Despite lifting FX ban, dollar supply declines to $53.02m

Nigeria recorded a significant drop in dollar supply on Friday, a day after the Central Bank of Nigeria lifted the forex ban on 43 items.

The apex bank in a major monetary policy shift, on Thursday, restored the 43 items which were banned from accessing forex since June 2015 in order to, according to it, “sustain the stability of the foreign exchange market and the derivation of optimum benefits from goods and services imported into the country.”

Items on the list include rice; cement; toothpicks; margarine; palm Kernel/Palm oil products/vegetable oils; meat and processed meat products; vegetables and processed vegetable products; poultry – chicken, eggs, Turkey; Soap and cosmetics; tomatoes/tomato pastes; milk; maize and tinned fish in sauce (Gelsha)/Sardines.

The CBN in a statement signed by the Director, Corporate Communications, Isa AbdulMumin, said it would continue to promote orderliness and professional conduct by all Nigerian foreign exchange market participants to ensure market forces determined exchange rates on a willing buyer – willing seller principle.

The statement added that the apex bank has set as one of its goals the attainment of a single FX market.

Mixed reactions trailed the decision as some experts warned that the new policy might worsen the forex challenge as it would increase demands without commensurate boost in supply.

Data from the FMDQ showed a decline in dollar supply at the Investor & Exporter forex window on Friday, a day after the policy was announced.

The I&E window on Friday recorded a turnover of $53.02 million from $407.66 million on Thursday, representing a decline of 86.99 percent.

LCCI counsels CBN on policy

Meanwhile the Lagos Chamber of Commerce and Industry (LCCI), which said the policy is a market-friendly step towards unifying the exchange rates and is expected to curtail inflationary pressures in the short term, urged the CBN to adopt creative financing options for clearing the short to medium-term backlog.

The LCCI said the policy change is expected to reduce the demand pressure on the parallel market and ensure there is a gradual convergence in FX market rates.

President/Chairman of Council, LCCI, Asiwaju Michael Olawale-Cole, in a statement added that the policy would promote orderliness and professional conduct by all market participants to ensure market forces determine exchange rates on a willing buyer- willing seller principle.

“The Chamber recommends that the CBN adopt creative financing options for clearing the short to medium-term backlog and establish a mechanism to address forex unification under the current system. The Chamber believes the authorities must pursue the right monetary policy reforms to improve the investment climate and boost investor confidence. We call on the CBN to ensure transparency and accountability in banks’ foreign exchange dealings at the investors & exporters windows,” he said.