Nigeria will no longer provide foreign currency for importers of sugar and wheat, the central bank said on Twitter on Friday, as the country tries to conserve national dollar reserves.
Africa’s most populous country, and its biggest economy, relies on imports to feed its 200 million people. The central bank restricted access in 2015 to foreign exchange for 41 items it says can be produced locally, and has added to the list since then.
“Sugar and wheat to go into our FX restriction list. We must work together to produce these items in Nigeria rather than import them,” the central bank said in a tweet.
Currency restrictions aimed at easing pressure on the local currency amid a shortage of dollars have contributed to galloping inflation and further weakened the naira in recent years, analysts say.
The Nigerian currency hit a record intra-day low of 437.62 to the dollar on Friday after the central bank sold hard currency at a weaker level in the forward market to foreign investors.
Annual inflation hit a more than four-year high in March, driven largely by food price inflation, which rose 1.16 percentage points from a month before, to 22.95%. read more
The World Trade Organization is concerned about Nigeria’s foreign exchange management and how it has been used to support manufacturing, exports and imports, the global body’s director-general said on Monday.
Ngozi Okonjo-Iweala – a former Nigerian finance minister who took the top job at the WTO this month – said some WTO members had brought complaints and that Nigeria needed to explain its foreign exchange regime to them.
Okonjo-Iweala said Nigeria had invoked WTO’s agreement on balance of payment to conserve foreign exchange.
Nigeria’s balance of payment gap hit $14 billion in 2020 as a result of a wider budget deficit triggered by a COVID-induced oil price crash that slashed revenues, weakened the naira and caused dollar shortages.
“It invoked this article but some other members have brought a complaint against us that we shouldn’t have used this article in that way,” Okonjo-Iweala told reporters after meeting Nigerian President Muhammadu Buhari.
“So, yes, the WTO is concerned about foreign exchange, the way we manage it and how we use it to support manufacturing, export and import in our economy.”
In August 2019, the central bank told lenders to stop offering credit to importers of milk after saying it would ban access to foreign exchange for dairy purchases to spur local production. It later lifted forex restrictions for milk imports for six firms following an outcry from businesses.