Two years after the Central Bank of Nigeria (CBN) restricted 41 items, including plastic and rubber products, vegetable oil, cosmetics, poultry products, roofing sheets, wheelbarrows, toothpicks, among others, from accessing foreign exchange from the interbank foreign exchange market, stakeholders insist the decision has worsened forex, fuelled inflation and seriously hurting manufacturing.
According to them, the Federal Government goofed by taking a step considered extreme by many, without putting in place measures to ensure that people start manufacturing those items locally.
For Chika Onuegbu, a Port Harcourt-based economist and chartered accountant: “We should be worried about basic items like wheelbarrows and galvanised steel sheets being banned. These are actually things that are supposed to help the housing needs of the people. The only problem here is that the CBN just placed a ban on these things without coming up with any policy that encourages them being locally manufactured. And that is why we are having problems. I think the CBN should learn that merely banning things would not cause people to start manufacturing them locally. To that extent, the policy of the CBN is wrong. After placing the ban, the CBN ought to have started planning the success of the policy, which is aimed at making sure we manufacture those things within the country. But that aspect of the policy is not there. The CBN was basically banning these items for the purpose of managing forex. And what has happened is that those things keep coming in as people now go to the black market to purchase foreign exchange to import them, and then poor people end up buying the items at a very high price, which is very punitive.
“When you look at it from this perspective, the CBN policy is very wrong. Had the CBN collaborated with the Ministry of Finance, Bank of Industry and the National Assembly to ensure adequate incentives to encourage local manufacturing of those items, then that policy would have been good. But that policy is not good because the CBN is only interested in the forex aspect of the policy, and not in local manufacturing of those items.”
Immediate past chairman of Manufacturers Association of Nigeria (MAN), Cross River/Akwa Ibom Chapter, and Vice President, Cross River State Shippers Association, Obong Iniobong Jackson, maintains that the forex restriction “has distorted businesses a lot because it was so sudden, and it also affected the manufacturing sector in a lot of ways, having impaired the importation of raw materials and other things, which cannot be brought in on time.
“I know that the Federal Government has been trying to review forex rules with a view to injecting sanity into the process, but the approach the CBN governor adopted I consider not okay for the economy, especially as it affects the manufacturing sector. Even though the overall aim of government is to bar certain persons from accessing forex, others who have need to import a wide range of raw materials were affected in one way or the other.”
Jackson, who expressed doubts whether the restriction has been of great benefit to government added, “what the government said it was trying to do was to try and control access to forex by some persons, but doing that should not affect businesses negatively as it is the case. I do not know if government has benefited from that policy enormously, but I know that the organised private sector has not benefitted because it has affected most of us in the sector. On the whole, I think the policy was wrongly timed, as far as I am concerned.”
The Lagos Chamber of Commerce and Industry (LCCI), is of the view that many of the products on the list are intermediate goods, which are critical inputs for many manufacturing firms, as well as, other critical sectors of the economy.
“It, however, appears as if the formulation of the policy has suffered from CBN’s limited understanding of the manufacturing process of many of the sectors affected by this policy. Many of the restricted items are irreplaceable raw materials in the manufacturing process of many industries, and this policy will cause significant damage to the Nigerian manufacturing sector and economy. We affirm that while there are several items on the list, which any patriotic Nigerian will not object to, there are many others that will harm the manufacturing sector,” the LCCI stated.
Conversely, a former director of the Central Bank of Nigeria (CBN), Dr. Obadiah Mailafia, believes that restriction is the way to go if the country must cease being a dumping ground for foreign goods that have facilitated the closure of local industries.
According to Mailafia: ‘’Let me say that I endorse the ban on the 41 items that was imposed by CBN. Ordinarily, I am an advocate of free trade and I believe that when nations exploit their relative comparative advantage through trade, it leads to increased welfare for all concerned, but free trade may not be as free as it sounds. I get worried that Nigeria has become one of the world’s premier dumping grounds.”