Nigeria experienced a notable decrease in its dollar supply on the day following the Central Bank of Nigeria’s decision to lift the forex ban on 43 items. This marked a significant shift in the country’s monetary policy landscape,Daily Trust reports.
The central bank, in a substantial policy reversal announced on Thursday, reinstated access to foreign exchange for the 43 previously banned items, which had been restricted since June 2015. The rationale behind this move, as explained by the bank, was to maintain stability in the foreign exchange market and maximize the benefits derived from imported goods and services.
Among the items included on the list were rice, cement, toothpicks, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry (chicken, eggs, turkey), soap and cosmetics, tomatoes/tomato pastes, milk, maize, and tinned fish in sauce (Gelsha)/sardines.
The Central Bank of Nigeria, in a statement issued by its Director of Corporate Communications, Isa AbdulMumin, emphasized its commitment to ensuring orderliness and professionalism among all participants in the Nigerian foreign exchange market. This, the bank stated, would allow market forces to determine exchange rates based on a willing buyer-willing seller principle. The bank also expressed the aspiration to achieve a single FX market.
The decision received mixed reactions, with some experts cautioning that the new policy might exacerbate the forex challenges by increasing demand without a corresponding boost in supply.
Data from the Financial Markets Dealers Quotations (FMDQ) indicated a decrease in dollar supply at the Investor & Exporter forex window on the day following the policy announcement. The I&E window reported a turnover of $53.02 million, down from $407.66 million on the previous day, representing an 86.99 percent decline.
Meanwhile, the Lagos Chamber of Commerce and Industry (LCCI) commended the policy as a market-friendly step toward unifying exchange rates and curbing short-term inflationary pressures. The LCCI advised the CBN to explore creative financing options to address the short to medium-term backlog, foreseeing that the policy change would alleviate pressure on the parallel market and eventually lead to a gradual convergence in FX market rates. The LCCI also stressed the importance of ensuring transparency and accountability in banks’ foreign exchange dealings in the investor and exporter window.