The Central Bank of Nigeria has said it is raising dollar supply in the foreign exchange market, just as it also lifted the ban on 43 items that were previously not qualified for forex at the official market.
The decision came after the naira tumbled to 1,050/$ at the parallel market on Thursday, following pressure from international organisations and experts.
The PUNCH earlier noted that despite unifying exchange rates, the CBN had in June said that the status quo remained on the 43 non-eligible items banned from the forex market introduced under the former governor, Godwin Emefiele.
Nigerians imported not less than nine items worth N18.12tn from the forex ban list of the CBN between 2016 and 2022.
According to an analysis of Nigerian Foreign Trade reports of the National Bureau of Statistics from 2016 to 2022, items such as crude palm oil, vegetable products, animal products, meat, vegetable fats and oil, steel products, rubber, plastic, clothes, and textiles were imported from various countries.
In a different report, The PUNCH stated that despite the unavailability of forex for banned items by CBN, Nigerians imported five items worth N543bn in the first quarter of 2023.
However, different economic experts and organisations have repeatedly advised the CBN to remove the forex restrictions.
Earlier in the week, Citigroup said that the restrictions placed on foreign exchange provisions for 43 items by the CBN must go if the country was to fix the challenges plaguing the forex market.
This was revealed in the CEEMEA Frontier Credit Market Commentary written by credit analyst, Ayso van Eysinga, following a trip to Nigeria.
In his notes, Van Eysinga said that apart from clearing the backlog of forex demand, there was a need to remove restrictions from the 43 items.
Also, in its Nigeria Development Update (June 2023), the World Bank advised the CBN to end its forex restriction policy. It said this would complement moves to reduce inflation through a sequenced and coordinated mix of monetary, fiscal and trade plans.
CBN bows to pressure
The CBN has finally succumbed to pressure and lifted the ban on the importers of 43 items restricted from accessing foreign exchange on its official platform.
It disclosed this in a statement titled, ‘CBN restates commitment to boost liquidity in forex market’, signed by the bank’s Director, Corporate Communications, Isa AbdulMumin, on Thursday.
“Importers of all the 43 items previously restricted by the 2015 circular referenced TED/FEM/FPC/GEN/01/010, and its addendums are now allowed to purchase foreign exchange in the Nigerian foreign exchange market,” the statement said.
The apex bank said it would continue to promote orderliness and professional conduct by all Nigerian foreign exchange market participants to ensure market forces determined exchange rates on a willing buyer – willing seller principle.
It added, “The CBN reiterates that the prevailing foreign exchange rates should be referenced from platforms such as the CBN website, FMDQ and other recognised or appointed trading systems to promote price discovery, transparency, and credibility in the FX rates.
“As part of its responsibility to ensure price stability, the CBN will boost liquidity in the Nigerian foreign exchange market by interventions from time to time. As market liquidity improves, these CBN interventions will gradually decrease.”
The statement said the CBN was committed to accelerating efforts to clear the FX backlog with existing participants and would continue dialogue with stakeholders to address the issue.
It stated, “The CBN has set as one of its goals the attainment of a single FX market. Consultation is ongoing with market participants to achieve this goal. Participants and the general public are to be guided by the above.”
Meanwhile, some Bureau de Change operators who spoke to The PUNCH on Thursday said the dollar traded between 1,025/$ and 1,050/$ in Lagos and Abuja.
A BDC operator in Lagos, Abguadi, said, “The dollar was bought at N1,025/$ and sold at N1,035/$ on Thursday.”
According to another BDC operator, Abdul, “We bought dollar for N1,015/$ and sold it at N1,035/$. The price has been rising.”
A BDC operator, Yusuf, said, “Some BDCs don’t even have access to the forex. Today, we bought the dollar and sold at 1,035/$ and 1,050/$.”
Another BDC operator in Abuja, Ibrahim Yahu, said as of the close of business on Thursday, they were buying at N1.030/$ and selling at 1,045/$.
A forex dealer identified simply as Suraju said, ‘’I buy at N1,030/$ and sell N1,035/$; It is just a difference of N5.’’
However, on the Investor & Exporter forex window, the naira appreciated slightly after closing at 759.20/$ from 766.41/$ on Wednesday.
But the new Governor of the Central Bank of Nigeria, Olayemi Cardoso, also says the new leadership team will review the CBN foreign exchange market policies, corporate governance practices, and monetary policies to reposition the apex bank to achieve its core mandates.
Already, he said the new team members, who resumed fully at the bank a few weeks ago following their confirmation by the National Assembly, were carrying out a comprehensive assessment of the challenges facing the central bank.
According to him, the ongoing assessment of the bank will lead to tweaking or jettisoning of some policies as part of a wide-ranging programme to reform the bank as a catalyst for economic growth and development.
This was contained in a document obtained by our correspondent on Thursday.
The document was titled, ‘Preliminary assessment of challenges facing the Central Bank of Nigeria.’
In the document, Cardoso outlined the challenges facing the CBN, introduced high-level proposals to address reformation challenges while examining the role of a refocused central bank in supporting the economic agenda of President Bola Tinubu.
Corporate governance failure
In the paper, the new CBN governor raised several questions, ranging from how corporate governance failures in the CBN could be addressed, how public and financial systems’ stakeholder confidence could be restored in the autonomy and integrity of the CBN, as well as the need to refocus the central back to its core functions.
He also harped on what should be put in place to revert to evidence-based monetary policies, including the discontinuation of unorthodox monetary policies and foreign currency management, unorthodox use of Ways and Means spending, and developing control limits in the use of Ways and Means in financing public sector deficit.
On the backlog of FX demand, Cardoso emphasised the need for creative financing options for clearing the short to medium-term backlog.
The new central governor also plans to limit the CBN’s fiscal side interventions while proposing responses to addressing inflation and price stability issues.
Cardoso said, “These problem statements need in-depth review by the new Central Bank leadership team to determine what mechanisms are currently working, what can be tweaked or dispensed with and what new tools need to be introduced.”
On how the CBN can be refocused to support economic growth, he said, “The economic policy proposals of the administration identify a set of fiscal reforms and growth targets that will achieve $1.0tn GDP within eight years. In reviewing selected BRICS and MINT countries with large populations and similar developmental characteristics as Nigeria, it is interesting to identify macroeconomic indices that point to Nigeria’s economic trajectory, given the faithful implementation of the proposed economic reforms. In economies bigger than $1.0tn, these indicators include moderate inflation, sizable foreign reserves, and the capacity to rebound from a cyclical economic downturn quickly.”
He added, “Much has been made of past CBN forays into development financing, such that the lines between monetary policy and fiscal intervention have blurred. In refocusing the CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth.”
He listed the advisory roles as the CBN acting as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy, facilitating new regulatory frameworks to unlock dormant capital in land and property holdings, accelerating access to consumer credit and expand financial inclusion to the masses; de-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies; and exercising the CBN’s convening power to bring critical multilateral and international stakeholder participation in government and private sector initiatives.
In conclusion, Cardoso said, “It must be emphasised that CBN does not have a magic wand that can be waved at the current economic challenges. The problems facing the bank are large and complex. However, with focused leadership and sustained reforms, it is expected that over time, the country will see gains open economic spaces, attract new investments, create employment, and give our hardworking and talented compatriots an opportunity for a more prosperous future”.