“Farmers Will be Unhappy”: Analysts Speaks on CBN Lifting Ban on Rice, Palm Oil, Other Items
- Financial analysts applaud the CBN’s move to allow importers access to FX for trading some items
- The analysts say foreign investors face difficulties repatriating income and dividends due to FX policy
- They told Legit.ng that Nigerian farmers will not be happy with the restoration of FX restriction on rice, others
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Financial analysts have reacted to a recent move by the Central Bank of Nigeria (CBN) to restore 43 items banned eight years ago from accessing foreign exchange.
The development contrasts the 2015 Circular referenced as TED/FEFPC/GEN/O1/010 and its addenda, prohibiting importers from doing so for specific items.
Analysts who spoke to Legit.ng hail the move by the apex bank but noted that the decision would not be favourable to all, especially local farmers.
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The move is long-awaited
According to Charles Abuede, a financial analyst, the decision by the CBN to allow importers of items previously restricted from accessing foreign exchange (FX) is indeed a long-awaited move.
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He said the restrictions had led to a widening gap between official and parallel market FX rates, putting pressure on the naira.
He said:
“The inability of importers and manufacturers to access FX through official channels led to a surge in demand for dollars in the parallel market, which in turn weakened the Naira and created opportunities for speculative trading and arbitrage.
Abuede’s point aligns with an explainer released by the CBN on what needs to be known about the recent restoration.
It mentioned that the limitations forced importers into the black market, which increased the demand for forex. It added that Price increases resulted from a weakening of the currency rate on the black market.
To ensure that market forces decide currency rates based on the Willing Buyer-Willing Seller concept, the CBN said the development was part of its endeavour to encourage orderliness and professional behaviour by all Nigerian foreign currency market players.
Abuede said that banks also had cumbersome processes for FX applications, resulting in significant delays of 30 to 60 days for access to FX. As a result, he said many FX users turned to the parallel market due to these challenges.
“The decision by the CBN to lift these restrictions is seen as a positive development for Nigeria's economy and the FX market. It is expected to help stabilize the Naira by reducing demand pressure across markets. However, a key challenge to this change is the availability of FX supply.
“Foreign investors have been interested in the Nigerian market, but they've faced difficulties repatriating income and dividends due to FX policy inconsistencies and a lack of sufficient greenbacks in the market.
He, however, added that the outcome will depend on various factors, including the effectiveness of the CBN’s policies and the overall economic environment.
Olumide Adesina said that ending an eight-year ban on 43 items that had been restricted from accessing the Nigerian FX market is a good step in the right direction, but the main issues are liquidity and backlogs.
Commenting on the implication of the move, he said,
“Nigerian farmers will be unhappy with CBN lifting FX restriction on palm oil, rice, meat, and vegetable oil but such a move can tame food inflation”
Meanwhile, former Chairman of Stanbic IBTC, Atedo Peterside, earlier said the Central Bank of Nigeria did the right thing to lift the Forex ban on 43 items.
More Dollars Pump into Nigeria After CBN Lifts Forex Ban on 43 Items
To stop the 40% decline experienced in the naira this year, Nigeria’s central bank removed limitations on purchasing foreign currency needed to import 43 products.
Legit.ng reported that the action has since caused a surge in the supply of dollars.
Chapel Hill Denham, a Lagos-based investment bank, reports that after the central bank’s decision, liquidity at the investors and exporters window jumped more than five times to $407.7 million on Thursday.
Source: Legit.ng
