CBN gives reason for lifting forex restriction on 43 items

The Central Bank of Nigeria has outlined reasons for removing foreign exchange restrictions on 43 items.

Recall that on Thursday, the apex bank lifted the forex restriction on rice, cement and 41 other items.

The decision generated mixed reactions across the financial sector over its implications.

While some hailed the decision, others believed it would promote a surge in importation thereby affecting local manufacturers.

However, in a statement on Friday, the Corporate Communications Department of CBN explained that the move would help weaken the soaring parallel market exchange rate and promote orderliness in the forex market.

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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.

Newspot reports that the Naira stood at N1030/1$ on Friday at the parallel market, while at the official market, it is N764.86/$1.