By Dike Onwuamaeze
The new policy of the Central Bank of Nigeria (CBN) that added 41 items to the list of commodities barred from the official foreign exchange market windows would cause significant damage to the Nigerian manufacturing sector and economy. This is the official view of the Lagos Chamber of Commerce and Industry (LCCI) on the policy. According to the chamber, “manufacturers who require any of the 41 restricted items as input and raw materials for their production may have to simply shut their operations once existing stock is exhausted because most of them are irreplaceable raw materials in the manufacturing process of many industries.”
The chamber remarked that CBNis in danger of exerting monetary policy tools almost to a point in which economic harm might result as the formulation of the policy suffered from limited understanding of the manufacturing process of many of the sectors it would affect. Itadvised the CBN to urgently review the policy because its impact wouldnot only be significantly negative, it would also undermine the economic role and importance of Small and Medium Enterprises (SMEs) and moderate-sized manufacturers and produce oligopolistic, and even monopolistic outcomes, which are at variance with its mandate of building a sound economy.
“The new CBN policy is ambiguous as the restricted items are not well-defined and specific, plunging both manufacturers and banks into confusion regarding CBN’s intent. We urge the CBN to immediately amend the policy with full product definition and specification of all restricted items, including HS Codes and excluding any items which are non-substitutable industrial raw materials from the list. The CBN policy should also allow appropriate time frames for items which require some time interval before local substitutes can be created for imported raw materials.”
The LCCI reminded both the CBN and the federal government that manufacturers are yet to recover from harsh impact of the recent currency devaluation and would not wish to see their woes compounded with a policy induced inability to source critical raw materials. The chamber claimed that this would push many firms over the precipice and orchestrate business closures, loss of jobs, declined manufacturing sector production and greater social tension. These scenarios need to be prevented.
MudaYusuf, director general of LCCIwho expressed the concerns of the chamber, said that the fundamental factors that needed to be addressed to get the economy on the path of buoyancy are diversification of the Nigerian economy in terms of exports and government revenue, resolving the issues around downstream oil sector deregulation and upstream oil sector fiscal regimes and the attainment of power sector efficiency and creating alternative economies in solid minerals, agriculture, manufacturing and other sectors to build a productive, export-led local economy.
“These matters cannot be resolved through exclusive deployment of monetary policy tools! We call for a conversation between the CBN and federal government so that a more appropriate regime of economic and fiscal policy initiatives can be designed to address these issues.”
Moreover, the chamber identified the need for CBN to harmonise its policies with other agencies of government such as the Nigeria Customs Service, Federal Inland Revenue Service as well as the Standard Orgnisation of Nigeria and the Nigeria Immigration Service. For instance, the Customs recent introduction of the ECOWAS Common External Tarrif (CET) appears to be at cross-purposes with CBN policy. “Finally, we urge increased engagement and consultation between the CBN and manufacturers and other stakeholders so that policy will be based on a proper understanding of the real impact on all stakeholder groups and the overall economy. The LCCI offers to provide, as it has done in this case, a continuing platform for such engagement,” the chamber said.
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