When President Goodluck Jonathan announced plans to raise tariff on certain imported food components in the proposed 2012 budget, most people gave it a fleeting thought. But when Saunsi Lamido Sanusi, Central Bank of Nigeria (CBN) governor made reference to that move as part of how the apex bank hopes to reduce foreign exchange demand in one of the discussions held in Lagos last week, everything fell in place.
Up till the end of trading session for this year, last week, demand continued its upward trend in the foreign exchange market. The central bank has applied every known formula to bring demand down, but to no avail. Apparently, since the beginning of the year, Sanusi had had sleepless nights trying to stay ahead in beating back round trippers and speculators.
Each time he almost stabilised the market, demand came back strongly, surpassing supply, to the extent that the CBN decided to intervene outside the official arrangement, but there is still no solution.
But this new plan Sanusi sold to President Jonathan appears practicable and may just be the way out of? the ever increasing demand for foreign exchange (forex).
But the president put it differently. According to him, “It is common wisdom that the best way we can grow our economy and create jobs for our people is for us to patronise Nigerian-made goods. This is why we are introducing enabling policies to drive this process. In this regard, we are introducing fiscal policy measures that will encourage the purchase and utilisation of locally produced commodities”.
No doubt, the move is a double barrel one. While it will help grow our indigenous industries, it will also help stem the amount of fund outflow through the foreign exchange market.
Analysts say the move will be a brilliant one; so long the government is able to enforce it to the letter.
For them, to discourage the importation of rice, one of the most staple foods in the country, will go a long way in reducing demand for forex. For now, over 80 per cent of the rice that is consumed in the country is imported. That means that demand for forex to import rice will reduce, thus bringing down its demand.?