Banning imports remains our best option

The CBN decided to refuse 41 imported items access to official forex. But given that the same CBN operates four forex windows, the imported items denied official forex access continue to still access forex from one of the forex windows. The only difference is the inconvenience of having to pay more for forex. But no […]

The CBN decided to refuse 41 imported items access to official forex. But given that the same CBN operates four forex windows, the imported items denied official forex access continue to still access forex from one of the forex windows.

The only difference is the inconvenience of having to pay more for forex. But no problems after all the high cost of forex can be easily passed over to the local consumers. And obviously that’s what has been happening.

In other words, rather than banning the 41 items from accessing forex triggering import substitution industrialization so that the 41 items will henceforth be locally made, in the absence of local capacity the same items continue to enter the country’s consumer market only that now they are  higher in prices to the consumer.

And what else will have been the consequence than high inflation growth rate? But in order to artificially strengthen the naira the same CBN has to intervene in the forex market by subsidizing these same imported goods for both their importers and consumers.

So the difference in forex that would have discouraged the imports of the 41 items has been drastically narrowed to the benefit of the importers and the consumers of the 41 items.

So the CBN on one hand bans 41 items from accessing forex but allowing the same 41 items access into the country by the customs these goods continue to enter the country’s consumer market becomes the irony. This is the consequence of lack of harmony between our monetary policy makers and fiscal policy makers.

The US and China tariff war is different. It is different because both being highly industrial economies can only discourage imports through high tariffs than imports through import ban. This is simply to make imported goods more expensive than the locally made goods.

Because made in China is more competitive than made in US as a result of being cheaper, it is tariff trade war that will narrow the difference in prices. This way made in US will no longer be more expensive notwithstanding that one of the reasons made in US is more expensive is because the dollar is strong currency and has to remain a strong currency due to the very fact that it is the only way the US can benefit from the dollar being a de facto reserve currency.

But because the yuan is yet to be a de facto reserve currency, the Chinese government has continuously kept the yuan artificially weak making made in China cheaper. The benefit has been to Chines exporters to the US who are continuously using the advantage of cheap products to price out made in the US not only from Chinese consumer market but from the US consumer market too.

Nigeria cannot adopt the tariff policy strategy because if we apply the tariff policy in the absence of having the imported goods first being locally made here, then, the same goods will still continue to come into the country but only at higher prices.

But will this discourage their imports? Of course not, because there are no alternatives to them in the country’s consumer market.

To discourage their imports the same goods have to be made locally which has to only happen as a result of banning their entry. That is why our industrialization policy ought to aim at import substitution.

With the total ban of these goods from entering the Nigerian consumer market, it is then that their absence should force either their importers to relocate their factories to Nigeria or local investors take full advantage of their absence from the market to begin to invest in the production of these now absent products in the local consumer market.

 

Odilim Enwegbara, Abuja.