43 items restriction to FX: Nigeria suffers $1.4bn revenue drop in 5 years, Cardoso reveals

The governor, Central Bank of Nigeria (CBN). Mr. Olayemi Cardoso on Friday disclosed that Nigeria suffered approximately $1.4billion or $275million annually in revenue drop between 2015 and 2019 when 43 items were restricted access to foreign exchange market.

CBN had recently lifted the ban on 43 items from accessing the official foreign exchange market, allowing market forces to determine exchange rates based on the Willing Buyer – Willing Seller principle.

Cardoso, giving his keynote address to the banking community at the 58th annual Bankers’ Dinner and 60th Anniversary of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, said the apex bank is witnessing a clear progress in stabilizing the Nigerian foreign exchange market.

According to him, “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 (NFEM) and widening the premium between the parallel and official market.

“Studies have shown that during the period when the 43 items were restricted, there was a 51per cent increase in trade evasion by importers accessing the foreign exchange market, resulting in a revenue drop of approximately $1.4 billion, or $275 million annually, between 2015 and 2019.

“Additionally, 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.

“Furthermore, evidence has shown that foreign exchange restrictions had an adverse impact on Nigerian households and contributed to inflationary pressures.

“The reduction in trade restrictions and levies on rice, sugar, and wheat by 50 per cent had only a minimal impact on welfare, with a 0.8 per cent improvement, and a mere 0.4per cent reduction in extreme poverty.

“Moreover, 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. Lastly, it is important to note that trade policy is primarily the responsibility of the fiscal authorities, and delving into such matters falls outside the purview of the CBN.”