CPPE seeks review of forex ban on 40 items

The Centre for the Promotion of Private Enterprise (CPPE) has advised the Central Bank of Nigeria to review its ban on some of the over 40 items, which the regulator has stopped importers from accessing foreign exchange to bring into the country.

The organisation also faulted the plan by the Nigeria Customs Service to re-introduce excise duty on the production of soft drinks in the country, describing it as ill-timed, insensitive and most inappropriate given the prevailing harsh economic and business conditions.

The Centre, led by Dr. Muda Yusuf, its Chief Executive Officer, disclosed this in its economic and business environment review for 2021 and agenda for 2022, released recently.

According to the CPPE, there is a need for the CBN to engage stakeholders as its current forex policy regime is negatively affecting investors, manufacturers and other stakeholders.

It said: “In the bid to reduce the pressure on foreign reserves, the CBN had excluded over 40 items from access to foreign exchange in the official window.

“Some of the products on this list are intermediate products for some manufacturing firms, which have negatively impacted some manufacturers. It would be advisable for the CBN to have a robust engagement with the stakeholders to review this list in the New Year.”

According to the organisation, the CBN should adopt a flexible exchange rate policy regime, and allow the pricing mechanisms to reflect the demand and supply fundamentals in the foreign exchange market.

“Our proposition is that we should adopt a flexible exchange rate policy regime. We would like to clarify that this is not a devaluation proposition. Rather, it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market. It is a model that is sustainable, predictable and transparent. It is a policy regime that would reduce uncertainty and inspire the confidence of investors.

“It is a policy framework that will minimise discretion and arbitrage in the foreign exchange allocation mechanism. A flexible exchange rate regime is a policy choice adopted to cope with changing demand and supply conditions in the forex market,” Yusuf added.

According to the centre, adopting a market rate will deepen the autonomous foreign exchange market by liberalising inflows from export proceeds, diaspora remittances, multinational companies, donor agencies, diplomatic missions, and others.

It added that a flexible exchange rate would enhance liquidity in the forex market, increase investors’ confidence, and ensure a more transparent model for forex allocation.

Also, the CPPE said the Cash Reserves Requirements imposed on Nigerian banks by the CBN is one of the highest globally, adding that it is a major impediment to financial intermediation by banks.

On the proposed reintroduction of excise duty on carbonated drinks, CPPE said, “The proposal was a negation of the economic recovery and job creation aspirations of the federal government. Many upcoming small businesses in the beverage sector would be hard hit by this proposal. The millions of micro-enterprises in the soft drinks’ distribution chain will be adversely impacted by the imposition of the excise tax. This is detrimental to the job creation and poverty reduction commitment of President Muhammadu Buhari.

“Nigerian manufacturing companies, and indeed most investors, are going through tremendous stress at the moment. They are currently grappling with serious macro-economic challenges and structural constraints impacting capacity utilisation, productivity and competitiveness.

“This is affecting sales, turnover, profitability, shareholder value and the sustainability of investments. The norm globally at this time is to provide incentives for industries to aid their recovery from the shocks of the pandemic and escalating costs. We cannot afford to be doing the exact opposite. Manufacturers, across all product segments, need a respite, especially in the light of the unprecedented escalation of production and operating costs.”