INTERVIEW: Reversal Of Forex Ban On 43 Items Is A Policy Summersault, Unhealthy For Nigeria’s Economy- Yusuf, MAN South-West VP

Dr. Kamoru Yusuf is the Vice President of the Manufacturers Association of Nigeria (MAN), South-West Zone as well as the Chairman Basic Metal, Iron and Steel and Fabricated Metal Products. In this interview, he spoke on the impending issues, implications, and dangers envisaged by the reversal of the 43 items on the prohibition list by the Central Bank of Nigeria, as well as the possible solutions.

As a background, what in your view, is the genesis of the ban of 43 items by the suspended Governor of the Central Bank of Nigeria, Mr Godwin Emefiele?

There is no doubt that the Nigerian economy is facing challenges just like every other nation of the world, especially developing countries or what we regard as third world nations. All efforts put in place by successive governments are always met with numerous challenges especially when a new administration is inaugurated.

There are always errors in the decision-making techniques of new administrations due to lack of far-reaching consultation and non-inclusion of appropriate stakeholders that can further provide genuine working ideas and templates for the good of the nation.

However, for the sake of emphasis, I make bold to take Nigerians back memory lane on the 43 items that were placed under FX restriction by the previous administration under the President Goodluck Jonathan-led government and this policy continued during the President Muhammed Buhari administration by setting up National Advisory Committee on Economic policies.

It would be recalled that the Nigerian government called for the services of one of the big four audit and advisory firm in Nigeria (KPMG) to work with the Ministry of Industry, Trade and Investment which final result was advocacy on the Industrial Revolution Plan on Backward Integration as well as Ministry of Finance working with a firm called McKinsey in order to bridge the gap in our economy which solely relies on crude oil. The policy was to encourage non-oil sector and manufacturers’ input at increasing the GDP and create jobs, which was an incentive to encourage lots of investors; who later inject funds and committed energy into backward integration.

In 2015 when the global recession started in which Nigeria was not spared, the economic team of the Federal Government led by the former Coordinating Minister of Economy, Dr. Okonjo-Iweala and the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga , CON as well as other Ministers; the Comptroller-General of the Nigeria Customs Service, Presidential Committee on Trade Malpractices (PCTM), Governor of Central Bank Nigeria (CBN), and all CBN Deputy Governors with the Directors, Secretary to the Government of the Federation, National Bureau of Statistics and some captains of industries, came together and analyzed some items that are creating demand pressure on forex from CBN official window via importation of items that the nation has the capacity to produce. When the issue was considered, about 100 items were listed but was later streamlined to 43 items by the committee at the initiative of the CBN.

Some of these items restricted from receiving FX have their peculiarities, can you speak about some of the banned products and the implication of the action of the government?

Of course, yes, some of these items are very critical to the Nigerian economy. For instance, let me highlight some of the items:

Cement Production: It was discovered that we have the required mineral in sufficient quantity for the production of cement locally, and with existing investors who have 10 years backward integration plan that assisted in increasing the cement capacity yearly with production that is consistent with the observed increase and Nigeria became a net exporter of Cement. This is the major reason for listing the item in order to encourage backward integration and discourage importation.

Rice Production: Statistics have shown that billions of dollars in FX are being demanded from the apex bank for importation of rice from Thailand and other rice exporting countries annually. The FX is what the government of these countries were relying on for their yearly budget. This made the Federal Government to put in place the rice policy. This was to encourage local producers of rice to build rice mills across the country and simultaneously encourage off- taking rice paddy from the local farmers.

Unfortunately, COVID-19 distracted the policy, all the paddy available in storage that was meant to be used in order to control the rice price and quantity was what the rice mills across the country used to survive during the pandemic period, when people were restricted from going out and farmers were also restricted from going about their farming activities. These, in turn, put pressure on rice production, which created shortages of paddy.

Steel Sector: Nigeria has sufficient capacity in steel production. This has been confirmed over the years. Referring to 43 items as restricted by the CBN, Government has realized that the sufficient local capacity and high local demand in steel are embedded with the items 11 to 23 as obtained in the restricted list. It can then be safely concluded and from available statistics that since 2017, importation of items 20; 21 and 23, as listed in the circular has drastically reduced to about three per cent which makes the demand on FX from the apex bank to be at almost zero.

I want the federal government to know that the major problem at the moment is the demand that is higher than the supply in the FX market. Therefore, reversal of the 43 items is a policy summersault which is not only dangerous but also very unhealthy for the nation’s economy.

What are some of the suggestions that you will give as the likely way out from the current predicaments?

Nigeria is currently at a very dangerous situation. Her economy is exposed to numerous challenges and risks and there is no gain saying the fact that the effect of the reversal and removal of ban on the 43 items will create a serious setback on the productive sector; thereby impacting negatively on virtually all other critical areas; such as unemployment, youth restiveness, wrong declaration at the ports, importation and flooding of Nigeria market with substandard products and above all, proliferation of the country with arms and ammunition.

As I speak with you, most financial institutions are really confused, and this policy, if not quickly reversed, may lead to the distress of some banks while massive loss of jobs is looming. This fear is open for the CBN to verify.

Part of the possible solution is the immediate review of the policy surrounding the operation at the free trade zone in Nigeria, which has been subjected to serious abuses with little or no value addition to the economy nor generating FX to the country. Government needs to investigate and harvest the comprehensive list of the companies who registered under the free trade zone; including the claimed value of their investments.

It is observed that 60% of the goods coming into the country from Asia are finished products which can be valued around $800 million of which some of them are substandard. As a result of this, the Nigeria Customs Service is losing about N300 billion which is supposed to be generated through Duty Revenues every month but which some of the products mentioned earlier, were imported under the disguise of the free trade zone investments. Whereas, the law governing the Free Trade Zone prevent the Federal Inland Revenue Service (FIRS) from generating taxes on all the goods brought in through the Free Trade Zones.

It is worthy to note that these goods will be sold in naira and the importers are always wanting to repatriate the money back to their country in dollars and as they have no other source of getting the money, they then resolved to go to the black market since the goods were brought into the country in a dishonest manner. It is therefore evident that they can afford to buy the dollar at any rate because they already have export rebates from their country for the finished goods exported to Nigeria; hence their patronage of black market.

We, therefore wish to appeal to President Asiwaju Bola Ahmed Tinubu, through the Minister of Industry, Trade and Investment to institute an inquiry into the operations of the FTZ with a view to auditing the number of companies registered under free trade zone, their business activities/model and their initial claim when registered and compare this with the data with the Nigerian Customs for the value of goods coming into the country through the FTZ which is expected to serve as part of their KPI with the Ministry within a time frame as decided by Mr. President.

It is worrisome that most of the importers in FTZ claiming to be manufacturers/investors are part of those causing the problem in the FX black market as they are bringing products of their parent companies into Nigeria under the guise of free trade zone without paying appropriate taxes and duties, while all the goods ended up being sold within custom territories.

Also, I want to recommend that Mr. President should kindly direct the Nigeria Customs Service, which has a robust platform to submit the list of importers who have been bringing goods into the country in the name of free trade zone to furnish to government relevant information with the respective values since 2018-till date, in order to justify the amount that these businesses have repatriated out of Nigeria in the name of Free Trade Zone without payment of duty or any form of taxes to the Nigerian government.

Even those expatriates that produce in the Free Trade Zone using our local mineral resources are not bringing dollars nor are they paying appropriate taxes to the Nigerian government instead, what they are doing is repatriating dollars out of the country.

Mr. President should also consider as part of the KPI for the Ministry of Solid Minerals, to list all the companies that are mining minerals resources from Nigeria such as; Gold, Lithium and Tantalum among others and exporting such out of the country. They cannot make Nigeria the country of shipment and make their countries as the beneficiary of the FX because what we need is the proceeds of what they mined and they are to return back to the country, the requisite repatriation in dollars.

As at today, the unverified data has indicated that end users of Lithium abroad have brought in their machines and heavy equipment for mining Lithium in Nigeria. This implies that they will mine $1 billion worth of minerals monthly and only $50,000 royalty will be paid to the government. Can anyone justify why Nigerians that are supposed to carry out these mining activities, sell abroad and bring the proceeds back into Nigeria, do not have access to Mining Rights? For example, in India, which has discovered a large quantity of Lithium, the country made the necessary policy to generate forex through Lithium.

Many gold/lithium miners and commodity exporters in Nigeria are keeping about 70% of the forex from their sale proceeds in foreign bank accounts because there is no law in Nigeria that control the value of the FX earning on their exports Vis-a-viz the money that comes back to Nigeria through the Central Bank of Nigeria. Federal government of Nigeria as a matter of priority, needs to put in place the same policy used in the sale of crude oil to that of sales of gold, lithium and other mineral per ton through the database of Nigeria Export Promotion Council (NEPC).

Therefore, the Federal Government might need to initiate a policy that will ensure total ban of exportation of raw metals in the mining sector except wherein, values additions have been created before export is allowed.

Are you calling for urgent intervention in the Steel Sector and what intervention would you suggest?

Steel sector plays similar role as that of cement, sugar, fertilizer and petrochemical industries, all of which can provide the needed tripod-support for the development of other light industries in the country. The incremental and progressive results being witnessed by these industries were the outcome of the success stories of the indigenous players in the cement industry over the past 9 years and with reduced stakes from the offshore investors. The best model, is to indigenize and empower Nigerians and ensure that the strategy as encapsulated in the Nigeria Industrialization Revolution Plan (NIRP), creates avenues for whosoever wishes to partner with the local giants who have verifiable track record in the industry to do so.

Another point of urgent attention is for the President to make as part of the Minister’s KPI (performance bond) to make sure that Ajaokuta Steel Complex, which is a great national asset, is not in the hands of foreigners. This is because if this happens, all its benefit will be repatriated out of the country. It is better with Nigerians as there are capable citizens who can make Ajaokuta Steel Complex to run in full capacity in the same way it is done in the cement, which as at now, is been replicated in the petrochemical industry.

All accruing benefits will remain in our country without having to be repatriated in forex out of the country. All that is required is for the government to identify some patriotic Nigerians that will make this happen within a very short time and with maximum support by the government, such investment will remain in Nigeria and with Nigerians along with its productivity/prosperity and reward for the nation.

It is also necessary to remind ourselves of the first bitter lesson that the government experienced with over 15 years set back during the concession of Ajaokuta Steel to foreigners without adding any meaningful value to the country and in turn ended up in an unnecessary and distracting litigations and at the end of the day, half a billion dollars was claimed from the Nigerian Government. This is so sad because such money could have been injected into the nation’s economy to provide infrastructures, create more jobs and used to further stabilize the economy.

Another bitter lesson is Delta Steel which was sold to foreigners at a token value of N31billion, despite that, they could not make the place to work and could not make us proud with such giant steel plant. So, what magic can they perform in Ajaokuta that Nigerians cannot do? Let me remind you that skill acquisition is the same all over the world, the only difference is skin colour.

Another way that could be easily employed is for the government to urgently channel the Comprehensive Import Supervisory Scheme, (CISS) charges paid to the Nigeria Customs Service, (NCS) over the years, to provide it as bailout and support to the steel sector. Such money should be utilized to drive the industrial revolution that will galvanize national industrial development.

There will be no reason for the government to be worried about bringing Ajaokuta back to life. We have the resources as a nation and we also have expertise who can make it work. We don’t need foreign investors to do it. Ajaokuta can be back again to produce automobile cars and other associated raw materials for downstream industries.

You will agree with me that, with the gigantic size of Ajaokuta, the complex should not focus on the middle-steel production, which are massively available around Nigeria and West Africa. Rather, it should focus on the configuration of a high-class production of steel products such as Slab Caster, Hot Rolled Coils and Plates, and Foundry for the production of the required machinery and tools in the country; given that the 50 percent requirement for these high-class configurations are already available in Ajaokuta. Although, we still welcome more opinions and contributions towards developing our sector for better performance to the benefit of our dear country and humanity at large.

There are lots of patriotic Nigerians who are dedicated and ready to serve their country truthfully in their respective sector and expertise such as our great mentor, Alhaji Aliko Dangote GCON, Alhaji Abdulsamad Rabiu CON, Dr Kamoru Yusuf, Chief Innocent Chukwuma CON, Chief Eric Umeofia, to mention just a few. These individuals are owners of fully established business brands in Nigerians that can be trusted with deliverables on state of the art which will have positive impacts on the nation’s economy.

If the government is to reintroduce the forex ban on 43 items, how can it be better implemented?

The Federal Government needs an all-inclusive review of the 43 items restricted from accessing FX in the official trade window as this will put further pressure on the official market with an indirect impact on the parallel market as well.

The current Price Verification Systems recently launched by the CBN, will checkmate round tripping as well as curb price inflation. Also, the platform is having technical issues of uploading line items using XML format. Wherein the XLS format is utilized, there are missing items on the uploaded items. The approval/rejections time needs review as some takes more than two to three weeks before approval or rejection notice is received. These observed challenges need to be looked into for adequate enhancement and engagements of the platforms in tandem with the set objectives it’s set out to achieve.

The Federal Government needs to continue with the bold steps it has already taken in the liberalization of the FX market and the eventual subsidy removals on petroleum products. If these suggestions are followed, with further attendant consultations, it will yield a greater impact and turn around the country’s economy for the good of all.

The Federal Government is hoping to take advantage of the African Continental Free Trade Agreement, what are some of the steps the government can take for our products to effectively compete in the global market?

The only way Nigeria can participate successfully in the African Continental Free Trade Area (AfCFTA) and successfully compete among countries in the continent is to develop our giant industries. We can look at China, which always underwrite their capital projects under Sinosure (China Credit Insurance Corporation).

The Federal Government should also borrow a leaf from other developed nations as well as some African countries by creating platforms for Credit Insurance Underwriters in order to reduce the huge risks involved in capital projects. Government also needs to create more funding windows and other support infrastructure to elicit rapid industrial development.

There cannot be a significant growth in the sector without the intervention by the Federal Government where and when necessary. Government should be the driving force behind the steel industry, which has the capacity and potential to resolve part of our social unrest by getting thousands of unemployed youths off the streets through direct and indirect job opportunities.