UNDERSTANDING THE CBN'S NEW DECISION ON 43 ITEMS

UNDERSTANDING THE CBN'S NEW DECISION ON 43 ITEMS
                            By:
              Nurudeen Dauda
              13th October,2023
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To start with, what the CBN did in 2015 as part of its dollar "demand management" was to "delist" 43 goods from its official foreign exchange window which was then about N305 to $1 far "cheaper" than the parallel market window rate which was then about N600 to $1 in order to reduce the "demand" for dollars as a result of its drastic short in dollar "supply" due to the collapse of crude oil price which is its major "source" of Dollars supply. Crude oil price reduced then to as low as $30 from as high as above $100 per barrel coupled with lower crude production.

It is important to note that the then CBN decision which delisted those 43 items from the official foreign exchange market did not prevent them from "sourcing" their dollars from the parallel market or wherever for their importation which was thought more expensive. However, it is apt to state that "Rice" which was part of the 43 items was officially banned from importation through the land borders only, but Rice importation was only allowed through the waterways.

We continued to import "Rice" through the watersways throughout the period up till now. We have never ceased to import foreign Rice through the watersways till date. It is equally, important to state that the new CBN decision did not unbanned the importation of Rice through the land borders.  

Those who think this decision will make foreign Rice cheaper must think twice because there are no cheaper "dollars" again anymore. In early 2014 when crude oil which is the main source of dollar supply was above $100 the exchange rate was about N160 to $1. The dollars exchange exchange rate now at the Investors & Exporters window is about N770 to $1. The importation of Rice with expensive dollars have never stopped through the waterways throughout the Buhari administration. 

The expensive foreign Rice has always been available in the market. The foreign Rice will only be cheaper if the "Naira" appreciates significantly against the "Dollars". As an import dependent economy Dollars supply remains a biggest challenge to us against a higher Dollars demand. Until we get more liquidity in the foreign exchange market or become a productive economy we still have a long long way to go.

In my thought, the CBN realized that there is no point to continue to delist the said 43 items from the foreign exchange market since the market has been floated which informs their new decision.

For us to get its right the new CBN  management must think out of the box in attracting excess"supply" to the foreign exchange market which is presently lacking, but badly needed.

May God bless Nigeria!

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