According to research, in the fourth quarter of 2023, Nigerians spent N1.39 trillion on the importation of seven of the 43 goods that the Central Bank of Nigeria had previously banned from being accessed through its official platform for foreign exchange.
This was due to the fact that in 2023, citizens imported goods valued at N4.29 trillion, a 100% increase from the N2.14 trillion in total commodities imported in 2022.
The CBN classified roughly 41 import items as invalid for foreign exchange in 2015. As a result, importers of the commodities were compelled to obtain foreign exchange on the black market, frequently at higher rates, which put pressure on the naira.
The restriction, according to the apex bank, is a component of initiatives to maintain the stability of the foreign exchange market, guarantee efficient use of foreign exchange, and maximize benefits from goods and services imported into the nation.
These goods can still be imported, though, as the Nigerian Customs Service did not forbid or ban them.However, the Central Bank of Nigeria lifted the import prohibition on 43 items in a statement issued last October, making it possible to buy foreign currency on the Nigerian foreign exchange market.
As a result, the N1 trillion value of imported goods improved noticeably to N1.39 trillion from the N1.29 trillion recorded in the third quarter of 2023 as a result of the apex bank’s decision to reverse its forex ban policy.In its Nigeria Development Update report from December 2023, the World Bank also predicted that the lifting of import restrictions in Nigeria would help approximately 1.3 million people escape poverty.
According to recent estimates from the World Bank, the prices of affected items could decrease by 4.7% if import restrictions were lifted. Approximately 1.3 million people, or 0.6% of the population, would be lifted out of poverty as a result of this overall increase in purchasing power.A review of the National Bureau of Statistics’ most recent Nigerian Foreign Trade reports revealed that imports from other nations included things like rubber and plastics, textiles, animal products, meat, vegetable fats and oils, and crude palm oil.
According to the annual breakdown, imports of crude palm oil from Malaysia and China brought in a total of N50.44 billion; vegetable products brought in N1.63 trillion; trade in animal products brought in N597.47 billion; and imports of mackerel meat from Chile, Ireland, Poland, South Korea, and the Netherlands brought in N124.99 billion.
Nigeria imported N1.29 trillion worth of plastic and rubber goods, textiles brought in N377.18 billion, and vegetable fats and oil brought in N214.6 billion, according to data released by the NBS.
Muda Yusuf, the director of the Center for Promotion of Private Enterprise, called the central bank’s list of prohibited foreign exchange items “aberrations,” adding that the goods were recognized by law in the country’s trade policy document.
The list itself is confusing our trade policy, according to Yusuf, because only fiscal authorities should decide what is allowed and prohibited for import. What the CBN has done is out of the ordinary; every nation’s trade policy is outlined in its fiscal policy, which is a document that lists the tariffs and goods that are prohibited from being imported or exported. It follows that you are unable to import those goods.
“The CBN now has its own list of items for which you can not officially source foreign exchange when you have that information document by concerned authorities, which causes a lot of confusion in the system. Harmonization is what is required, and the apex bank should not be in charge of determining what products qualify for foreign exchange. That choice relates to trade policy.
He clarified that one important reason for the discrepancy between the official exchange rate and the black market rate is the ban.Since the importers obtain their foreign exchange from the parallel market, it is also exerting significant pressure on that market and contributing to the growing divergence between the official and parallel exchange markets. And that is causing them a great deal of trouble.
Johnson Chukwu, a financial analyst and managing director of Cowry Asset Management, counseled the government to put more emphasis on domestic manufacturing in order to lessen the nation’s reliance on imports.
Chukwu stated, “It would be unwise for anyone to import those products in the first place if we have an adequate supply of those items.”
“The reason is that the prices will drop below what we can import once you have an adequate supply of these products.”