In a stunning U-turn, the Central Bank of Nigeria (CBN) has blamed the growing discrepancy between official and black market exchange rates on the 43 blacklisted commodities imposed in 2015.
This shift in perspective was communicated by the CBN in a press statement headlined “WHAT YOU NEED TO KNOW ABOUT THE CBN’S LIFTING OF FOREX RESTRICTIONS ON 43 ITEMS,” which was published on its website.
This FAQ-style explanation tries to explain the recent decision to relax the prohibition on these 43 goods and highlight its implications for the currency market.
According to the central bank, the decision to relax the embargo was motivated by the awareness that the limitations had forced importers to resort to the underground market, increasing demand for foreign exchange.
This, in turn, exerted pressure on the parallel-market exchange rate, resulting in higher prices.
These comments from the CBN imply that the 43 banned items inadvertently stimulated demand within the parallel market, thus contributing significantly to the ongoing depreciation of the naira.
Furthermore, the CBN suggested that by rescinding the ban, it anticipates a reduction in the gap between the official and black market exchange rates.
- “In recent months, the widening premium between the official rate and the parallel market indicates that the rate has not been setting a clearing price.”
- “Importers of these products rely on the parallel market to source FX for importing these goods. This puts additional demand pressures on the parallel market, thereby widening the gap with the official rate and permanently segmenting the market.”
- “Removing these restrictions eliminates the need for importers of these products to go to the parallel market, reducing the pressure on the naira.”
- “The hitherto FX restrictions had implications on inflation, causing the prices of affected goods to increase.”