• Importers seek re-appraisal of domestic production capacity of excluded items
• Apex bank extends BVN deadline • Experts list emerging challenges 

THE rigid posture of the Central Bank of Nigeria (CBN) over its recent import policy may be fuelling concerns among investors in the nation’s real sector, especially those investing in value-chain sectors that attract intervention from the Federal Government.

Though the CBN maintained that its action was necessary for economic stability, members of the organised private sector believe the move may have been wrongly conceived without the apex bank properly appraising domestic capacity for production of some of the excluded items.

Meanwhile, the CBN has extended the Bank Registration Verification (BVN) deadline to October 31, to accommodate customers who had thronged the banks to beat an earlier closing date.

This is contained in a circular issued by the apex bank and signed by Mr. Dipo Fatokun, director, Banking and Payment System Department, in Abuja yesterday.

Commercial banks, however, are struggling to meet the CBN deadline to transfer all revenue accounts collected on behalf of the Federal Government and its agencies to CBN account within 24 hours of the value date of such collections with effect from February 28, 2015.

In the circular extending the BVN deadline, the apex bank noted: “It has come to our notice that the BVN registration has elicited tremendous interest from the Nigerian bank customers who crowded the banking halls in order to beat the deadline. “In view of the foregoing, it has become imperative for the banks to extend the timeline for all customers to have the BVN. “The deadline for the enrolment is hereby extended from June 30 to October 31.’’

According to the statement, the extension is expected to facilitate a smooth completion of the registration exercise. It further stated that the extension would give Nigerian bank customers in the Diaspora, ample time to enrol into the programme. The statement, however, stated that the guideline for the enrolment of the Diaspora account holders was being finalised and would be released soon. For the CBN’s forex policy, stakeholders say a painstaking gap analysis to determine the domestic capacity for production vis-a-vis the demand should have preceded the policy decision by the CBN.

To others, the CBN’s decision may serve as a necessary stop-gap in addressing lingering foreign exchange (forex) leakages while propelling actions that may boost backward integration exercises in some of the sectors.

However, investors in various backward integration schemes initiated by the immediate past administration for the revival of some sectors, have urged the apex bank to give preferential treatment to salvage their investments in the country.

For rice importers who have invested in the backward integration exercises, a minimum investment in rice production and processing of $10 million, which was deposited under a Domestic Rice Production Performance Bond (“the Bond”) as a means of demonstrating a clear commitment to domestic investments in rice production and processing may be at stake with the policy. For importers of some raw materials needed for the production of some of the prohibited commodities, the apex bank’s decision is prone to multiple definitions and discretionary interpretations by agencies and institutions responsible for implementation.

They also believe that the alternative forex markets – parallel market and the Bureau de Changes (BDCs) are not deep enough to meet the demand of the essential intermediate products on the exclusion list. The CBN Governor, Godwin Emefiele, while acknowledging that people do not like to be forced to do something, said it is one of the hallmarks of effective policymaking for the policymakers to be nimble and responsive to developments inimical to the society.

“My personal as well as the bank’s institutional analyses of the situation compelled us to believe that we needed to aggressively begin the process of feeding ourselves by ourselves and producing much of what we need in this country.

“The huge amounts of money the country spends on importing things we can produce locally have become a significant drag on our Foreign Exchange Reserves. Most of you are aware of the often-quoted number of N1.3 trillion, which is what we spend on average importing Rice, Fish, Sugar, and Wheat every year,” he said.

Explaining his personal frustration over the development, the bank chief queried why the country should be importing rice when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the rice belts of Nigeria are being wasted, ignored and depleting huge forex too.

To him, it takes nothing for these importers to go into processing these locally produced rice, utilise the vast expanses of arable land for rice cultivation instead of taking the easy route of importing rice. Renowned Economist, Bismarck Rewane observed that the decision by the apex bank sends a signal that there is a cash flow problem adding that it could however affect the level of inflows and outflows in the country.

He added that for some manufacturers, the decision means more funding, while to some importers of finished goods that can be produced in the country; there is an increased pressure in accessing foreign exchange. According to him, importers should not blame anyone for anything that happens to the currency if finished goods are being brought into the country while continually placing pressure on the naira.

On his part, President, Rice Millers, Importers and Distributors Association of Nigeria (RIMIDAN), Tunji Owoeye noted that the decision would have an impact on government’s backward integration policy in the rice sector, adding that many investors raised their stakes in the sector due to the incentives proposed by government to encourage many of them.

“We urge government to modify the policy by giving preference to stakeholders involved in rice backward integration the essence of which is to encourage investors to invest in the rice value-chain. There is a gap in the production and consumption of the commodity in the country.

It is the people in the value-chain that are filling that gap through some guided measures to manage the imports. “If a government initiates a move and consequently backs out, it is taking carrot form one side and giving it out at another end. I believe government means well in addressing dumping but I believe that the move should be guided, while identified companies that have invested in backward integration should be given an opportunity to access government’s forex window”, he added.

On its part, the Lagos Chamber of Commerce and Industry (LCCI) urged the apex bank to increase engagement with stakeholders to better appreciate the dimensions of the shocks and disruptions of its recent policy pronouncement, adding that it is important to situate policy decisions within a larger economic context than the narrow prism of monetary variables. The chamber, through its President, Remi Bello, submitted that the policy should be put on hold pending a proper study of the demand and supply gaps in the various sectors affected by this policy, adding that many of the products on the list of the 41 products are intermediate goods, which are critical inputs for many manufacturing firms as well as other critical sectors of the economy.

“The list is prone to multiple definitions and discretionary interpretations by agencies and institutions responsible for implementation. The HS codes of the items are not indicated in the CBN circular. Discretionary interpretations create room for corruption.

The alternative forex markets – parallel market and the BDCs are not deep enough to meet the demand of the essential intermediate products on the exclusion list.

Therefore the exclusion of the items from the forex market is as good as import prohibition”, Bello added. As a result of the development, the LCCI urged the Buhari administration to urgently constitute its cabinet to give clear direction to the economy.

However, Afrinvest Securities Limited, in a report titled: “CBN Currency Restriction: Another Dodgy Devaluation?” said the move was a fallout of the huge unmet demand for forex at the Interbank market despite the induced stability observed in recent time.

“We estimate the size of the newly excluded products to be in excess of 20 per cent of total forex utilisation of banks. This is based on CBN data, which placed Financial Services (38.8 per cent), Industrial Sector (17.6 per cent), Manufactured Products (7.1 per cent), Food Products (7.1 per cent) and Agricultural Sector (0.7 per cent) as largest contributors’ to total forex utilised by banks in the fourth quarter of 2014.

Predictably, we believe this is targeted at easing demand pressure on forex in a bid to conserve the depleting forex reserves (down 14.8 per cent year-to-date to $29 billion). “We note that the capability of these restrictions to stimulate domestic production of the excluded items, as suggested by the CBN depends to a large extent on too many variables outside the CBN’s purview.”

While the analysts said there is a visible evidence of the responsibility and independence of the CBN by the action, they also lauded the bank for remaining proactive in taking critical monetary policy decisions that will guarantee external economic stability amongst other concerns.

The CBN circular on MDA’s funds read: to all banks, the apex bank noted most banks were yet to comply fully with the provisions of its January 14 circular directing banks to transfer revenue accounts to its account.

The circular issued by the apex bank’s Director of Banking supervision, A. O Idris, read: “We have observed with dismay that most banks are yet to comply fully with the provisions of the circular directing banks to transfer ALL revenue accounts collected on behalf of the Federal Government and its Agencies to CBN account within 24 hours of the value date of such collections with effect from February 28, 2015.

“Banks are therefore, by this circular, directed to ensure strict compliance with effect from the date of this circular, failing which severe financial and administrative sanctions will be imposed. For emphasis, June 30, 2015 shall be the FINAL deadline.” Indeed, the decision by the CBN is projected to lead to a loss of an estimated N558 billion of DMBs’ deposits.