The Central Bank of Nigeria’s decision to stop foreign exchange sales to importers of 40 items on Tuesday is a good move but it will make the naira to fall further against the dollar, especially at the parallel market, economists and analysts have said.
The CBN had banned the importers of rice, private jets, textiles, poultry products, vegetable oil and 35 other items from accessing foreign exchange at the nation’s forex markets.
The regulator said the move would help preserve the external reserves, facilitate the resuscitation of domestic industries and generate employment opportunities.
But economists and analysts, who reacted to the announcement on Wednesday, said the naira had already come under severe pressure and would fall further as the central bank pushed forex demand from the interbank market to the parallel market.
The CBN had said that those desirous of importing the listed items could do so using their own funds without recourse to the Nigerian forex markets.
They predicted that the naira could fall to 230 against the dollar at the parallel market in coming days or weeks.
An analyst and currency strategist at Ecobank Nigeria, Mr. Kunle Ezun, said, “The immediate effect of the circular is on the parallel market (black market), where dollar-naira currently stands at 220. By this circular, the CBN has surreptitiously transferred the funding of the excluded items to the parallel market. This is expected to increase the naira volatility to about 230.
“This will lead to an interbank exchange rate of around N217 to one dollar (the CBN indicative rate is currently set at one dollar to N196.90).”
An Associate Professor of Economics at the Ekiti State University, Abel Awe, commended the CBN for the move but said it might fuel further pressure on the naira, making it to go for about 230 against the dollar at the parallel market.
He recommended an outright ban on the importation of the listed items and other similar items by the Ministry of Finance.
The Head, Investment Research, Sterling Capital, Mr. Sewa Wusu, noted that the naira had been under pressure because the market was waiting in anticipation of a further devaluation.
“What the economy needs now is to become a producer economy. If our industries are allowed to produce these items, our dependence on oil and other imported items will be reduced. Most of these items can be produced locally. The ban is a good move,” he said.