The Governor of the Central Bank of Nigeria, Olayemi Cardoso in a recent address at the annual dinner organized by the Chartered Institute of Bankers of Nigeria (CIBN) has promised Nigerians that the apex bank is committed to ensuring price stability and financial system sustainability.
The CBN Governor gave clarity on the 43 items on which FOREX ban was recently lifted. He pointed out that these items were never out rightly banned by the government. Mr Cardoso stated thus:
“Allow me to provide further clarification on the issue of the 43 items. Firstly, it is important to note that these items were never out rightly banned by the government. The CBN had imposed restrictions on their access to foreign exchange in the official market. However, these restrictions resulted in increased demand for foreign exchange in the parallel market, leading to the depreciation of the exchange rate in that segment of the Nigerian Foreign Exchange Market (NFEM) and widening the premium between the parallel and official market. Studies have shown that during the period when the 43 items were restricted, there was a 51.0% increase in trade evasion by importers accessing the foreign exchange market, resulting in a revenue drop of approximately US$1.4 billion, or US$275 million annually, between 2015 and 2019.
Additionally, revenue from tariffs on goods decreased from a high of approximately US$920 million in 2011 to about US$250 million in 2017. In 2019, the actual tariff on goods stood at US$320 million, but counterfactual evidence suggests that as much as US$680 million could have been earned in the same year. Furthermore, evidence has shown that foreign exchange restrictions had an adverse impact on Nigerian households and contributed to inflationary pressures. The reduction in trade restrictions and levies on rice, sugar, and wheat by 50.0% had only a minimal impact on welfare, with a 0.8% improvement, and a mere 0.4% reduction in extreme poverty. Moreover, the benefits of trade gains for the general population were negligible, as the average industry in Nigeria pays 13.7% more for its inputs. Lastly, it is important to note that trade policy is primarily the responsibility of the fiscal authorities, and delving into such matters falls outside the purview of the CBN”
Reassuring Nigerians that the CBN is up to the task in rejigging the economy, the CBN boss stated thus:
“As an adviser to the government, the CBN will be repositioned as a catalyst for economic stability and growth. Instead of direct interventions, we will collaborate with stakeholders and formulate policies that create an enabling environment for sustained economic growth and development. Our catalytic role will support increased investment and private sector participation in the economy, improve access to finance for MSMEs, and enhance financial services for the underbanked. This includes promoting specialized institutions and financial products to support emerging sectors, developing regulatory frameworks to unlock dormant capital in land and property holdings, facilitating accelerated access to consumer credit, and expanding financial inclusion to reach the masses. Furthermore, we will work with experts to develop de-risking instruments that encourage private sector investment in key industry verticals such as housing, textiles and clothing, food supply chain, healthcare, and educational supplies, which have high potential for local inputs and value retention. The CBN will leverage its convening power to engage multilateral and international stakeholders in government and private sector initiatives.
Central banks are known as banks of last resort because they underpin the financial system. To do so effectively will require rebuilding and restoring trust in the Central Bank of Nigeria. Let me assure you that I am irrevocably committed to that calling.
In navigating these challenging economic times, the Central Bank of Nigeria is fully committed to ensuring price stability and financial system sustainability. We will stand by Nigeria and Nigerians. Our actions will be fully guided by the principles of transparency, responsibility, and a deep commitment to Nigeria’s progress.