The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has slammed his predecessor, Godwin Emefiele, over the Foreign Exchange (Forex) restriction on the importation of 43 items into the country.
Cardoso said there was no evidence that the forex restriction placed by the apex bank on the items had any positive effect on the general populace or the economy.
The CBN boss stated this at the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) on Friday in Lagos State.
Cardoso said evidence shows that foreign exchange restrictions hurt Nigerian households and contributed to inflationary pressures, which led to the decision to lift the restriction.
He said the restrictions increased demand for foreign exchange in the parallel market, led to the exchange rate depreciation in that segment of the Nigerian Foreign Exchange Market and widened the premium between the parallel and official markets.
The CBN Governor also clarified that contrary to belief in the public domain, the 43 items were never explicitly prohibited from importation or sale in the country.
Cardoso said studies had shown that when the 43 items were restricted, there was a 51.0 per cent increase in trade evasion by importers accessing the foreign exchange market.
He said this resulted in a revenue drop of approximately $1.4 billion, or $275 million annually, between 2015 and 2019, adding that revenue from tariffs on goods decreased from a high of approximately $920 million in 2011 to about $250 million in 2017.
The CBN governor added that the reduced trade restrictions and levies on rice, sugar, and wheat by 50.0 per cent had a minimal impact on welfare, with a 0.8 per cent improvement and a mere 0.4 per cent reduction in extreme poverty.
Cardoso explained that the benefits of trade gains for the general population were negligible, as the average industry in Nigeria pays 13.7 per cent more for its inputs.
He said the end of the restriction will boost liquidity in the Nigerian foreign exchange market and intervene occasionally, adding that interventions will decrease as liquidity improves.
The CBN boss, however, explained that the apex bank had implemented restrictions on accessing foreign exchange for the importation of these items.
Cardoso emphasized that the issue of trade policy, specifically the importation and sale of the 43 items, was primarily within the domain of the fiscal authorities, not the CBN.
He said this distinction was important because it clarifies that the CBN’s decision to lift the foreign exchange restrictions on these items was not intended to infringe upon the responsibilities of other government agencies.
Forex Restriction On Rice, Others
Recall that in a circular in June 2015, the CBN published a list of imported goods and services that will not be eligible for foreign exchange in the Nigerian foreign currency market.
The list, which was originally 41, was updated to include two more items.
But on October 12, the CBN announced that it had lifted the ban on issuing foreign exchange for importing rice, vegetable oil, and poultry products, among other 43 items.
