The decision of the Central Bank of Nigeria to deny importers of 41 items access to the nation’s foreign exchange markets through Deposit Money Banks is paying off and is in the right direction, a financial expert has said.
Two months after the controversial decision, the Chief Executive Officer, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo, said the policy had helped to ensure some stability for the naira and led to an increase in the country’s foreign reserves.
He said, “To a great extent, since that policy was announced, we have seen the first stability in the value of the naira, and I think that is a very good point for everybody to see.
“Also, we have seen the foreign reserves increasing; I think we are back to $31bn now – for the reserves that were dipping to a low of N29bn.”
Fakayejo stressed that the decision would only lead to some level of hardship in the short term, with greater benefits expected in the medium to long term.
He said, “If you look at that policy, it is definitely geared towards conservation of our foreign reserves and reducing pressure on the exchange rate.”
He explained that news that the nation’s refineries had started refining crude oil would also lead to a reduction in pressure on the naira.
“If that be the case, it is definitely going to reduce importation of petroleum products by about 40 per cent. The average utilisation of foreign exchange by importers of petroleum products as given by the CBN is about 35 per cent.
“Now, if the dependence is reduced by 40 per cent, then the utilisation of foreign reserves by importers of petroleum products will cascade down to about 15 per cent. That means we are going to have a conservation of about 15 per cent (on the foreign reserves).”
On the argument that Nigeria is not self-sufficient in rice production, Fakayejo said, “There is no country that will make a developmental change without having to at least ooze out some sweat before it comes out of that and start to smile.
“Countries have had to pay prices for adjustments they have had to make that are favourable in the medium to long-term development of the economy.”
He added that it was important for Nigerians to note that the imported rice is sometimes five to 10 years old and only suited for feed mills, but is being brought to Nigeria for human consumption.
He, therefore, urged Nigerians to pay the price of future growth and development by “maybe buying local products at a higher price” and in so doing conserve the country’s foreign exchange and enhance local production so that at least more people could be gainfully employed and benefit from the value chain attached to the process.
“I believe it is a price that Nigerians must be ready to pay and I expect that everybody that has the future of this country at heart should support that policy by the CBN,” he said, adding that the Federal Government had through the CBN made funds available to farmers at single-digit interest rate.
The CBN had in June stopped the sales of foreign exchange to importers of rice, private jets, textiles, tomato paste, poultry products and 36 other items in order to shore up the country’s falling external reserves.
The decision had generated debate, with many including the Lagos Chamber of Commerce criticising the decision, warning that it would lead to factory closure, job losses and encourage inflation.