Central Bank of Nigeria Forex Restrictions and Implications for the Economy.
After the recent policy step to ban foreign exchange sales by the Central Bank of Nigeria (CBN) to certain segments of the economy was announced last week, the first statement from some experts in the real sector was “why did it take so long?” Stakeholders from other sections of the economy however thought differently.
With the pressure pilling on the Naira, is it not ‘sacrilegious’ for the CBN to approve millions of dollars foreign exchange sale to an individual who is buying a private jet for example?
The nation is almost down and out. Equipment such as turbines and the likes, needed for the construction of power plants, which the country so desperately needs are mostly imported and forex is needed to purchase them. Eighty per cent of the roads in Nigeria are either completely damaged or in terrible shape and need to be built or rebuilt. Therefore forex is needed to obtain the machineries needed to construct roads.
What about the rail transportation and the water ways transportation that the country desperately needs to take the pressure away from the roads? Most of the boats, boat parts and train coaches among other things are only available outside Nigeria and forex is certainly needed to obtain them.
Hospitals need to be better equipped with state of the art Magnetic Resonance Imaging (MRI) machines, Dialysis machines, surgical and suture materials to transform them from mere consulting centres to actual magical care providers and all these require huge forex.
What about forex required for the desperately needed machines to enhance the nation’s capacity to process raw materials into finished goods, such as factory production lines and even petroleum refineries, which will help the country end its dangerous and expensive addiction to imported petroleum products?
When these and many more segments of the nation’s economy need the scarce foreign exchange to acquire items and equipment that will result in value creation and a concomitant accelerated growth of the overall Nigerian economy, it is therefore foolhardy to allow addicts of luxury goods compete with them for forex at the CBN.
New Policy Step.
Better late than never, analysts heaved a sigh of relief, when the CBN last Tuesday officially stopped the sale of dollars for a list of 40 items, in its quest to reduce the pressure on the Naira as well as preserve the country’s external reserves.
These items include rice, cement, margarine, palm kernel/palm oil products/vegetable oil, meat and processed meat products, vegetable and processed vegetable products, poultry – chicken, eggs, turkey – private airplanes/jet, Indian Incense, tinned fish in sauce – Geisha/Sardines, cold roiled steel sheet and galvanised steel sheets.
Others are roofing sheets, wheel barrows, head pans, metal boxes and containers, enamelware, steel drums, steel pipes, wires, rods, wire mesh, steel nails, security and razor wire, wood particles boards and panels, wood fiber board and panels, plywood boards and wooden doors.
In addition, sourcing of forex for the importation of toothpicks, glass and glassware, kitchen utensils, tables, textiles, woven fabrics, clothes, plastic and rubber products, soap and cosmetic, tomatoes/tomato paste and Eurobond/foreign currency bond/share purchase has been prohibited.
The central bank disclosed this in a circular signed by its Director, Trade and Exchange Department, Mr. Olakanmi Gbadamosi, which was posted on its website.
It explained that: “These items are not banned, thus importers desirous of importing these items shall do so using their own funds without any recourse to the Nigerian forex market.”
It advised all authorised dealers to ensure strict compliance with the directive.
“In the continuing effort to sustain the stability of the forex market and ensure the efficient utilisation of forex and the derivation of optimum benefits from goods and service imported into the country, it has become imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian foreign exchange market to encourage local production.
“The implementation of the policy will help conserve forex reserves as well as facilitate the resuscitation of domestic industries and improve employment generation,” it added.
THISDAY had on Sunday disclosed move to ban some of the items. The value of Nigeria’s external reserves is currently $29 billion.
“The only thing that will reduce pressure on our currency is by producing those things we are importing today,” CBN Governor Godwin Emefiele, had said in a forum in Lagos this January.
“We will try as much as possible not to hurt your business, but we need to be able to work together,” he had told the gathering of CEOs of firms in the country.
The central bank had devalued the naira in February and had scrapped the WDAS/RDAS, all in a bid to strengthen the Naira.
The regulator “will meet legitimate demand, but we will not be concerned about illegitimate demand,” Emefiele said.
“We have seen the pressure in the forex market arising mostly for the lopsided dependence on imports. Today in Nigeria, toothpick, tomato paste, furniture, rice, sugar, fish and petroleum products are all being imported into Nigeria.”
Real Sector Experts Support CBN.
How can Nigeria be self-sufficient in cement production, locally, churning out nearly 40 million tonnes of the essential building material annually and yet release millions of dollars daily to traders to import the same product into the market that is already saturated.
Vice-President of the Nigerian Association of Chambers of Industry Mines and Agriculture (NACCIMA), Mr. Dele Oye, said the CBN made the right decision, stating that considering the crisis which the nation’s economy currently faces not only the government but also the private citizens in the country must significantly adjust their consumption patterns.
“It is time for segments of our society to make sacrifices. a fixation on a luxurious consumption pattern will not do the country any good. The fact is that the revenue is just not there. Oil prices have been down by over 50 per cent continuously for almost one year and from the prevailing global projection, it is not likely to improve any time soon. So, there is serious need for structural adjustment of the consumption habit of the government and people of the country.
As for the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, the CBN decision is for the greater good.
He noted that the decision will help to consolidate on the nation’s advancement in local rice, poultry, vegetable oil, sugar, tomato and textile production among others.
“Although some of the big traders will be affected by the policy, it will actually do more good to the nation’s economy by helping to reduce the pressure on the Naira, and also provide a good price advantage for locally made goods in the market helping locally produced rice, cement and vegetable oil for example to compete better from imported ones,” he said.
Mixed Feeling from Finance Experts.
Head of Research at Sterling Capital, Sewa Wusu, said while the move may douse some of the demand pressure in the short run, noting that there is a lot of expectation that the CBN will devalue. “Market is still expecting a lot from the CBN in terms of foreign exchange policy. The apprehension that the CBN will devalue again has been going on. We cannot rule out the fact because now the reserve is under pressure and there is need to just do something. Although the circular states that importers should use their own funds, but my take is that most of these importers have been using their funds before now”
Sewa noted. “We see this policy move as confirmation that forex supply remains extremely tight. But more worrying is the fact that it suggests that the central bank remains reluctant to devalue the Naira,” said Yvonne Mhango, sub-Saharan Africa economist at Renaissance Capital.
For the head of economic research at Ecobank, Angus Downie, “this sudden change in policy emphasises the difficulties the central bank is facing in managing forex reserves, which points to possibly greater exchange rate policy changes to come.”
Bank Customers’ Reaction.
Bank customers are however divided on the necessity and impact of the policy on the economy. While some criticised the reduction, saying it would hurt their businesses, others commended the step, saying it would help curb wastage of foreign exchange and corruption.
Criticising the new limit, Mr. Chiedu Igwe, an importer said, “The idea of reducing the debit card limit to $50,000 per person per annum is discomforting. I travel out often to get items for my trade and that aside; I spend money on vacations using a Naira debit card. So with this new limit on debit card, how am I going to keep up with my business and personal foreign exchange needs while I am overseas? I wish the implementation of the policy could be re-adjusted if possible to help businessmen like me.
Another businessman, “Mr. Lekan of LakeSide Clothing said, “I am not comfortable with the reduction, because I travel overseas to purchase most of what I sell in my stores. I make use of my debit card for shopping whenever I travel abroad, and I travel more than once in a year. So this new limit will disrupt my business plans.”
Corroborating these views, Mr. Umaru Hassan, a customer of Diamond Bank, Apapa, said that the reduction in limit is not good for business people, as most of them always travel abroad to purchase goods and conduct other business related activities that involves the use of money. “The idea of reducing the limit to $50,000 per person, per annum is an indirect way of reducing their ability to do business”, he said, adding that the CBN should reverse the policy.
On the contrary, veteran producer, director and actor, Prince Jide Kosoko commended the reduction, saying it would help curb the outrageous spending of many Nigerians. He said, “CBN has brought up the policy to redeem the value of the Naira. I know this will not go well with some Nigerians but the CBN has the power to do it. Many Nigerians travel abroad and spend their annual savings within one month in the name of holidays”.
Similarly, actress Ronke Ojo, commended the reduction saying it is another means of eradicating corruption. “It is obvious that electronic banking has generated some hiccups in the economy. However, the policy is a means to curb our excesses and eradicate corruption in the country,” she said.
According to Chief Executive Officer, H. J Trust Bureau De Change, Mr. Harrison Owoh: “The reduction in limit would minimise the various abuses associated with the use of Naira debit card overseas, like round tripping. He noted that some people use the card to withdraw dollars abroad at cheaper exchange rate, and then import the dollars and exchange them at higher exchange rate.
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Nigeria’s central bank rolling back forex restrictions.
The Central Bank of Nigeria (CBN) will no longer impose "allocation/utilisation rules" on commercial banks when it comes to the foreign exchange (forex) market, the central bank announced today (February 20).
In a statement, the Nigerian central bank outlines a number of measures it plans to implement with immediate effect to revamp its foreign exchange programme to increase the supply of foreign exchange to the public.
"The Central Bank of Nigeria is providing direct additional funding to banks.
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Central bank of nigeria forex restrictions

An Abuja-based Financial Consultant, Odilim Enwegbara, has dismissed opposition to the foreign exchange restriction policy of the Central Bank of Nigeria, saying the approach was the best way to build the country’s economy and curb inflation.
Mr. Enwegbara, the Chief Executive of Pan Africa Development Corporation, spoke in an exclusive interview with PREMIUM TIMES on Monday.
In June last 2015, the CBN imposed restrictions on importers of 41 goods and services in the country from accessing foreign currencies at the Nigerian foreign exchange markets after the Naira plunged to a record low in February in the wake of unprecedented drop in global oil prices.
The policy drew huge criticisms from Nigerians, particularly investors who claimed various sectors of the economy were impacted negatively by scarcity of foreign exchange on their businesses.
Apart from former CBN governor and current Emir of Kano, Lamido Sanusi, the Lagos Chamber of Commerce and Industry (LCCI) criticized the policy, claiming its members in the steel, furniture, pharmaceuticals and manufacturing sectors lost over N1.46 trillion in six months of the policy.
But Mr. Enwegbara said Nigeria needed the FOREX restriction policy as one of the ways to limit access to importers of finished goods and compel manufacturers abroad to relocate to Nigeria to produce locally.
“We (Nigerians) are importing most of the things we consume here, because cost of production here is high,” Mr. Enwegbara said. “We need to adopt the policy of monetary easing to make liquidity available to small businesses. Increased production will reduce pressures on imports and foreign reserves as well as curb imported inflation.
He said government should focus more on importing those critical inputs to manufacturing, in terms of plants and equipment, to help diversify the economy, pointing out that importation of finished goods into the country should be discouraged.
“Those exporting finished goods to Nigeria should be forced to relocate to Nigeria to produce those things locally. Over a period, the pressure on our FOREX would reduce and inflation would come down,” he said.
Although Mr. Enwegbara criticised CBN’s high interest regime, which is driving high cost of production and inflation, he said the bank’s FOREX restriction policy was the best for the country’s economy at the moment.
“Importers of finished goods and importers of critical inputs to jumpstart and grow our industrial base should not source FOREX at the same rates,” he said.
Given all the high costs associated with doing business in Nigeria, the financial management expert argued that removing FOREX restriction would benefit importers of finished goods than those interested in producing same locally.
He commended the federal government’s decision to enlist Nigeria as the 32nd member of the China-led bilateral currency swap club, saying removing dollars in major bilateral trade between Nigeria and China would be a source of relief to the country’s fiscal and external accounts.
He said the high cost of production in the economy, which was as a result of the high infrastructure deficit in the country, would not have happened if successive governments, particularly the immediate past administration, had utilized the capital allocations in the budgets for the purpose they were meant.
Mr. Enwegbara accused the administration of diverting capital budget allocations between 2013 and 2015 to recurrent expenditure and debt servicing without appropriate extra-budgetary appropriations by the National Assembly.
In 2013, he said, out of about N1.59 trillion budgeted for capital projects, only N900 billion was spent, while about N690 billion was diverted to service debts. Although about N591 billion was voted for the year, a total of N834 billion was actually spent.
In 2014, he said the vote for capital spending was N1.119 trillion, but only N587.61 billion was actually spent, while about N228.1billion was spent without appropriation above N712 billion budgeted for debt servicing for the year.
In 2015, while N417 billion was voted for capital spending, Mr. Enwegbara said only N194 billion was actually spent, while about N193 billion was spent on debt service above the N715 billion voted for that purpose.
“If the Okonjo-Iweala-led economic team had not pursued anti-infrastructure investment, anti-real sector growth, and anti-diversification economic policies, the current negative impact of global oil price volatility on our economy, especially on our fiscal and external accounts, would have been minimal,” he noted.
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Central Bank’s Forex Restrictions.
ON June 23, the Central Bank of Nigeria released a circular titled: “Inclusion of Some Imported Goods and Services on the List of Items Not Valid for Foreign Exchange in the Nigerian Foreign Exchange Markets,” and listed 41 items that can no longer be imported with foreign exchange sourced from the apex bank, deposit money banks, bureaux de change and other authorised sources.
They include rice, cement, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, toothpicks, glass and glassware, kitchen utensils, tableware, vitrified and ceramic tiles and textiles among other items. The CBN clarifies that they are not banned, just that importers of these items can no longer access foreign exchange from the Bank and the industry it regulates.
The CBN cited as its reason the need to “encourage local production of these items”, adding that “implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation.”
Governor of the Central Bank, Mr Godwin Emefiele, defended the Bank’s latest action at a press conference in Abuja, saying Nigeria can no longer import just about everything, and time has come to stop making the country a dumping ground for all sorts of imported junk from all over the world.
We agree with Mr Emefiele on this. Indeed, why should Nigeria import toothpicks? With all our arable land, why should we continue to import rice, tomato, fruits, and other consumables? If we look around us, we will see the remains of the companies that used to produce many of these items. We now import plywood. What happened to our wood industry? What did we do to our paper mills at Oku-Iboku and Iwopin? What have we done to Ajaokuta Steel industry, and the aluminium smelting plant at Ikot-Abasi?
We allowed these companies to die and the vision behind their founding was derailed. Today we are importing what we should be producing at home and generating mass unemployment.
It is now time to pick up the gauntlet, revive the industries, establish more, and create jobs for our population.
We should also get more proactive about what we export. Increasing domestic production and export will remove Nigeria from the nightmare of a mono-economy and guarantee stability and prosperity for the nation.
At this juncture of reorganising our economy, we expect the CBN and the Federal Government to sustain every measure that will increase local production, generate employment and diversify the economy. Even if we allow such luxury imported items as champagne and apples to be imported into this country they must be appropriately taxed and the proceeds channelled to the benefit of the general population.
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