The Central Bank of Nigeria (CBN) has provided justification for lifting foreign exchange restrictions on 43 items.
On Thursday, the apex bank lifted the forex restrictions on 43 items, including rice and cement, eliciting various reactions within the financial sector regarding its potential impact.
Some applauded the decision, while others expressed concerns about potential increased imports and its impact on local manufacturers.
However, the CBN’s Corporate Communications Department released a statement on Friday, elucidating that the decision aimed to alleviate the escalating parallel market exchange rate and bring about better organization in the forex market.
CBN said it aimed to unify the forex market with flexible and transparent pricing.
“The restrictions pushed importers into the parallel market, contributing to the surplus demand for FOREX. This weakened the parallel-market exchange rate, pushing up prices.
“The CBN wants to promote orderliness and professional conduct by all Nigerian Foreign Exchange Market participants to ensure market forces determine exchange rates on a Willing Buyer – Willing Seller principle.
“The CBN wants a unified market for FOREX with flexible and transparent pricing.
“The CBN wants to ensure price stability and is seeking to boost liquidity in the Nigerian Foreign Exchange Market. As liquidity improves, we expect the distortions to moderate”.
Speaking on the implications of the decision, CBN said it would reduce the demand for forex, thereby making the exchange rate adjust to clear the market and ensure that there is always supply.
The bank said the decision would also control inflation, especially on goods that depended on forex.
CBN added that following the decision, local manufacturers will benefit from cheaper imported inputs, just as consumers will benefit from cheaper retail products.
“It is expected that employment generation will be boosted as closed factories re-open. Price stability will benefit the economy and the standard of living in general”, the CBN stated.
