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Sustain The Forex Restriction On 41 Items



Nigeria recently signed a bilateral currency swap agreement with the People’s Republic of China worth about N720 billion. The excitement that followed this historic economic partnership also generated some misgivings and misinterpretations that are creating unnecessary anxiety in the minds of small and medium scale enterprises (SMEs) that took advantage of the ban to venture into local production of some of those items. This category of entrepreneurs, deriving from past experiences were, genuinely, worried that it might lead to the lifting, even if unofficially, of the ban placed by the Central Bank of Nigeria (CBN) on 41 items from accessing foreign exchange in the official foreign exchange market.

In placing that lid on those items’ access to official foreign exchange, the apex bank explained that the aim was to encourage their local production, conserve the nation’s foreign reserves, resuscitate domestic industries and improve employment opportunities. It stressed that imported goods and services from the list of items were not valid for forex in the Nigerian Foreign Exchange Markets. This policy implies that those who import these items can no longer buy foreign currency from the official window to pay the overseas suppliers. Rather, they will have to source forex from the parallel market or Bureau De Change to pay for their imports. The CBN emphasised that the policy is very much in place and described the fears as unfounded.

However, explaining the currency swap policy, the apex bank pointed out that the deal would not cover the importation of the 41 items banned in its 2015 circular on items not valid for foreign exchange. It is in the interest of the economy that the policy is sustained regardless of any political pressure to review it. In the opinion of this newspaper, the policy is a success story as it has impacted positively on the economy by opening business opportunities that many, especially young entrepreneurs, never believed were possible.
It needs be stressed, in our view, that because of the ban, policies like the Anchor Borrowers Programme (ABP) is flourishing. Initiated by the federal government through the CBN in partnership with state governments and private sector groups, it has attracted investments of more than N55.526 billion assisting, in the process, over 250,000 farmers by providing them with the requisite training, tools and funds at single digit interest rates which would enable improved cultivation of key agricultural items such as maize, soybeans, rice, cotton and wheat.
It is pertinent to observe that two years into its implementation, the programme has contributed to the creation of an estimated 890,000 direct and 2.6 million indirect jobs, led to the improvement in the local production of those banned items, conserved foreign exchange which in turn removed pressure on the naira. The policy has helped local companies which have been turning in profits and also declaring dividends to shareholders and paying taxes to government.

In terms of employment generation, the policy has encouraged start-ups and the attendant multiplier effects in the labour market. From the 2018 budget estimates and the 2018-2020 Medium Term Expenditure Framework, Nigeria has been able, as a result of the introduction of the policy, to attract investment worth $10billion.
The CBN is already taking appropriate measures to ensure that the policy is not contravened in the process of implementing the currency swap deal. Chinese investors are interested in setting up shop here. And that is because if they produce here, it will be better for them as that business decision will remove delays associated with transportation and other logistics.

In our opinion, the fears in the mind of these SMEs may not be altogether unfounded even with the assurances by the Central Bank. What is urgently needed in order not to reverse the gains of the ban is constant monitoring and supervision of the implementation processes in Nigeria and also on the Chinese end. Perhaps, the apex bank may see the inevitability of initiating a legislation to strengthen its arm as it continues in its determination to make the policy work on a sustained basis. That it has survived to this time is, indeed, a testimony to the courage and resilience of the authorities who have raced pass through earlier predictions of its possible negative impact on the economy of the country. Before now the country is used to policy reversals that had stymied the growth of the productive sectors of the economy especially the SMEs. We urge the CBN to persevere for their sake because failure or a reversal at this time cannot and must not be considered as an option.