The federal government of Nigeria has lost about N455.9billion, from June 2015 till date, to the foreign exchange policy of the Central Bank of Nigeria (CBN).
Investigation revealed that the amount which should have accrued to coffers of the government as revenue, is lost following the ban placed on 41 items from accessing the foreign exchange.
It would be recalled that the CBN banned certain items from the list of those to access the Foreign Exchange. The banned items include rice, cement, margarine, palm kernel/palm oil products, vegetables oils, meat and processed meat products, vegetables and processed vegetable products.
Others are Poultry chicken, eggs, turkey private airplanes/jets, Indian incense, tinned fish in sauce(geisha)/sardines, cold rolled steel sheets, galvanized steel sheets, roofing sheets, wheelbarrows, head pans.
Also banned by the apex bank are metal boxes and containers, enamelware, steel drums, steel pipes, wire rods(deformed and not deformed), iron rods and reinforcing bard, wire mesh, steel nails, security and razor wine, wood particle boards and panels, wood fibre boards and panels, plywood boards and panels.
The ban also covers wooden doors, toothpicks, glass and glassware, kitchen utensils, tableware, tiles-vitrified and ceramic, textiles, woven fabrics, clothes, plastic and rubber products, polypropylene granules , cellophane wrappers, soap and cosmetics, tomatoes/tomato pastes, Eurobond/foreign currency bond and share purchases.
Barely two years after the government enforced the ban, industry watchers said it was counterproductive insisting that it denies government of huge revenue.
Industry experts who spoke on the issue urged the CBN to review the policy on the 41 items restricted from the official foreign exchange market as it had stifled production and forced many firms out of business.
They urged the apex bank to redirect its policies towards stimulating the economy rather than tightening money supply in 2017 and stressed that monetary and fiscal policies should rather be coordinated for economic revival and growth.
The experts also called for review of some other monetary and fiscal policies of government that would hinder the growth of the manufacturing sector in 2017.
It can be observed that the revenue accruable from Nigerian Customs Service, NCS has been receding as a result of the implementation of the foreign exchange ban on the items.
Findings revealed that in the maritime industry, the policy has led to loss of revenue by terminal operators, shipping companies, manufacturers and freight forwarders.
The comptroller-general of customs, Col. Hameed Ali (rtd) reveals that Customs recorded a loss of N230 billion in the last quarter of 2015 due to the Central Bank of Nigeria’s (CBN) closure of the foreign exchange window to the 41 imported items.
He also said that in first half of 2016, Nigeria lost a total of N138.9 billion, representing 35.5 per cent in income generation expected from the agency between January and May, 2016.
Ali disclosed that within the period, the Nigeria Customs Service lost a total of N138.9billion out of the N390.6billion it was expected to generate. He further disclosed that the agency was able to generate the sum of N251.8billion out of which the sum of N211.124, 434,386.60 was generated for the Federation Account with the sum of N40,591,872,059.41 generated for Non Federation Account.
Giving a breakdown of revenue generation within the period, the Customs boss said “compared to last year or what we are expected to generate, we are in deficit of N18,406,949,135.55 as against the sum of N78,110,936,416.67 expected to be generated in the month of January.”
For the month of February, the Customs, according to Ali, lost N27,176,737,878.21 instead of N78,110,936.416.67 just as the sum of N28,910,737,844.24 could not be realized from N78,110,936,416.67 expected in the month. The agency equally lost the sum of N32,304,439,625.98 from N78,110,936,416.67 in April just as it lost N32,039,511,153.56 from the expected generation of the sum of N78,110,936,416.67 in the month of May.
“With this, it means we have 35 per cent less than what we are supposed to have generated,” he said.
Indeed custom’s revenue generation has been on a downhill movement since the implementation of the policy in 2015.
The service generated N898billion as revenue in 2016, including VAT as against N904billion in 2015.
The revenue of 2015 was also lower to the N977.09billion generated in 2014 by the service. Ali attributed the loss to CBN’s forex policy and increase in volume of credit.
“The CBN forex policy has become a big problem to trade, therefore people are not importing and we are a nation that is dependent on importation. If people do not import, there will be no duty paid and customs will have nothing to collect. With this trend, there is no way we can, by any chance, meet the target set to us.
We are hoping and praying that with the release of the budget and with the now relaxed forex market, we hope that traders will begin to pick up and import things. If things do not improve, certainly, we are in big problem,” he said.
Ali called for the review of the foreign exchange policy, declaring that it has adversely affected the revenue of the government.
Speaking on the matter the president, Manufacturers Association of Nigeria, Frank Jacob said he was not surprised that the Nigeria Customs Service was losing revenue because his members were unable to port raw materials due to inability to access foreign exchange.
He stated that the association’s members have lost lot of money to the federal government’s ban on forex for the 41 items.
His words, “we have lost a lot of money. Those item banned from accessing foreign exchange are items for our members and, those members because they cannot get their raw materials, have either closed shops or have their output lowered and for that we have been asking for review of the 41 items not valid for forex.
“Of the 41 items we broke them into 110 and of the 110, 75 are raw materials for our members and it is this 75 items we ask FG to remove from the list so that our members can source foreign exchange to buy their raw materials” he enthused adding “I am not surprised that the customs is losing money because they make money from import duty paid by our members. So if those items cannot access forex, they won’t be able to make revenue.”
Jacob disclosed that the recent directive by the apex bank to maintain an official exchange rate and the bound of N197 to N199/USD from February 2015 to June 2016 by the interbank to the manufacturers is yet to be implemented by the banks.
The Organised Private Sector, speaking through MAN, insisted that reviewing the ban was necessary in achieving the government objectives of reviving the economy, revitalizing the industrial sector, growing the MSMEs and creating employment for the citizenry.
It will be recalled that the apex bank introduced a forex window to address the problem of foreign exchange scarcity and some monetary controls in June 2016 but manufacturers are yet to assess the widow.
“The business environment is still plagued by epileptic power supply, bad roads, high interest rate and high cost of energy which contributed to high cost of production and impediment to competitiveness of the sector,” Jacob said.
He maintained that the challenges of acute scarcity of foreign exchange which restricted the ability of manufacturers to import raw materials for production still remains.
Jacob said that the raw materials can only be imported and that the issue of forex is another thing that is also affecting production capacity.
The MAN president revealed that about 272 firms have shut down, while some reduced their production, staff strength and remuneration of workers.
He said that if by first quarter this year, the federal government fails to address the lingering crisis affecting the manufacturing sector since last year “more companies will close shop.”
He urged the apex bank to enforce the new foreign exchange system for the manufacturers, without which there would be a cumulative loss for manufacturers in 2017, he said.
Also speaking to our correspondent, the chairman, Apapa Branch of MAN, Mr. Babatunde Odunayo, said that some Letters of Credit and Form Ms, approved to manufacturers at N197/US$ before the introduction of the flexible exchange system, were yet redeemed at N320.
Odunayo said this meant a huge loss to manufacturers as the related goods had mostly been sold before the commencement of the new exchange rate system.
He said that the exchange rate loss of N500 billion reflected in manufacturers’ accounts and led to factory closures, unemployment and loss of investments.
Othee stakeholders who decried the ban and appealed for urgent review included the director-general, Nigerian Textile Manufacturers Association (NTMA), Mr. Hamma Kwajaffa.
Kwajaffa disclosed that the textile industry nearly went into extinction due to inability to access foreign exchange for critical raw materials adding that no textile manufacturer had accessed foreign exchange in spite of the $660 million earmarked for manufacturers at the official interbank market throughout last year.
But the director-general, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, urged the federal government to ensure more liquidity in the foreign exchange market to restore investors’ confidence in the economy.
However, the CBN said it was not considering reversal of the policy noting that rather than reverse the policy, it would continue to come up with policies that would support the real sector in order to adequately diversify the economy.
The CBN acting director of corporate communication, Isaac Okoroafor said that the naira should be allowed to float freely.