Reprieve may soon come the way of businesses that have been crippled by the 41 items placed on forex prohibition list by the Central Bank of Nigeria (CBN) as the Federal Government is considering removing the list from monetary policy space and place it on fiscal policy space.
According to Business247 News Online findings, some of the items placed on forex restriction by the CBN happen to be raw materials for some companies and the development has made businesses very challenging for the companies in this category and this situation has contributed, in no small way, to the cost of living of average Nigerian.
But this medium gathered that the recent meeting between the Federal Government and the Organised Private Sector (OPS) as championed by the Lagos Chamber of Commerce and Industry (LCCI) is pointing at the direction of government shifting ground on the issue.
According to the Director General of LCCI, Mr. Muda Yusuf, one of the key aspects of the recent engagement with the Vice President, Professor Yemi Osinbajo, “was the famous 41 items on forex prohibition list”.
He said that the Federal Government was considering moving it from monetary policy space to fiscal policy space, “meaning that if your raw material or your product is on that list, you cannot source for foreign exchange for it through interbank market on monetary space where it is currently. That was what the CBN said. But if it is moved from monetary policy space to fiscal policy space that means, you can have access to forex at interbank market.
“Some manufacturers’ raw materials are on the list and it has been removed, the concerned comapnies can go to the interbank market and bid for forex. So, in the fiscal space, they will now determine want to do, maybe there will be import prohibition or they want to increase the tariff or whatever. That has not been determined, but the issue of the CBN saying you cannot access foreign exchange market will no more be there. We were not given a day it would be effected, but he said that was what they were thinking.
Some people have argued that the policy has helped the economy in a way as people are now producing these banned items locally and making good profit. Business247 News Online then asked the DG if the change in the policy direction would not put an end to the positive impact of the policy.
“You see, for any policy there are costs and there are benefits, there are winners, there are losers. That is the way it is. For some people, the best policy of this administration is the prohibition of those 41 items from forex at interbank market and they are praying that it just remain because they are making good business.
If you are a player in particular product area and they said importation of that product should be banned, that’s a good business for you. Some of them have been declaring good profit on the Nigerian Stock Exchange, like Okomu and the rest of them but what about the welfare of the people on the street?
“One thing about policy is that policy makers, most often, talk to many of us who either are producers, business people or consultant, nobody talks to the man on the street and the man on the street does not even understand how the policies either affecting him, penalising or benefiting him, he does not know how it is affecting him because they don’t understand transition mechanism.
“The thing is that any time there is two-point gap between capacity to produce domestically and your demand; it is the consumers that will pay for it. Somebody was telling me about the experience with common nylon and how it has affected pure water business.
“The experience of sachet water producers is one example that will come handy here. According to some producers, a kilogram of nylon they were buying about N600 last year is about N1, 200 now. How much of that cost can be passed to those who buy water. To move the water from N5 to N10, it was a problem and that’s why many of them have closed down.
“You see, common nylon and what happened to nylon is that the polypropylene granules used for the production of nylon is put under the 41 items. They said Indorama in Port Harcourt can produce what the nation needs. This is the problem. So, there is a big gap between the domestic capacity and the need.
“Meanwhile, Indorama and the rest of them are celebrating that this is a good policy. That is what the CBN is referring to that the policy is working without looking at what is the implication for the producers of pure water and the implication on the people buying the product. Nobody is looking at that. So, that is what I am saying that there will be losers, there will be gainers.
It would be recalled that on June 23, 2015, the Central Bank of Nigeria (CBN) released a circular, listing 41 items as not valid for foreign exchange (forex) through the official forex window. The CBN Director of Trade and Exchange Mr. Olakanmi Gbadamosi, said the exclusion of the items was in order to ensure efficient utilization of forex. The CBN also argued that the move would encourage patronage of locally made good, pushing its argument that Nigerians were still in the business of importing toothpicks.
After the ban, many manufacturers in the country complained that the bank’s action was affecting over 700 products in the market. “The 41 items that were banned by the CBN from accessing forex from official sources, to us in the chamber is like 728 lines of product. To them, they see it as 41 items. “We don’t subscribe to importing toothpick, tomato paste and all of that but there are key manufacturing items we are looking at.
“Out of the 41, we brought about 12 items to them that we don’t have the capacity to meet this. For example, everybody knows that Nigerian is rich in palm oil, but the local demand capacity is 1,800 metric tonnes per annum.
“Today the domestic production is just 600 metric tonnes. You need about five to eight years for the best seed of palm oil to yield; we demanded for some lag, but this is not happening. I can tell you that about 80,000 jobs are at risk in the manufacturing sector.” Yusuf said.
Below are the 41 items:
Rice
Cement
Margarine
Palm kernel/Palm oil products/vegetables oils
Meat and processed meat products
Vegetables and processed vegetable products
Poultry chicken, eggs, turkey
Private airplanes/jets
Indian incense
Tinned fish in sauce (Geisha)/sardines
Cold rolled steel sheets
Galvanized steel sheets
Roofing sheets
Wheelbarrows
Head pans
Metal boxes and containers
Enamelware
Steel drums
Steel pipes
Wire rods (deformed and not deformed)
Iron rods and reinforcing bard
Wire mesh
Steel nails
Security and razor wine
Wood particle boards and panels
Wood Fibre Boards and Panels
Plywood boards and panels
Wooden doors
Toothpicks
Glass and Glassware
Kitchen utensils
Tableware
Tiles-vitrified and ceramic
Textiles
Woven fabrics
Clothes
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