Banned 41 items: NESG calls on CBN to review

Reprieve may soon come the way of businesses that have been crippled by some of the 41 items placed on forex prohibition list by the Central Bank of Nigeria (CBN) as the Nigeria Economic Summit Group has resolved at the just concluded 2016 summit that the Central Bank of Nigeria (CBN) should review the items to ascertain those to be removed form the list.

It would be recalled that in June 2015, the CBN classified the items as “Not Valid for Foreign Exchange”, on grounds that they could easily be produced in Nigeria, rather than spend the country’s foreign reserves to import them.

The technical sub-committee of the Summit identified challenges and recommended solutions towards realizing the objective of the theme of the summit for this year, “Made-In-Nigeria”. Some of the items placed on the list are basic raw materials needed for manufacturing of some locally produced goods.

Details of the recommendations contained in the final resolutions sent to President Muhammadu Buhari said 16 of the 41 items were primary inputs for producers’ of made in Nigeria products.

“We recommend the urgent review of the list of items excluded from accessing the FOREX market,” Co-Chair of Private Sector sub-committee, Lanre Akinbo, said.

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.

According to Business247 News Online findings, some of the items placed on forex restriction by the CBN are 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.

The Director General of LCCI, Mr. Muda Yusuf, told this medium after the meeting with members of the Organised Private Sector (OPS), one of the key aspects of the engagement with the Vice President, Professor Yemi Osinbajo, “was the famous 41 items on forex prohibition list”.

The Vice president 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 companies 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.

“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 and Clothes