In a bid to maintain the stability of the foreign exchange (FX) market and ensure the efficient utilization of foreign exchange for optimal profits from imported goods and services in Nigeria, the Central Bank of Nigeria (CBN) recently issued a new directive in a circular that he distributed.

The directive exempts some imported goods and services from the list of items eligible for FX access in Nigeria’s foreign exchange markets to encourage and support the local production of these items in the country.

The implication of this development is that importers wishing to import any of the items listed in the aforementioned CBN directive would be obliged to seek FX funds without resorting to the Nigerian foreign exchange market (interbank market and BBN intervention).

The list of affected items is outlined below, but may be revised as needed. However, please note that the importation of these items is not prohibited.

Items include the following:

Rice
Cement
Margarine
Palm kernel/palm oil products/vegetable oils
Meat and processed meat products
Vegetables and processed vegetable products
Poultry chicken, eggs, turkey
Private planes/jets
indian incense
Canned fish in sauce (Geisha)/sardines
cold rolled steel sheets
galvanized steel sheets
roofing sheets
wheelbarrows
head pans
metal boxes and containers
Utensils
steel drums
Steel tubes
Wire rods (deformed and undeformed)
iron rods and reinforcing bar
Wire mesh
steel nails
Safety wine and knives
Wood particle boards and panels
Wood Fiber Boards and Panels
Plywood boards and panels
Wooden doors
toothpicks
glass and glassware
Cookware
crockery
Tiles-vitrified and ceramic
textiles
woven fabrics
Clothing
Plastic and rubber products, polypropylene granules, cellophane wrappers
soap and cosmetics
Tomatoes/tomato paste
Eurobonds/Foreign Currency Bonds/Share Purchases

In our opinion, we understand that stock purchases (item 40 on the list) refer to Nigerians accessing the foreign exchange market to invest in foreign securities and not to foreign investors bringing funds into Nigeria for investment purposes.

The CBN claimed that this was in a bid to maintain foreign exchange market stability and ensure the efficient utilization of foreign exchange while encouraging local production of these items. The CBN also clearly stated that the importation of these items is not prohibited, however importers of these items will do so using their own funds without resorting to Nigerian foreign exchange markets.

The implication of this is that there will be reduced demand on the official market, which means reduced pressure on the official forex market. However, there will be greater pressure on the parallel market (Casa de Cambio). The gap between the parallel market and the official market will widen and the price of the dollar in the parallel market will increase. This will also lead to an increase in the cost of these items locally for consumers and ultimately inflation.