Features

Is Nigeria’s Forex Ban on Food Products Working?

Published

on

News

President Muhammadu Buhari in August ordered the Central Bank of Nigeria (CBN) to implement a forex ban on food products. In a statement, Buhari directed the central bank: “Don’t give a cent to anybody to import food into the country.” The directive is in line with the government’s efforts to ensure full food security.

AgroNigeria Managing Director Mr. Richard-Mark Mbaram allayed initial concerns about the ban, noting that President Buhari’s order is only meant to protect local producers of agro commodities. “There are particularly wide-ranging implications for agricultural productivity and development…” explained Mbaram in August. “The most striking implication is a positive one in that it basically creates a situation where hurdles are placed on the path of importers of food and other agro commodities.”

Is the forex ban working?

It’s too early to tell if the ban is working or not. But on the surface, it looks problematic. A Nairametrics op-ed about the forex ban identifies three potential concerns:

1. A shortage of local food

2. Food prices might rise

3. Monetary policies may not fix the first two problems

Milk and rice supplies are reportedly not enough to meet countrywide demands, and the longer the forex ban continues the likelier it is that food shortages will arise. Once that happens the direct consequence is food inflation. In such a case, fiscal policies like forex bans are unlikely to either bridge the resulting food shortages or control rising food prices.

But the measure is well-intentioned, as it aims to make Nigeria self-sufficient. This is why the Nigerian government is prepared for some short-term pains, notably price increases on food. But the long-term trade-off, explains President Buhari spokesperson Garba Shehu, will be worth it. “These restrictions are temporary,” he notes. “They will last until our farmers and manufacturers… are competing on an even footing.”

The other benefit: replenishing foreign reserves

An added benefit is replenishing Nigeria’s depleted foreign reserves. Ventures Africa reports that the foreign reserves of the country fell from $45 billion (₦16.3 trillion) in July to $40.7 billion (₦14.7 trillion) in October.

Failure to conserve and replenish foreign reserves will result in dire consequences for the naira. Of note, it may lose significant value against other currencies, notably the US dollar. Already the exchange rate now, which has stayed between ₦360–₦364 to $1, is markedly lower as opposed to 4 years ago (between ₦450–₦500 to $1).

This is particularly worrisome given the US dollar’s standing as one of the world’s most powerful currencies. FXCM details how the US dollar is one of the most traded currencies on the foreign exchange, as it is the currency that dictates the market. Conserving and replenishing Nigeria’s foreign reserves, particularly dollars, is just as imperative as promoting self-sufficiency in food production (which is why the forex ban was implemented in the first place).

A question for the long-term

The question as to whether or not the forex ban is working will only be answered three to six months from now. After all, it has been only three months since President Buhari’s directive. The forex ban is a long-term fix to make Nigeria self-sufficient (and conserve its foreign reserves at the same time). A more accurate evaluation, therefore, can come only in the long-term as well. Rest assured that NNN will monitor the situation closely in the coming months.

Short Link: https://wp.me/pcj2iU-2Kpb

Richard Woodward

Richard Woodward: NNN is a Nigerian online news portal that publishes breaking news in Nigeria, and across the world. We are honest, fair, accurate, thorough and courageous in gathering, reporting and interpreting news in the best interest of the public, because truth is the cornerstone of journalism and we strive diligently to ascertain the truth in every news report. Contact: editor @ nnn.ng. Disclaimer.

16,000 jobs’ll be created when National Theatre’s renovation is completed – Official Gen. Joshua Dogonyaro, ex-CDS dies at 80 Death Coronavirus – Eritrea: Ministry of Health announcement (May 12, 2021) New board will run the National Theatre after renovations – GM Ogun Govt. restates commitment to quality health care Eid-el-Fitr: Ganduje urges Muslims to pray for peace Coronavirus – Nigeria: COVID-19 case update (May 12, 2021) Eid-el-Fitr: Orji Kalu advocates national cohesion Expert wants greater investment in food security Incentives for the production of the digital economy in Cameroon (by Achare Takor) Ex minister, Turaki urges Muslims to uphold Ramadan values, peace, unity, benevolence Coronavirus – Daily update on the status of COVID-19 statistics in Zambia (May 12, 2021) Wet Season Farming: FG to distribute farm inputs to farmers Video press release: Weekly press briefing on the coronavirus epidemic Coronavirus – Ethiopia: COVID-19 cases reported in Ethiopia (May 12, 2021) Marriott International opens 5-star hotel in Lagos Coronavirus – South Africa: COVID-19 Statistics in South Africa (May 12, 2021) Kogi governor lauds appointment of Obaje as NG-CARES coordinator COVID-19: NCDC records 1 death, 44 new infections AbdulRazaq appoints 41-year-old multimedia czar as Kwara Tv GM Sallah: Gov. Matawalle assures workers of job security Company Income Tax increases by N97bn in Q1, 2021- NBS Coronavirus – Kenya: COVID-19 update (May 12, 2021) De-escalation ‘an absolute must’ in Israel-Palestine conflict – UN Chief Coronavirus – Eswatini: COVID-19 daily update (May 12, 2021) NMA demands renewed effort to tackle insecurity Coronavirus – Rwanda: COVID-19 update (May 12, 2021) Eid-el-Fitr: PDP urges unity, patriotism to tackle national challenges NUPENG directs members to shut down services in Kaduna State Edo Assembly wants livestock farms registered JUSUN urges FG to deduct Judiciary funds from May FAAC Eid-el-Fitr: APC urges Nigerians to pray for country’s leaders, peace, unity WHO panel urges bold overhaul of pandemic prevention measures $540bn remittance flow reaches low-and-middle-income countries in 2020- WB Arsenal dent Chelsea’s Champions League push Kalu salutes Ekweremadu at 59 NECO: 115 inmates credit English, Maths in Enugu Infinix Releases Award Winning NOTE 10 Pro Series Powerful Performance. Iconic design Eid-el-fitr: Yahaya Bello calls for national integration Eid el-Fitr; Atiku wants Nigerians reflect on peace, unity Osinbajo graces Museveni’s inauguration in Kampala Managing mental health conditions among army officers Infant, two others die in gas explosion in Ogun Uzodimma dissolves cabinet, sacks 20 commissioners We don’t demand money from job seekers, NDLEA warns applicants VC assures of infrastructure development in UNICAL Basketball Africa League announces broadcast partners and fixture schedule ahead of inaugural season Eid-el-Fitri: Observe fire safety measures, Fire Service CG urges Nigerians Ourtv introduces sports channels for Extreme fighting, basketball Nizzolo wins the Giro d’Italia Maglia Ciclamino after biting his nails second in stage 5