The Central Bank of Nigeria (CBN) has outlined the reasons behind its decision to remove foreign exchange restrictions on 43 items.
On Thursday, the apex bank announced the lifting of the forex restriction on items such as rice, cement, and 41 other goods.
This move has sparked diverse reactions within the financial sector, with some applauding the decision, while others express concerns about a potential increase in imports, which could adversely affect local manufacturers.
However, in a statement released on Friday, the Corporate Communications Department of the CBN explained that the objective of this decision is to weaken the parallel market exchange rate and establish orderliness in the forex market.
The CBN stated its intention to achieve a unified forex market with flexible and transparent pricing mechanisms.
“The previous restrictions forced importers to seek foreign exchange in the parallel market, leading to a surplus demand for forex. This, in turn, weakened the parallel-market exchange rate and caused price hikes,” the statement read.
The CBN seeks to promote organization and professionalism among all participants in the Nigerian Foreign Exchange Market, ensuring that exchange rates are determined by market forces based on the principle of willing buyers and sellers.
“The CBN aims to establish a unified forex market with flexible and transparent pricing.
“Furthermore, the CBN aims to maintain price stability and increase liquidity in the Nigerian Foreign Exchange Market. As liquidity improves, we anticipate that the distortions in the market will decrease,” the statement added.
Regarding the implications of this decision, the CBN explained that it would reduce the demand for forex, thereby facilitating the adjustment of exchange rates to meet market demands and ensuring a consistent supply of forex.
The CBN further stated that this decision would help to control inflation, particularly on goods that rely on forex for importation.
In addition, the CBN emphasized that local manufacturers would benefit from the availability of cheaper imported inputs, while consumers would enjoy the affordability of retail products.
“It is expected that the reopening of previously closed factories will boost employment generation. Price stability will further contribute to the overall well-being of the economy and the standard of living,” the CBN noted.
According to reports, the parallel market rate for the Naira against the US Dollar stood at N1030/$1 on Friday, while the official market rate was at N764.86/$1.
