Dec 12, 2016

41 Banned Items: Nigerian Government to Dump CBN’s Forex Policy

Recall that earlier in the year, the Central Bank of Nigeria (“CBN”) banned 41 items from access to the Official Foreign Exchange Market. The items include the following:

1.    Rice
2.    Cement
3.    Margarine
4.    Palm kernel/Palm oil products/vegetables oils
5.    Meat and processed meat products
6.    Vegetables and processed vegetable products
7.    Poultry chicken, eggs, turkey
8.    Private airplanes/jets
9.    Indian incense
10.  Tinned fish in sauce(Geisha)/sardines
11. Cold rolled steel sheets
12. Galvanized steel sheets
13. Roofing sheets
14. Wheelbarrows
15. Head pans
16. Metal boxes and containers
17. Enamelware
18. Steel drums
19. Steel pipes
20. Wire rods (deformed and not deformed)
21. Iron rods and reinforcing bard
22. Wire mesh
23. Steel nails
24. Security and razor wine
25. Wood particle boards and panels
26. Wood Fibre Boards and Panels
27. Plywood boards and panels
28. Wooden doors
29. Toothpicks
30. Glass and Glassware
31. Kitchen utensils
32. Tableware
33. Tiles-vitrified and ceramic
34. Textiles
35. Woven fabrics
36. Clothes
37. Plastic and rubber products, polypropylene granules, cellophane wrappers
38.  Soap and cosmetics
39.  Tomatoes/tomato pastes
40.  Eurobond/foreign currency bond/ share purchases.

It appears the Nigerian government have reconsidered their position on this subject and would reverse the policy which many have argued did more harm than good to the Nigerian economy. In the space of 8 months, the Nigerian Naira, the official currency of the country has lost more 250% of its value, trading at NGN485/$1 from NGN199/$1 that it traded for in the first quarter of the year.

The plan is contained in the newly released 2017 Fiscal Policy Roadmap. The policy document prepared by the Minister of Finance, Mrs. Kemi Adeosun, will, instead, come up with fiscal measures to reduce pressure in the parallel market. According to the document, the FG “will replace administrative measures on list of 41-items with fisca measures to reduce demand pressure in parallel market.” The plan of the Nigerian government is to address barriers to growth that will drive productivity,generate jobs and broaden wealth-creating opportunities to achieve inclusive growth”.

It is generally thought that the initial policy of the CBN to restrict access to foreign exchange for the importation of these items from the official foreign exchange market created a major business barrier and encouraged activities in the foreign exchange parallel market, which led to a wide gap existing between the official value of the Naira and its parallel market value. While the CBN values the Naira at NGN305/$1, it is exchanged at NGN485/$1 at the parallel market. It is hoped that this proposed change will free the market from regulatory chokehold and encourage investments and businesses.

Magnus Amudi is an Associate Attorney at Aelex. His major areas of practice are Corporate/Commercial Law, Energy and Natural Resources, Company Secretarial/Compliance, Labour and Employment Law.

Ed's Note - This article was originally published here