In an effort to maintain the stability of the foreign exchange market (FX) and ensure the efficient use of foreign exchange to get the most out of goods and services imported into Nigeria, the Central Bank of Nigeria (CBN) recently issued a new directive in a circular it distributed.
The Directive exempts certain imported goods and services from the list of goods entitled to access currency in Nigerian foreign exchange markets, in order to promote and support local production of these products in the country.
The result is that importers wishing to import any of the items listed in the above-mentioned CBN Directive will be required to receive foreign exchange funds without recourse to the Nigerian foreign exchange market (interbank market and BBN Intervention).
The list of affected items is set out below, but may be revised if necessary. However, please note that the import of these products is not prohibited.
Elements include the following:
Palm kernel / Palm oil products / vegetable oils
Meat and meat products
Vegetables and processed vegetable products
Chicken poultry, eggs, turkey
Private jets / jets
Canned fish in sauce (geisha) / sardines
Cold rolled steel sheet
Galvanized steel sheets
Frying pans for the head
Metal boxes and containers
Rods (deformed and not deformed)
Iron rods and rebar
Protection and razor wine
Particleboard and panels
Fiberboard and panels
Plywood boards and panels
Glass and glassware
Glass and ceramic tiles
Plastic and rubber products, polypropylene granules, cellophane wrappers
Soaps and cosmetics
Tomatoes / tomato pastes
Purchase of Eurobonds / foreign currency bonds / shares
In our view, we understand that stock purchases (item 40 on the list) refer to Nigerians entering the foreign exchange market to invest in foreign securities, not foreign investors coming to Nigeria for investment.
CBN said it is committed to maintaining the stability of the foreign exchange market and ensuring the efficient use of foreign exchange while stimulating local production of these items. CBN has also clearly stated that the import of these goods is not banned, however importers of these products do so using their own funds without resorting to Nigerian foreign exchange markets.
The result is that there will be reduced demand in the official market, which means reduced pressure on the official foreign exchange market. However, the pressure on the parallel market (Bureau de Change) will be intensified. The gap between the parallel and official markets will widen and the dollar exchange rate in the parallel market will widen. It will also lead to an increase in the cost of these products locally for consumers and, ultimately, to inflation.