the President, Association of Bureau De Change of Nigeria (ABCON), Aminu Gwadabe, the policy on the 41 items helped in eliminating spurious demand and illegitimate forex transactions in the market.

Gwadabe has said the strategic partnership between the central bank and his association also helped to keep the naira stable at both the official and parallel markets, despite recent pressure observed in the market.

“This feat will no doubt strengthen the effectiveness of the technical compliance of the Anti-money laundering and counter terrorism financing laws and help Nigeria’s assessment into the Financial Action Task Force coming up next year,” he stated.

He expressed gratitude for the observed increase in surveillance by the security agencies on illicit financial flow and controls at the nations boarders, but also noted that the secondary forex market currently enjoys huge confidence, making it difficult for forex speculators and illegal forex dealers to manipulate activities.

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