The CBN on Thursday, October 12, 2023 announced the lifting of FX restrictions on the importation of 43 items which was introduced eight years ago as a measure to curb the pressure on the local currency.

In a statement signed by Dr. Isa AbdulMumin, Director of Corporate Communications at the CBN, the apex bank said importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEM/FPC/GEN/01/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian FX market.

Reacting to the development, the Director/CEO, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, applauded the CBN for the review of the FX exclusion policy, describing it as a welcome decision by the organized private sector.

“We welcome the decision of the CBN to discontinue the forex exclusion policy on the 43 items. It is a move in the right direction. It is part of the policy normalisation process.

“The exclusion of the 43 items was one of the several drivers of distortions in the forex market. The exclusion of the items also contributed to the persistent divergence in rates between the official window and the parallel market.

“The exclusion was also in conflict with extant trade policy as the items were not under import prohibition in the first place. It was an example of lack of policy coordination under the previous administration,” Dr Yusuf said in a note to THEWILL.

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He noted that the new directive will improve transparency and disclosure in FX transactions, while advising the CBN to avoid manipulation of the process especially from outside.

“The new directive will also improve transparency and disclosures in foriegn exchange transactions.

Meanwhile, the CBN should avoid market suppression tendencies, especially outside the I and E window. All policy impediments to forex inflows should be removed.

“Meanwhile, the fiscal authorities should continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principles. We need to worry about the risk of import surge.

“There is also a need to upscale the use of fiscal policy measures to boost domestic production and productivity,” he stated..

However, Uche Uwaleke, Professor of Capital Market at Nasarawa State University, Keffi, expressed concern over the timing of the policy, stressing that it would stretch the naira towards the parallel market point.

“Regarding the readmission of the 43 items to the forex market, its immediate impact will be to reduce the premium between the official and the parallel market.

“But it will have negative implications for import substitution and local manufacturing efforts. Decision to readmit 43 items is ill-timed in view of the current forex shortage. The official exchange rate will further rise to meet the parallel market rate,” Prof Uwaleke told this newspaper in a note.

An economist and sustainability expert, Mr Marcel Okeke, noted that the policy would lead to further depreciation of the naira as the local currency comes under intense pressure.

The pioneer economist at Zenith Bank told this newspaper by telephone that the CBN will be compelled to undertake some “under current” measures to save the naira through regular intervention and this would amount to a reduced transparency which will scare investors.

He stressed that focusing on the demand end of the FX challenge without addressing the supply side through increased productivity will achieve little results.

Dr Boniface Chizea, economist and CEO, BIC Consulting, said it was a fervent attempt to align with the demand by the international multilateral financial organisations.

“Simply, it flows with the attempt to go with the market which has put us in the hole we find ourselves in today. Reading through the release, it is obvious that there is a fervent attempt to align with the views of the international multilateral financial organisations. Let’s watch as matters unfold,” Dr Chizea said in a note to THEWILL.

The FX market reacted positively to the CBN’s policy reversal on Thursday with the naira gaining N17.6 to close at N759.20/$ on the I&E window against N776.80/$ on Wednesday, according to data from the FMDQ website.

Turnover hit an all-time high of $407.66 million – the highest since the abolition of multiple exchange windows on June 14, 2023, suggesting a significant intervention by the CBN.