Items are invalid for foreign currency in the foreign exchange markets of Nigeria

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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:

Fig

Cement

Margarine

Palm kernel / Palm oil products / vegetable oils

Meat and meat products

Vegetables and processed vegetable products

Chicken poultry, eggs, turkey

Private jets / jets

Indian incense

Canned fish in sauce (geisha) / sardines

Cold rolled steel sheet

Galvanized steel sheets

Roofing sheets

Wheelbarrows

Frying pans for the head

Metal boxes and containers

Enameled tableware

Steel drums

Steel pipes

Rods (deformed and not deformed)

Iron rods and rebar

Wire mesh

Steel nails

Protection and razor wine

Particleboard and panels

Fiberboard and panels

Plywood boards and panels

Wooden doors

Toothpicks

Glass and glassware

Kitchen utensils

Utensils

Glass and ceramic tiles

Textiles

Woven fabrics

Clothing

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.

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