For importers and clearing agents, granting 43 items approval to access official Foreign Exchange (FOREX), market is one of the best decisions taken by the administration of President Bola Tinubu while local manufacturers believed it’s ill-advised and a death sentence on locally made goods.
One if the reasons Maritime experts support the decision was because they believed it will reduce pressure on the unofficial market as importers can access the official market for their dollar needs and as well open Form M for importation of goods into the country but, local manufacturers believed otherwise.
Reacting to the Central Bank of Nigeria’s (CBN’s), announcement, the Manufacturers Association of Nigeria (MAN), said the decision to remove forex restriction on 43 items may lead to the total collapse of several local industries.
The Vice Chairman of Basic Metal, Iron and Steel Products sector of the Association, Lekan Adewoye, condemned the new policy of the CBN and asked the Federal Government to urgently reverse the decision in order to save the Nation from a looming job crisis, insecurity and outright collapse of the economy.
“The news came as a surprise to manufacturers who are still struggling to stay in business, CBN did not ban the importation of these items in 2015, and the apex bank only put a restriction on the importation of these items. “For items that can be produced in Nigeria, such manufacturer ought to be encouraged. This directive will further kill the manufacturing industry that is already struggling to survive.”
“The problem is about policy somersaults, some of our members who have out rightly invested in backward integration will now start to regret this move because everyone who can assess FOREX will claim to be an importer, forcing sincere manufacturers to close shop and increasing the numbers of jobless persons.”
Nigerian manufacturers don’t really have any competitive advantage over those in other developing countries, at best, what you have is competitive parity, because something has to be an advantage if your competitors don’t have it. And the little incentive that government has provided now has been removed by the directive from the Central Bank of Nigeria,” he disclosed.
Also speaking, the Vice President, MAN, South-West Zone, Dr. Kamoru Yusuf, said Nigeria is at a very dangerous situation. He added that her economy is exposed to numerous challenges and risks.
“The effect of the reversal and removal of ban on the 43 items will create a serious setback on the productive sector; thereby impacting negatively on virtually all other critical areas; such as unemployment, youth restiveness, wrong declaration at the ports, importation and flooding of Nigeria market with substandard products and above all, proliferation of the country with arms and ammunitions.
“As I speak with you, most financial institutions are really confused, and this policy if not quickly reversed, may lead to the distress of some banks while massive loss of jobs is looming. This fear is open for the CBN to verify,” he expressed.
However, importers and clearing agents disagreed with the local manufacturers, saying it will help stabilise the foreign exchange market by reducing pressure on the market as well as ending false declaration of cargoes.
For instance, the Nigeria Customs Service (NCS), has blamed the enactment of the policy for the current woes bedeviling the ports as Importation reduced to 65 percent.
However, economists and financial experts have applauded the CBN’s decision to reverse the ban on 43 items by allowing importers access the official FX market.
They said importers of the product rely on the parallel market to source FX and they put additional demand pressures on the parallel market, thereby, widening the gap with the official rate and permanently segmenting the market.
They argued that removing these restrictions eliminates the need for importers of these products to go to the parallel market, thereby, reducing the pressure on the naira.
“The hitherto FX restrictions had implications on inflation, causing the prices of affected goods to increase. Local production will benefit from cheaper imported inputs, and consumers will benefit from cheaper retail products. The policy is suitable for a unified forex market and positive as well for inflation,” an economic expert who craved anonymity said.
Speaking in the same vein, the former acting president of the Association of Nigerian Licenced Customs Agents (ANLCA), Dr Kayode Farinto, said removal of restriction placed on 41 items by the Central Bank of Nigeria (CBN), will boost import and reduce false declaration of cargoes at the seaports.
“Removing the restrictions on 43 items from accessing the forex market by the federal government is a welcome development and I do know that our import has dropped to 65 percent in the last one or two weeks. But, lifting the restriction will encourage importers because placing prohibition on these items when they are not on import prohibition list was encouraging false declaration, corruption and adding to cost of cargo clearance.”
However, now that the importers know they can go abroad, bring these items and open Form M for it, then it’s an encouragement for the importers to do the right thing and I believe that will grow the nation’s economy as well.”
Farinto, however, predicted that import improvement based on the policy won’t be felt until middle of December 2023 or first quarter of 2024.
“It is a welcome development, it will grow the economy and increase the level of import into the country. It will take another 60 days to see the boost because import is not about going of the shelves to pick your import and we know a large chunk of our trade is to China and Far East Asia so, before one can travel and come back, it will take another 60 days.”
He continued, “It’s a welcome development that will boost the economy and increase the level of import. We should expect import boost between 1st and 2nd week of December and by middle of January, 2024, the effect will be massive,” he stated.
On his side, the President, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, said, there may not be much difference with the new directive of the CBN.
“They only ban forex for the items. Bringing it back I do not see much effect in the sector because it has been banned for a very long time. People may not rush to it immediately because of the high exchange rate. The exchange rate is not something that is stable; it is continuously moving high up, so it is going to take some time before it will stabilise. It may not really have a serious effect. Importing still has to contend with the floating exchange rate which is something that has been affecting importation into the country,” he added.
“If exchange rate continues like this, a lot of people may be discouraged from importation,” he warned.
When you look at what is happening in the country, it is going to affect import and the country at large, so the Central Bank has to work hard. Forex that is not stable will affect the importation of these items, especially rice. A lot of people are just watching and there are so many factors that has made it so. If the exchange rate is not stable, people might not go into rice importation.” Amiwero added.
Also speaking, a member of the Association of Nigerian Licensed Customs Agents, Sikiru Remilekun, said that there may not be much-noticed difference with the lifted ban on rice imports.
Remilekun warned that the importers of these commodities may have to face stiff opposition from local manufacturers who won’t be happy with the lifting of the ban.
Also reacting to the lifting of the forex ban, a former National President of the National Association of Government Approved Freight Forwarders (NAGAFF), Eugene Nweke, believed that the move will engender forex flexibility and liquidity.
He said, “It will engender forex flexibility and liquidity because importers specialising in the imports of the listed items who before now reduced their import volume will explore the difference between the rates at the parallel and official markets.”
According to Nweke, “Many investors (foreign manufacturers) will explore the opportunity to reappoint product brand sole distributors or outsource local manufacturing or assembly, implying that a lot of business MOU’s (outsourcing deals will be entered into which will also attract foreign capital) will thrive, thereby increasing commercial activities and in the overall, it will boost forex performance and turnover.
It will also increase ship calls to port and cargo throughputs. In addition, other related services, revenue generation, and job creation will thrive as well.”