- Ban on 41 items yielding fruits, but there is need to do more
For a country that traditionally shells out scarce foreign exchange to import goods that can be produced locally, the news of a sharp decline in its import bill can only mean that the fiscal and monetary authorities are getting some things right. Delivering a keynote address at the 2017 annual dinner of the Chartered Institute of Bankers of Nigeria (CIBN) on November 10, Central Bank of Nigeria (CBN) governor, Godwin Emefiele, spoke of how the apex bank’s foreign exchange restriction on some 41-odd items in June 2015 has led to a drop in monthly import bill from the pre-restriction monthly average of $5.5 billion to $2.1 billion in the first year of implementation of the restriction, and now to $1.9 billion in the first half of the current year.
He spoke of a signiûcant reduction in rice import from Thailand on one hand, massive boost in local production of the commodity on the other, which he said led to the savings of over US$600 million in 2016 alone. He also spoke of massive expansion of milling capacity as a result of the bumper paddy harvest with its spin-offs in job creation.
“These are clearly verifiable successes of government’s attempts to create jobs locally, improve the wealth of our rural population, improve industrial capacities and ultimately attain economic growth in Nigeria”, he said.
There is no doubt that the situation is a far cry from the gloomy outlook of 2015. Our foreign reserve has witnessed an impressive surge in the last 12 months, due to improvement in oil price and the curb in imports generally. From $23 billion in October 2016, it currently stands at $34.112 billion. From capacity utilisation of 44.8 per cent recorded in the manufacturing sector last year, the manufacturers’ body, Manufacturers Association of Nigeria (MAN) is said to be looking up to 48/49 per cent by year-end, a leap of four percent, a huge chunk of which the body attributes to the restrictions.
On the other hand, to deny the exigency under which the forex restrictions were imposed is to choose to play the ostrich on the terrible fundamentals faced by the economy at the time. Oil prices had dipped and with it the considerably reduced inflow of forex. The uncontrollable surge in demand for foreign exchange had created the frightening scenario in which the nation’s foreign reserves stood the risk of being depleted. In the dire situation, the luxury of forex liberalisation as canvassed by many at the time would seem utterly unrealistic, hence the more pragmatic option of forex prioritisation.
Much as claims of progress cannot be denied, it is, in the same vein, not the same thing as saying that the economy is cruising steady. Yes, the forex restriction has impacted positively on the economy as industries have responded positively to it.
However, to the extent that the elements which undergird the economy have not changed in any fundamental sense, there is clearly a lot more work to be done to ensure that the current momentum is sustained. For instance, the massive curb in imports is a good sign but only if it translates to boost in industrial capacity and competitiveness; the same with bumper harvests – it is splendid to the extent that the farmer can begin to get real value for his labour which can only happen when the Federal Government does something about the intolerable post-harvest losses and only after the country ceases to export primary raw materials will little or no local value addition. While the immediate goal is to ensure that the economy is not allowed to slip into the bygone era of unbridled imports and profligacy, deepening the roots of the economy must be seen as the ultimate imperative.
One sure strategy to achieve that is for the Federal Government to fast-track the pace of infrastructure delivery, considering its drag-on effect on the overall economy.