…Says CBN’s Export Proceed Policy threatens sustainability of export business in Nigeria
The Lagos Chamber of Commerce and Industry (LCCI) has advocated for urgent reformation of the Nigeria Customs Service (NCS) through executive orders or legislative actions to enable it discharge its trade facilitation functions effectively.
The President of LCCI, Mrs. Toki Mabogunje who made this call during her address on the state of the economy organized by the chamber in Lagos on Tuesday, noted that despite the interventions and steps taken by the governments (Federal and Lagos State), the burdensome process of moving goods from the ports and extortions by government agencies persisted.
According to Mabogunje, “The bottlenecks with clearing of cargoes especially the activities of the Nigeria Customs Service (NCS) constitute significant deadweight to the process. We advocate for an urgent reformation of the NCS through executive orders or legislative actions to enable Customs discharge its trade facilitation functions effectively.”
She further called for proper management of the roads leading to the ports and the withdrawal of government officials from the roads to curbs the persistent traffic situation at the Lagos ports.
On the Central Bank of Nigeria (CBN) Export Proceed Policy, the LCCI President observed that feedback from her members revealed that exporters were still not getting a fair deal out of their proceeds based on the CBN’s directive that mandated exporters to submit their export proceeds for conversion at the NAFEX rate, which according to her was far less than the open market rate.
“While we appreciate CBN’s resolve in managing the country’s FOREX resources, the policy threatens the sustainability of export business in Nigeria. This policy is inconsistent with efforts aimed at boosting local production as well as non-oil export earnings”, she said.
Speaking on the Foreign Exchange Market, she explained that the Lagos Chamber welcomed the adoption of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as the official exchange rate adding that the unification was expected to improve the country’s currency management framework given that the multiple exchange rate system had been creating uncertainty issues and source of arbitrage.
The LCCI boss reiterated that the development was expected to bolster confidence of foreign investors in the economy noting that the move would also help the country to unlock external financing opportunities particularly from key multilateral institutions such as the World Bank and the IMF, who had for long advocated for a unified and flexible exchange rate system.
“However, we note the FOREX market is still faced with liquidity challenge. Many investors are lamenting about the difficulties in accessing foreign exchange for the importation of raw materials, equipment and critical inputs for production and processing. The situation is taking a huge toll on capacity utilization, recovery and sustainability of businesses in the production sector.
“The LCCI notes the indefinite extension of the Naira for Dollar scheme by the Central Bank of Nigeria. We consider this as part of CBN’s efforts at encouraging foreign exchange inflows into the economy via remittance proceeds. The apex bank also licensed 10 new International Money Transfer Operators (IMTOs) to facilitate remittance flows into the economy”, she further added.
On foreign trade, Mrs. Mabogunje pointed out that Nigeria’s trade with the global community rose by seven percent to N9.76 trillion in the 1st quarter of 2021, driven by rapid growth in imports despite a contraction in export proceeds.
She maintained that the rapid growth in imports in the first quarter could be attributed to relaxation of global and domestic restriction measures, which consequently supported resumption of economic activities insisting that the surge in imports highlighted the fact that economic activities were gradually recovering from covid-19 disruptions.
She said, “The exchange rate depreciation might have also contributed to higher import costs. The decline in exports earnings was buoyed by significant drop in crude oil receipts on the back of imposition of lockdown measures in India – Nigeria’s biggest buyer of crude oil. As such, trade deficit widened to N3.93 trillion in the first quarter of 2021, the worst quarterly performance in the last five years.
“The numbers expose the poor state of the non-oil sector and the continued dependence on crude oil for foreign exchange income despite the implementation of several policies and programs aimed at boosting domestic production and driving economic diversification. Persisting trade deficit across non-oil product categories from agriculture, manufacturing, raw materials to solid minerals reflect the numerous productivity challenges confronting the real sector. Over-reliance on crude oil for fiscal revenue and FOREX earnings will continue to expose the economy to fluctuations in the oil market even as the country lacks adequate buffers to absorb external shocks. This poses serious external stability risks.”
She therefore advised government at all levels in conjunction with monetary authorities to match talk with action as far as economic diversification was concerned saying that efforts must be channelled towards the enhancement of value addition in the non-oil products.
“Import substitution policies should be further encouraged to minimize importation and boost domestic productivity. Even within the oil sector, we need to diversify away from crude oil exports to boosting refining capacity, production of petrochemical products and accelerate reforms to halt importation of petroleum products. Effective harmonization of fiscal, monetary, trade and regulatory policies is needed to support businesses in the real sector. There is need for greater investment commitment to enhance the quality of Nigeria’s trade infrastructure”, she further said.
Photo: President, LCCI, Mrs. Toki Mabogunje
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