Nigeria May Lift Foreign-Currency Restrictions on 41 Imports

(Bloomberg) -- Nigeria may lift a ban that’s prohibiting the importers of certain goods from accessing foreign currency on the country’s interbank market, Vice President Yemi Osinbajo said.

The West African nation’s government will consider “policy-driven restrictions” to promote local manufacturing of 41 items such as rice and toothpicks, Osinbajo said in an emailed copy of a speech on Tuesday.

Ending the ban could be the latest easing of foreign-currency trading restrictions by the Central Bank of Nigeria after it removed a naira peg in June and introduced a window for portfolio investors to trade at a market-determined exchange rate last month. While many importers of listed items have sourced foreign currency from the black market at a premium as high as 30 percent, the central bank defended the policy, saying it encourages domestic production and conserves foreign reserves.

“This is a good development for particularly small manufacturing companies; a number of them had been complaining that the supply of some of the items locally is small, some do not have local supply,” Pabina Yinkere, head of institutional business at Lagos-based Vetiva Capital Management, said Tuesday by phone. Still, Nigeria “does need to spur domestic production,” Yinkere said.

Market Rates

Last month, the central bank introduced a foreign-exchange window for portfolio investors to trade currency at market-determined rates.The central bank removed a peg of 197-199 naira per dollar after more than a year in June, even as it continued with regular interventions to keep the currency from weakening below 315 against the greenback.

Removing currency-trading restrictions is welcome and if the government wants to regulate certain imports, that “should be controlled by the fiscal authorities with the use of tariffs, rather than monetary policy or FX” measures, Ayodeji Ebo, head of research at Afrinvest West Africa Ltd., said by phone from Lagos.

“In stabilizing the macroeconomic environment, we have focused on aligning fiscal with monetary policy and nudging the central bank toward the objective of more market-determined exchange rates,” Osinbajo said.

To contact the reporters on this story: David Malingha Doya in Abuja at dmalingha@bloomberg.net, Tope Alake in Lagos at talake@bloomberg.net, Solape Renner in Lagos at srenner4@bloomberg.net.

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro