The Central Bank of Nigeria (CBN) recently excluded some goods being imported into the country from the list of items valid for foreign exchange in the Nigerian Foreign Exchange Markets. The implication of this is that, those who import these items can no longer buy foreign currency from banks, bureau de change or any other official source to pay overseas suppliers of such goods. Instead, they have to source their foreign exchange from outside the banks and bureau de change. These items are not banned but importers can not access foreign exchange from Nigerian banks.
The CBN came to the decision as a result of the continued pressure on the naira exchange rate. The decision of the apex bank has not gone down well with many importers and their foreign interest that want the naira to further lose value. Some of the items in question are products that abound in Nigeria. Nigerians are able to produce enough of these items to service the economy. Even those not being produced locally are not essential products that the nation can not do without.
The restriction has started yielding results as Nigeria’s foreign exchange reserves has risen sharply to $31.89 billion from its previous balance of $29.1 billion as at last week.
It is common knowledge that Nigerian farmers are producing substantial paddy rice but the nation continued to spend billions of dollars every year importing rice. It is also common knowledge that Palm kernel/Palm oil abound in Nigeria. Yet Nigerians are importing same. The most ridiculous of these imported items are Indian incense, Wood particle boards and panels, Plywood boards and panels, wooden doors, Toothpicks, Tomatoes/tomato pastes. Every year tones of tomatoes grown in the north go waste because of lack of local patronage. Besides it is a thing of shame that a Nigeria business man will go to China and all he can import is took pick.
There are a lot of bamboos sticks all over Nigeria that can be used to produce took pick if it is so important to Nigeria. The sad thing is that instead of Nigerians to stand solidly behind the monetary authority to call the bluff of western interest against Nigeria, many are supporting and sponsoring publication against the restriction of access to foreign exchange. The pressure on the naira at the foreign exchange market might continue to mount and see further depreciation in value of the naira if stern measures are not applied. The naira is already exchanging at N350 to the pound and N230 to the dollar. Unfortunately western economists want Nigeria to further devalue the naira knowing too well that the country is import dependent and devaluation will further impoverish Nigeria citizenry.
At the current exchange rate no local industry will survive and the economy will worsen because Nigeria economy is not export driven. Devaluation of a currency is profitable to an export driven economy. The Nigeria economy has to be made to be productive and a hard decision has to be taken to change the economy’s structure, resuscitate local manufacturing, and expand job creation for Nigerians.
Why should Nigeria keep allocating scarce foreign exchange to rice importers when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the rice belts of Nigeria are wasted, and farmers are falling deeper into poverty while we export their jobs and income to rice producing countries? Besides these rice importers are tax evaders who use their connection with politicians to short change the nation through waivers and concessions. Nigeria must do every thing it can to protect the jobs and incomes of local farmers and boost local production using some of the same principles Western Economies use to justify the protection of their farmers through huge subsidies.
Nigerians must know that the country can not attain its full potentials by importing anything and everything. Since the introduction of Structural Adjustment Programme by the Babangida military junta the devaluation of the naira has been pursued with the hope that the economy will be better off but that has not been the case. The introduction of SAP saw the massive devaluation of the local currency and the enthronement of a free float for the naira. At the inception of the famous deregulation of the foreign exchange market, the CBN introduced three tier foreign exchange markets. There was the first tier market which was the official rate at which the government bought foreign exchange from the CBN. There was the Second tier market where the private sector and other individuals were sourcing their foreign exchange requirement from. The third was the autonomous foreign exchange market where exporters put the proceeds of their exports and sell same at their own determined rate.
However, there existed and still exists a parallel market where un-licensed individuals hawk foreign exchange along major streets in Nigeria and in mosques. The rates that ruled these markets were never the same. In fact, there have been multiple exchange rates in the economy since the deregulation. This gave room for foreign exchange speculations that resulted in excess demand for foreign exchange. Nigerians, banks and others have been hedging against depreciation ever since. As of today, the demand is high because those who have the resources are buying dollars for keeps in anticipation of possible devaluation of the naira as a result of declining oil prices. In-fact the Nigerian economy has been dollarised with local prices quoted in dollar.
In economics, there is what is regarded as shadow price of a given commodity. The shadow price usually is the price that is envisaged if the product were allowed to find its true value in a free market setting. As a result of the shadow price of the naira, the international business community always agitate that the currency was over valued and that the true exchange rate of the naira is the parallel market rate. Following this argument Nigeria has continued to adjust the currency from N2.02 to the dollar in 1986 to the N230 today. In 1987, the exchange rate was N4.02 to the dollar and in 1988, it had moved along the parallel market rate of N4.54. The economy was still on its knees as the exchange rate moved further in 1989 to N7.39 and in 1993, the two markets were merged at N22.05 to the dollar. By the turn of the century in 2000, the exchange rate was N102.10 to the dollar. By 2002, the exchange rate of the naira to the dollar was N121 and in 2004, the rate had peaked at N133. Today the naira is exchanging in the inter-bank market at N230 to the dollar. The handling of the exchange rate in the past had been questionable. Nigerians must come to grip with reality and stop frivolous importation. Nigeria can not continue to devalue its currency to satisfy few selfish interests.
