Central Bank of Nigeria, CBN, this week announced the tightening of foreign exchange controls on imported products by excluding 40 items comprising rice, toothpick, cement, margarine, palm kernel/palm oil, vegetable oil, meat and processed meat, among others, from the interbank Foreign exchange market.
CBN Governor, Godwin Emefiele said the measure was aimed at reducing pressure on the naira while preserving external reserves. Henceforth, importers of such items would have to source their forex requirements from private channels or the bureau de change (BDC) segment of the market.
Emefiele said the country spends an estimated N1.3 trillion on items that could be manufactured locally, adding that Nigerians need to have a soul-searching conversation on the impact the import regime has on the economy.
There is no gain saying the fact that unbridled importation of food items and other non-essentials by Nigerians is doing more harm than good to the economy in the areas of industrialization and job creation. It also exercises great pressure on the nation’s scarce foreign reserves with current food import bill estimated by the apex bank to be N660billion.
Agreed, trade liberalisation is a global phenomenon that allows countries take advantage of the area where they have comparative advantage. However, Nigeria is the only country that refuses to accept this economic theory as even the crude oil it produces has to be exported and the refined products imported. It is the only country endowed with huge limestone deposit yet it imports cement annually.
The never ending round of Doha global trade negotiation is about countries insisting on getting the best for their products and delivering better welfare for their work force. The ongoing trade dispute between United States and China is about protecting domestic market for the average American to take advantage of.
Toothpicks made from bamboo stick are being imported from China, Vietnam and other Asian countries. Are there no bamboo trees in Nigeria? What about table water? How can a nation in its right senses ask for table water to be imported into a country like Nigeria where the business of bottled water is thriving? Funny enough, the recent lifting of the ban on textile materials was announced few weeks after United Textile Mills Kaduna was re-opened.
If any investor is interested in toothpicks, could he not have been encouraged to set up a toothpick processing plant in Nigeria to generate employment? Are our policy makers aware of the damage they have inflicted on the economy of Nigeria by their actions?
More shocking are figures released by the National Bureau of Statistics which showed that total trade figure for the year 2009 went down by 3 per cent from N12.868.0 trillion in 2008 to N12.4824 trillion, of which export was 59.6 per cent thanks to crude, and import’s share was 40.4 per cent.
However, import moved up by 53 per cent from N3.2991 trillion in 2008 to N5.0479 trillion in 2009. The value of export dropped by 22.3 per cent, from N9.5689 trillion in 2008 to N7.4345 trillion in 2009. The value of crude oil also dropped by 28.2 per cent from N8,751.6 billion to N6,284.4 billion while non-oil exports appreciated significantly by 40.7 per cent.
Imports by Region table indicate that the continent of Asia placed first with a total value of N613.7 billion or 34.4 per cent. Placed second was Europe with a contribution of N601.9 billion or 33.7 per cent. America followed with the value of N328.9 billion or 18.4 per cent. Africa was placed fourth with a contribution of N214.1 billion or 12.0 per cent.
Import analysis by country revealed that the following countries took the first five positions: China – N309.4 billion (17.3 %), Albania – N201.9 billion (11.3%), United States – N134.1 billion (7.5%), France N98.9 billion (5.5%) and Belgium N89.5 billion (5.0%). There is no way any forward –looking country would be happy with this type of import record.
Indeed, a close study of Nigerian trade statistics showed that import has been growing rapidly. In 2005, import which stood at N1,779,601.6 6 rose to N2,922,248.5 7 in 2006; N4,127,689.9 in 2007; N3,299,096.6 9 in 2008 and N5,047,868.6 7 in 2009. Data for 2010 are still being compiled.
Nigeria’s growing import bill has shown a consistent pattern in which what could be grown locally and save the nation of huge foreign exchange are being imported with hard currency. In 1990, Nigeria spent a total of $43 million in food importation, it rose to $97 million in 1991, $1.46 billion in 1992, $1.73 billion in 1993 and $2.09 billion in 1994. Food import bill jumped to $10.99 billion in 1995, dropped off to $9.45 billion in 1996.
It rose again to $12.52 billion in 1997, $12.71 billion in 1998, $12.88 billion in 1999, $14.35 billion in 2000 and $24.36 billion in 2001. The trend has continued till date.
Regrettably, over 90 percent of the food imports are things we can grow or manufacture locally like rice, beans, toothpick, water, fish, wheat etc. We therefore support the new CBN measure but quickly add that it should go beyond forex restriction to outright ban of all food items.