The Centre for the Promotion of Private Enterprise (CPPE) has decried the suffocating impact of the restriction of access to foreign exchange by importers of 42 items, and has asked the Central Bank of Nigeria (CBN) to consider an urgent review of the policy to save the Naira.
Following alleged abuse by importers of the foreign exchange allocation, the CBN in 2016 introduced the policy on restriction of access to foreign exchange through the official window for importers of 41 items. The number later increased to 42 with the addition of milk to the list.
Although the apex bank has always insisted the import of the affected items or goods were not banned or prohibited by neither the Nigeria Customs Service nor the Federal Government, the importers of those items would not access foreign exchange through the official window.
The 42 items not valid for foreign exchange at the Nigerian official window include rice, cement, fertiliser, margarine, palm produce, beef, vegetables, poultry and eggs, wooden doors and Iron rods, private airplanes/jets, Indian incense, Tinned fish in sauce (Geisha)/sardines, Cold rolled steel sheets, Galvanized steel sheets, Roofing sheets, Wheelbarrows, Head pans, Metal boxes and containers, Enamelware, Steel drums and Steel pipes.
Others include Wire rods (deformed and not deformed), Iron rods and reinforcing bard, Wire mesh, Steel nails, Security and razor wine, Wood particle boards and panels, Wood Fibre Boards and Panels, Plywood boards and panels, Wooden doors, Furniture, Toothpicks, Glass and Glassware, Kitchen utensils, Tableware, Tiles-vitrified and ceramic, Textiles, Woven fabrics, Clothes, Plastic and rubber products, polypropylene granules, cellophane wrappers, Soap and cosmetics, Tomatoes/Tomatoes pastes, Euro bond/Foreign currency Bond/share purchases, and milk.
Four years after the policy, CPPE economists have drawn the attention of the CBN to the impact of the policy on the Naira, and have called for the review of its foreign exchange policy in 2022.
The CPPE made the call in its latest economic and business environment review for 2021 and agenda for 2022.
The group believes such a review would help in improving dollar liquidity as well as boost the chances of the Naira surviving against other currencies, as the current foreign exchange policy by the CBN is negatively affecting investors, manufacturers, and other stakeholders.
“To reduce the pressure on foreign reserves, the CBN excluded over 40 items from access to foreign exchange in the official window.
“Some of the products on this list are intermediate products for some manufacturing firms which have negatively impacted some manufacturers. It would be advisable for the CBN to have a robust engagement with the stakeholders to review this list in the New Year,” CPPE said.
The CBN, the group said, should adopt a flexible exchange rate policy regime that would allow the pricing mechanisms to reflect the demand and supply fundamentals in the foreign exchange market.
“Our proposition is that the CBN should adopt a flexible exchange rate policy regime. We would like to clarify that this is not a devaluation proposition.
“Rather, it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market. It is a model that is sustainable, predictable, and transparent. It is a policy regime that would reduce uncertainty and inspire the confidence of investors.
“It is a policy framework that would minimize discretion and arbitrage in the foreign exchange allocation mechanism. A flexible exchange rate regime is a policy choice adopted to cope with changing demand and supply conditions in the forex market.”
Also, the centre said adopting a market rate would deepen the autonomous foreign exchange market by liberalizing inflows from export proceeds, diaspora remittances, multinational companies, donor agencies, diplomatic missions, and others.
A flexible exchange rate, the group said, would enhance liquidity in the foreign exchange market, increase investors’ confidence, and ensure a more transparent model for foreign exchange allocation.
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