Yesterday, the Central Bank of Nigeria (CBN) released a circular banning importers of maize from accessing forex from the apex bank. This implies importers would have to rely on supply from the parallel market to carry out their transactions. According to the circular, the CBN noted that the ban was necessitated in order to protect local production of maize, stimulate rapid economic recovery, safeguard rural livelihoods and increase job creation.
Recall that in May 2015, the CBN announced the ban on importers of 41 items from accessing FX from official sources including items such as rice, cement, palm products etc. Since then, the CBN has increased the list by adding items like dairy products, textile, fertilizers etc. Indeed, the CBN governor, Godwin Emefiele had in 2019 guided that the list would be extended to cover some other items as the President Buhari-led administration aims to drive Nigeria towards food sufficiency. However, critics of the policy have always highlighted that the CBN only makes such moves in times of scarce FX rather than a deliberate attempt to stimulate food production.
The Naira has come under severe pressure in recent months following the hit to global crude oil prices and demand. This has forced the CBN to devalue the currency and indications point to further devaluations, evidenced in the quotations from the FX futures market with the 1-year N/US$ quotation at N410.60 (as at 13 Jul 2020).
According to data from the United States Department of Agriculture (USDA), Nigeria’s corn production for the 2019/2020 planting and market season stood at 10.5 MMT while consumption stood at 10.7 MMT. Nigeria imported 0.4 MMT of corn in 2019/2020 market season according to the data from USDA. Considering the low quantum of imports that would be disrupted relative to market size, we don’t expect any major shock to prices, though the recent decline in maize production creates some concern.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
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