Nigeria: What CBN Should Do With Buhari's Forex Directive

Nigeria naira
16 September 2019

AS the Central Bank of Nigeria, CBN, gets set to execute President Muhammadu Buhari's directive on restriction of foreign exchange for importation of agro-food items, we draw attention to issues that should be of utmost importance in the collective interest of Nigerians.

Though there have been arguments for and against the pronouncement to the effect that foreign exchange should be denied importers of food items, with CBN's recent decision to go ahead to execute the order, the policy seems to have come to stay. The focus should now shift to the positive side of the coin in ensuring wholesome implementation.

First, we share the views that the President means well in his directive. We believe he just wanted to discourage massive dumping of basic food items into the domestic market at a time the country is not only grappling with sustaining its foreign reserve levels at seven months coverage, but also faced with weak domestic production driven by foreign competition.

We support that this narrative be changed. The local agro entrepreneurs need to be supported by all possible policies because we believe that the most competitive advantage Nigeria can ever have for now is in primary produce.

Now we need the CBN to roll out the details and timeline of what they intend to do so that businesses that would be adversely affected can begin to reposition to minimise the impact and the collateral damages. Investors in those lines of businesses need not wake up one morning to meet their investments in jeopardy on account of the new policy.

The apex bank should clarify what exactly constitutes food items in the context of the presidential directive, listing the HS codes of the items affected.

CBN, before now, had placed 41 items on the forex exclusion list and recently added dairy products. It will be interesting to see what additional food items are being contemplated in the light of the presidential directives. Businesses in the affected items should be given enough time to adjust their business to the new circumstances.

We believe that in all of these, the country needs to worry about the implications of the policy execution for investors' confidence in the economy.

If policy and regulatory risks continue to escalate, the chances of stimulating foreign (and even domestic, to some extent) investment would remain dim.

Moreover, a rigorous impact study supported by infallible data should precede major policy changes such as this.

This is necessary to minimise shocks and dislocations in the investment environment. This is also imperative to stem further job losses.

The Federal Government must also be ready to contain the concomitant upsurge of smuggling which looms in the horizon.


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