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 has voiced concerns about Nigeria’s foreign exchange management and the way the country has used it to support manufacturing, imports and exports.
According to the letter, “We have for reference a letter from Honourable Minister of Industry, Trade and Investment ref: HMIT1/GEN/ CORR/008/ VOL. I/ dated 15th February, 2021 on the above subject.
“It has recently come to our notice that due to the recent location of a Sugar Refinery in a Free Trade Zone, Refined Sugar is being imported into the Nigerian Customs Territory under the concession granted to enterprises in the Free Trade Zones to export 100% of their output to the Nigerian Customs Territory, and this is real potential threat to the goals of the Nigerian Sugar Master Plan (NSMP).
“The Nigeria Sugar Industry is governed by the Nigerian Sugar Master Plan (NSMP). The NSMP provides a framework for motivating investment in the local production of Refined Sugar by securing the Nigerian Sugar market for investors in the Backward Integration Program (BIP). It does this by providing import sugar allocations for Raw Sugar to recognised investors based on the performance on the BIP and guided recognition of their installed refining capacity.
“Your Terminal is hereby informed by this letter that, in order to protect our national interest and ensure the returns in the Federal Government’s investment in the NSMP are realised, and in line with extant laws and regulations of the Federal Government of Nigeria, importation of Refined Sugar and all other sugar derivatives from the Free Trade Zones into the Nigerian Customs Territory are here prohibited by the Honourable Minister, Ministry of Industry, Trade and Investment,” the NPA letter stated.
It added that, “In view of the above, your terminals are by this letter directed to ensure strict compliance with this directive. Please accept as always the assurances of our esteemed regards.”
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.