Central Bank of Nigeria, CBN, not long ago announced the tightening of foreign exchange controls by excluding 40 items comprising rice, toothpick, cement, margarine, palm kernel/palm oil products/vegetable oil, meat and processed meat products, among others, from the inter-bank foreign exchange market.
CBN Governor, Godwin Emefiele said the measure was aimed at reducing pressure on the Naira while preserving external reserves. By implication, importers of such items would have to source forex requirements from private channels or the Bureau de Change (BDC) segment of the market.
The new restrictions are based on the shocking revelation that Nigeria spends an estimated N1.3 trillion on items that could be manufactured locally.
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 import food bill estimated by the apex bank to be N660billion yearly.
Trade liberalisation is a global phenomenon that allows countries take advantage of the area where they have comparative advantage. 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. Why can’t Nigeria borrow a leaf from these countries?
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 the United Textile Mills Kaduna was re-opened.
If any investor is interested in toothpicks, let him set up a toothpick processing plant in Nigeria to generate employment for our teeming youths.
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 our country’s trade statistics showed that import has been growing rapidly. The growing import bill has shown a consistent pattern in which what could be grown locally and save the nation of huge foreign exchange is being imported with hard currency.
Regrettably, 90 per cent of the goods imported are for consumption not for production purposes. Topping the list of often imported items is used passenger motor vehicles, second is common wheat and meslin while in the 15th position is frozen fish.
A report by Oxfam noted that “in stark contrast to the 1960s, when agriculture provided the main source of employment, income and foreign exchange earnings for Nigeria, the advent of commercial oil exploration in the mid 1970s heralded an era of decay and decline for agricultural output. What a pity.
The CBN Monetary Policy Committee recently reaffirmed its conviction that a stable exchange rate regime is critical to maintaining price stability but noted that in the absence of complementary policies, the regime is only sustainable at the cost of significant attrition in foreign reserves.
I quite agree with the monetary authority that the solution to reserve depletion lies in the implementation of appropriate reforms with regard to industrial and trade policies aimed at reducing import dependence, which are beyond the scope of monetary policy. Substantial foreign exchange is expended annually on Joint Venture Partners, JVC , on Cash calls and importation of petroleum products due to the delay in implementing much needed reforms in the oil sector.
This is in addition to the huge amounts spent on petroleum subsidies which rise with increase in oil price. The foreign exchange we spend on importation of food items is unnecessary. What is needed is the implementation of policies that will lead to food security and total self sufficiency.
The Nigerian economy is facing financial hemorrhage. Huge foreign exchange outflow is a major reason for the crash of the Naira against other currencies.
The trend became noticeable in October 2008 where in a matter of weeks, several billions of dollars were purchased through the banks and Bureau de Change.
Movement of funds is also in travels – business travel allowance, personal travel allowance, direct remittances etc. According to data obtained from CBN, in eight weeks alone, the total amount of foreign exchange that went out through travels amounted to $72.067 million, Debt service/payment – $799.19 4 million, wholesale at the Dutch Auction market – $6.276 billion, Direct remittance – $851.809 million, letters of credit – $3.205 billion and cash sales to banks and Bureau de Change – $3.170 billion, respectively. No country will survive under this situation.
Soon President Muhammadu Buhari will announce the portfolio of his new ministers. I expect the new finance minister upon assumption office to develop a fiscal policy to arrest the present ugly situation. We can’t continue this way.

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