The Central Bank of Nigeria (CBN) says the restriction on official foreign exchange for importation of 41 items in 2015 was to reverse the multiple challenges of dwindling foreign reserves, contracting gross domestic product (GDP), curb growing unemployment and protect the economy.
The CBN governor, Godwin Emefiele, who stated this in his keynote address at the opening of the 26th annual seminar for Business Editors and Finance Correspondents in Lokoja, Kogi State, said the policy was pivotal to the country’s economy pulling out of recession in 2017.
“The implementation of the FOREX policy on 41 items, in addition to other complementary macro-economic policies, was effective in lifting the Nigerian economy out of recession,” the CBN governor said.
He said following the implementation of the protectionist policy, which prioritised the supply of dollars to critical sectors of the economy to provide inputs to sustain production, real GDP grew by 1.40 per cent in the third quarter of 2017.
The GDP, which contracted to about -2.34 per cent in July 2016, began the initial growth from -1.73 per cent in late 2016 to -0.93 in the first quarter of 2017 before the first positive growth of 0.72 in the second quarter of the year.
Since then, the country’s economy has remained on the growing trajectory, with GDP rising to about 2.11 per cent in the first quarter of 2018, the highest since 2015, before the recent blip to about 1.95 per cent in April and further slip to 1.5 per cent in July.
The CBN governor said, since the introduction of the policy, the country’s foreign reserves grew from about $32.49 billion as at the third quarter of 2017 to almost $48 billion in the first quarter of 2018, before dropping to the current $42.72 billion at the end of the third quarter 2018.
He said given the appetite and taste of Nigerians for foreign goods to the detriment of domestic economic realities, it was to the advantage of the country’s economy for selective protection policy to be introduced in the form of restriction of FOREX to 41 items.
Despite the criticisms that greeted the introduction of the policy, Mr Emefiele said the policy put a halt to rising unemployment and imported inflation through the country’s borders through indiscriminate importation of goods and services.
Justifying the theme of the seminar, “Monetary Policy Implementation amidst global economic protectionism”, Mr Emefiele cited recent developments in international trade requiring most countries to adopt policies to protect their economies from dumping.
He said as an institution mandated to adopt monetary policy actions to regulate the value, supply and cost of money in the economy to achieve government’s macroeconomic objectives, the introduction of FOREX restriction on 41 items was timely.
While the monetary policy objectives may vary from country to country, the CBN governor said the introduction of the policy on 41 items was informed by the need to achieve price stability alongside other macroeconomc objectives.
“Protectionism refers to the restriction of trade between nations by utilising means such as tariffs on imported goods, restrictive quotas and a variety of other inhibitive government regulations designed to discourage imports and prevent foreign dominance of local markets”, he said.
Although he noted that protectionism directly contrasts with free trade in goods and services between and within countries, he said such policies are often aimed at spurring domestic economy towards local production and discouraging dumping to protect local industries from foreign take over, competition or domination.
He said as a result of the policy on 41 items, the foreign exchange that could have been allocated for the importation of goods with local alternatives, like rice, became available to support small and medium-scale enterprises to boost their capacity to produce.
As a result, the CBN said the policy led to a drop in the volume of rice imported from Thailand alone from 1.23 million metric tonnes in 2014 to about 23,193 metric tonnes in November 2017.
The Minister of Agriculture, Audu Ogbeh, had said the federal government’s expenditure on importation of rice crashed by over 90 per cent in 2017, from $1.65 billion per annum to about $160 million in favour of local rice production.
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