The CBN’s restriction on 43 goods cost Nigeria $1.4 billion over an eight-year period, according to Cardoso

Olayemi Cardoso, Governor of the Central Bank of Nigeria, lost a total of $1.4 billion in 8 years due to the CBN’s prohibition on 43 goods.

Cardoso made the announcement at the 58th Annual Bankers’ Dinner, which was held on Friday in Lagos by the Chartered Institute of Bankers of Nigeria (CIBN).

According to him, the 43 items were never explicitly prohibited from importation or sale in Nigeria.

He, however, explained that the apex bank had implemented restrictions on accessing foreign exchange for the importation of these items.

Cardoso emphasised that the issue of trade policy, specifically the importation and sale of the 43 items, was primarily within the domain of the fiscal authorities, not the CBN.

This distinction, he said, was important because it clarifies that the CBN’s decision to lift the foreign exchange restrictions on these items was not intended to encroach upon the responsibilities of other government agencies.

Recall that the CBN had in a circular in June 2015, published a list of imported goods and services that will not be eligible for foreign exchange in the Nigerian foreign currency market.

The list which was originally 41 was updated to include two more items.

But the CBN precisely on October 12 2023, announced that it had lifted the ban on the issuance of foreign exchange for the importation of rice, vegetable oil, and poultry products among other 43 items.

Cardoso said, “Allow me to provide further clarification on the issue of the 43 items.

“Firstly, it is important to note that these items were never outrightly banned by the government.

“The CBN had imposed restrictions on their access to foreign exchange in the official market.

“However, these restrictions resulted in increased demand for foreign exchange in the parallel market, leading to the depreciation of the exchange rate in that segment of the Nigerian Foreign Exchange Market and widening the premium between the parallel and official market.’’

Cardoso said studies had shown that during the period when the 43 items were restricted, there was a 51.0 per cent increase in trade evasion by importers accessing the foreign exchange market.

According to him, this resulted in a revenue drop of approximately $1.4 billion, or $275 million annually, between 2015 and 2019.

Cardoso added that revenue from tariffs on goods decreased from a high of approximately $920 million in 2011 to about $250 million in 2017.

“In 2019, the actual tariff on goods stood at $320 million, but counterfactual evidence suggests that as much as $680 million could have been earned in the same year,” he said.

He added that evidence had shown that foreign exchange restrictions had an adverse impact on Nigerian households and contributed to inflationary pressures.

Cardoso said the reduction in trade restrictions and levies on rice, sugar, and wheat by 50.0 per cent had only a minimal impact on welfare, with a 0.8 per cent improvement, and a mere 0.4 per cent reduction in extreme poverty.

Cardoso explained that the benefits of trade gains for the general population were negligible, as the average industry in Nigeria pays 13.7 per cent more for its inputs.

According to the CBN, this action will boost liquidity in the Nigerian foreign exchange market and intervene from time to time, adding that interventions will decrease as liquidity improves.