In an effort to maintain the stability of the Forex (FX) market and ensure efficient use of foreign exchange to get the best out of imported goods and services in Nigeria, the Central Bank of Nigeria (CBN) has recently issued a new directive issuing a circular.
The directive exempts some imported goods and services from the list of eligible items for FX access to the Nigerian foreign exchange market to encourage and support local production of these items in the country.
The effect of this development is that importers wishing to import any of the items listed in the CBN directives described earlier will need to source FX funds without any recourse in the Nigerian foreign exchange market (interbank market and BBN intervention).
The list of damaged items is described below but can be reviewed as soon as the requirements arise. However, please note that the import of these items is not prohibited.
Items include the following:
Palm kernels / palm oil products / vegetable oils
Meat and processed meat products
Vegetables and processed vegetable products
Poultry, eggs, turkey
Private jet / aircraft
Tinned Fish Sauce (Gaisha) / Sardines
Cold rolled steel sheet
Forged steel sheet
Metal boxes and containers
Wire rod (distorted and not distorted)
Iron rod and strong bird
Protection and razor wine
Wood particle boards and panels
Wood fiber boards and panels
Plywood boards and panels
Glass and glassware
Basnadi in the kitchen
Tiles-disputed and ceramic
Plastic and rubber products, polypropylene granules, cellophane wrappers
Soap and cosmetics
Prevents tomatoes / tomatoes
Eurobond / Foreign Currency Bonds / Share Purchase
In our view we should refer to share purchases (40 items in the list) with Nigeria that access the foreign exchange market for investing in foreign securities and not foreign investors investing money in Nigeria for investment purposes.
The CBN said the move was aimed at maintaining the stability of the foreign exchange market and encouraging local production of these items as well as ensuring efficient use of foreign currency. The CBN further clarified that the import of these items is not prohibited, but the importers of these items will use their own funds without resorting to the Nigerian foreign exchange market.
This means that demand in the public market will decrease, which means that the pressure on the public FX market has decreased. However, in the parallel market (Bureau de Change) the pressure will increase. The gap between the parallel and official markets will widen and the rate for the dollar in the parallel market will increase. This will increase the price of these items locally for consumers and for this final inflation.