The International Monetary Fund (IMF) has praised the Central Bank of Nigeria’s move to lift restrictions on 43 previously banned items from accessing foreign exchange through official channels.
The IMF also recognized that the newly appointed officials under President Bola Tinubu have initiated a series of reforms with the goal of delivering positive outcomes for the people of Nigeria. However, it cautioned that these reforms might require some time to yield the desired results.
Abebe Aemro Selassie, the Director of the African Department at the IMF, made this announcement during a media briefing on the Regional Economic Outlook for Sub-Saharan Africa in Marrakech, Morocco, which took place at the ongoing IMF/World Bank Annual meetings.
Selassie also emphasized the importance of enhancing tax reforms to boost revenue generation, create more fiscal flexibility, and reduce the burden of debt servicing and acquisition.
Speaking on trade restrictions, he said, “The view of the IMF is that Nigeria and many other economies are so sophisticated and complex, that I don’t think that these kinds of restrictions work.
“The best way to manage a modern economy is to have fiscal policy lever and monetary policy lever to use to affect the kind of policy outcome you want, rather than saying I don’t like these goods and so I don’t want it to come in, etc, that tends to create an unhelpful distortion.
“Of course, there are tax policies you can also use if you really want to be against certain types of imports. In general, I think the direction the CBN has moved is a helpful one.”
In response to a question on Nigeria’s rising debt, Selassie affirmed that it is manageable and sustainable. He also clarified that Nigeria is not currently engaged in discussions with the IMF regarding debt restructuring.
Selassie said: “I am not aware of any debt discussions that are going on, debt profiling or debt restructuring in Nigeria. In Nigeria, the most important cause of the pressures is the fact that the government does not generate enough tax revenue for all the services it needs to provide.
“Interest payment as a share of revenue is very high and does not leave much room to spend on other issues, that is the key issue that needs to be worked on.
“While there is not enough tax revenue, I think in the past reliance on oil when prices were high and secondly the subsidy regime which also implies and entails lots of government resources being directed where they should not be.
“These are all interlinked issues including causing some of the inflation that you have and the difficulty to tap into the international capital market. That is why the government has had to rely more on domestic financing which of course has crowded out the private sector and put constraints on monetary injections which has weakened the exchange rate.”
On Thursday, the Central Bank of Nigeria (CBN) announced that importers of 43 items, which were previously restricted from accessing foreign exchange (FX) at the official window, are now permitted to purchase FX in the Nigerian foreign exchange market.
Back in June 2015, the apex bank had initially included 41 items on the list of commodities that could not be bought with foreign exchange from the market. This decision was made in an effort to conserve scarce foreign exchange, stimulate domestic production for self-sufficiency, and encourage exports. Over time, the list was expanded to encompass 43 items.
Some of the items that were originally listed as ineligible for forex included rice, cement, margarine, palm kernel products, vegetable oil, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, private airplanes, tinned fish in sauce, roofing sheets, wheelbarrows, head pans, and more.