Report: Nigeria saves $12.34bn from forex restrictions

The Central Bank of Nigeria’s (CBN) decision to include some imported goods and services onalistof itemsthat,“arenot valid for foreign exchange,” in the country’s official forex markets, has saved $12.34 billion for the economy in the last seven years, a report obtained from the apex bank has shown.

According to the report, the CBN’s move helped to cut the country’s annual import bill, whichrosefrom $16.65billion in 1980, to $67.05billion in 2014, down to $54.71billion in 2021, thus resulting in $12.34 billion savings for the economy.

Thereport, whichfocused ontheperennialchallengeof how Nigeria can achieve exchange rate stability, pointed out that, like the price of every other commodity, the price of the dollar in Nigeria is determined by the interplay of demand and supply of thegreenbackinthecountry’s market. It noted that just as an increase in demand for a commodity leads to a rise in B the price of that commodity, a fall in supply will also push up its price. Thus, according to the report, the depreciation or appreciation of the naira is determined by the rise or fall of demand and supply of the dollar. The report said: “The simple truth is that the exchange rate in Nigeria has risen/ depreciated because it is suffering from two simultaneous effects: the supply of US Dollars is falling at the same time when the demand of US Dollars is rising.” It explained that with the currenthighlevelof demand for forex, the country’s exchange rate would be under constant pressure to rise, especially if the supply of dollarseitherremainedconstant or declines. The report noted that factorssuchasthecostof foreign education, healthcare and a huge import bill, has had major impact on the increase in the demand for foreign exchangeinthecountry, adding thatNigeriansspentatotalof $39.66billion on foreign educationandhealthcare- related services between 2010 and 2020. Specifically, it stated that Nigerian parents and guardians paid about $28.65billion for their wards to study abroad during the period underreview, whilepaymentfor healthcare-relatedservices in foreign countries during the same period gulped $11.01billion. Analysts note that it was as part of efforts to address the impact of rising demand forforex ontheexchangerate that led to the CBN denying importers of items that the country is capable of producing or that can be produced locally, access to forex on the official forex markets. In fact, following the decline of itsdollar buffers, occasioned by a sharp drop in the price of oil (the commodity that accounts for over 70 per cent of the country’s export earnings), the CBN, in June 2015, released a 41-item( later increased to 43) forex restriction list, containing items, such as rice, cement, margarine, poultry, chicken, eggs, turkey, palm and vegetable oil products, among others, that the Banking watchdog said, would no longer be, “valid for foreign exchange,” in the country’s official forex markets given that they can be produced locally. The CBN said at the time that the implementation of the forex restriction list policy: “Will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation.” New Telegraph had recently reported thatinhiskey noteaddresstothisyear’sedition of the annual workshop for Finance Correspondents and Business Editors, which tookplacein Akurelastweek, CBN Governor, Mr. Godwin Emefiele, again explained why the apex bank had to introduce some tough measures in 2014.


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