Mixed feelings on CBN’s forex ban reversal

By Anozie Egole

Major operators in the Nigerian Maritime sector have argued back and forth over the decision of the new Governor of the Central Bank of Nigeria, Dr Yemi Cardoso, to remove the ban on forex for imports of 43 items into the country. While some are of the opinion that the decision won’t benefit the economy much, others say it is a step in the right direction. ANOZIE EGOLE reports

When the Central Bank of Nigeria, precisely on the 12th of October 2023, announced that it had lifted the ban on the issuance of forex for the importation of rice, vegetable oil, and poultry products among other 43 items, many Nigerians took a deep breath of relief.

At least, they believe that the pronouncement will drive down the price of rice (the commonest food consumed by Nigerians) which has gone as high as N52, 000 per bag (depending on the quality), as at the time the forex ban was lifted.

The PUNCH reported that the Central Bank of Nigeria had lifted the ban on importers of 43 items restricted from accessing foreign exchange on its official platform.

The Apex bank disclosed this in a statement titled: “CBN restates commitment to boost liquidity in forex market”, signed by the Director of 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 that “The CBN reiterates that the prevailing foreign exchange rates should be referenced from platforms such as the CBN website, FMDQ, and other recognized 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.”

However, many maritime practitioners are saying that the new move by the apex bank may be of little or no consequence to the sector, if the issues of the exchange rate are not promptly addressed.

What practitioners say

Even though the move was lauded by some maritime practitioners, others are of the opinion that until drastic measures are taken to address the issue of forex, much impact won’t be felt in the sector because of the move.

The founder of the National Council of Managing Directors of Licensed Customs Agents, Mr Lucky Amiwero, said, there may not be much difference with the new directive of the CBN.

“They only ban forex for the items. Bringing it back I do not see much effect in the sector because it has been banned for a very long time. People may not rush to it immediately because of the high exchange rate. The exchange rate is not something that is stable; it is continuously moving high up, so it is going to take some time before it will stabilise. It may not really have a serious effect. Importing still has to contend with the floating exchange rate which is something that has been affecting importation into the country,” he added.

“If exchange rate continues like this, a lot of people may be discouraged from importation,” he warned.

When you look at what is happening in the country, it is going to affect import and the country at large, so the Central Bank has to work hard. Forex that is not stable will affect the importation of these items, especially rice. A lot of people are just watching and there are so many factors that has made it so. If the exchange rate is not stable, people might not go into rice importation.” Amiwero added.

Also speaking, a member of the Association of Nigerian Licensed Customs Agents, Sikiru Remilekun, said that there may not be much-noticed difference with the lifted ban on rice imports.

Remilekun warned that the importers of these commodities may have to face stiff opposition from local manufacturers who won’t be happy with the lifting of the ban.

The president of the trans-border traders association, Nasiru Salami, fingered insecurity among others as the reasons Nigerian farmers aren’t able to produce enough of these agricultural products.

“I think there is something we should understand. It is a very good policy to ban the importation of goods which are produced in the country, but if you don’t have an alternative, it is a problem. Ask yourself, Nigeria-made rice is about N46, 000 per bag of 50kg while imported Indian rice is N43,000 per bag, and there are other imported bags of rice which are about N53,000 per bag. When you look at all the imported rice you find out that they will pay for transportation, they will pay duties in the countries they are coming from. So, when you look at it, you will see that with that, you are enriching some people.

Nobody is happy to encourage the importation of agricultural products as Nigeria has the potential to produce them, but because of the security challenges, most of the farmlands have been destroyed, and now most of them have relocated to the cities. And all these things are making agricultural products become expensive. The lack of infrastructure is the thing that made these products expensive. When you ban goods that you cannot supply, the smugglers will be making money for themselves and the currency will continue to be devaluated. Because those products that you ban will come in through smuggling and they have to look for foreign exchange and when you are not exporting, you rely on importation from the neighboring countries that have already collected their taxes and now they will sell it to you. There is no way you won’t have problems, your money would be devaluated because many people have to move to buy those products outside Nigeria.

Also reacting to the lifting of the forex ban, a former National President of the National Association of Government Approved Freight Forwarders, Eugene Nweke, believed that the move will engender forex flexibility and liquidity.

He said, “It will engender forex flexibility and liquidity because importers specialising in the imports of the listed items who before now reduced their import volume will explore the difference between the rates at the parallel and official markets.”

According to Nweke, “Many investors (foreign manufacturers) will explore the opportunity to reappoint product brand sole distributors or outsource local manufacturing or assembly, implying that a lot of business MOU’s (outsourcing deals will be entered into which will also attract foreign capital) will thrive, thereby increasing commercial activities and in the overall, it will boost forex performance and turnover. It will also increase ship calls to port and cargo throughputs. In addition, other related services, revenue generation, and job creation will thrive as well.”

Way forward

There is a need for the government to urgently address the issue of forex and rising exchange rates in order for the importers to enjoy the full benefits of the CBN’s reversed policy.

A seasoned freight forwarder and the founder of one of the biggest freight forwarding groups in Nigeria, NAGAFF, Dr Boniface Aniebonam, advised that for Nigerians at large and importers, in particular, to be happy, seized bags of rice should be given back to the importers.

In a statement sighted by the PUNCH, Aniebonam said, “A passionate appeal to release rice imports and goods seized by the Nigeria Customs Service, the consequences of ill and inappropriate actions of the former administration of the Central Bank of Nigeria.”

Aniebonam, however, thanked the President, Bola Tinubu, for taking the popular trade-related decision to reverse the policies of the former administration.

He said, “It is already in the public domain that the new CBN governor had made it clear that he will be concentrating on the monetary policy of the apex bank rather than dabbling into fiscal policy trade. We can authoritatively say that a Daniel has come to judgment. Once again congratulations and thanks to Mr. President for making appropriate appointments in line with his mantra of new hope for Nigeria.”

According to him, “And so there were no reasons to confiscate and seize rice imports and the 43 items of innocent traders. Indeed we all know the existence of bills for collection in our foreign trade transactions. Honestly, Nigerians must remain very grateful to the officers and men of the customs, always deploying discretional powers in carrying out their statutory duty. Having said all these to the honorable minister and the comptroller General of Customs, we urge you to approach Mr. President to grant amnesty to all the people whose goods were seized and still within the custody of the NSC to take delivery of their imports. This is because the customs do not have reasons to seize such goods in the first instance. They were not banned and never breached customs laws and or trade policy. We want to believe that the rightful owners will want and be ready to pay appropriate customs duty and any other surcharge thereto and take delivery of their goods. It is even to the advantage of revenue due to the government than the sale of the auction,” he urged.