Central Bank of Nigeria Halts Forex Access on Corn Imports
The West-African country of Nigeria has announced a new move that some believe will compound the country’s food inflation. According to a July 13, 2020 report, the country has banned foreign exchange for the purpose of corn importation. This move is apparently in a bid to boost the local farming sector.
Forex and Corn Importation in Nigeria
COVID-19 continues to impact currencies around the world.
According to the recent report, the Nigerian Central Bank has made an effort to stop the issuance of foreign currency for corn importation. As such, all authorized dealers are to halt the processing of transactions for corn importation. Moving forward, they are also to deny any such requests.
This is all for the purpose of boosting local corn production, especially considering the fact that Nigeria is heavily dependent on importation. The country is known to import oil, raw materials, and food items. This has, however, proven to be an issue.
Oil exports represent 90% of the country’s income, and as the price of oil globally has taken a hit, so has the country. Inflows of foreign currency have declined, and the national currency, the naira, has seen its value also decline. Until the oil price recovers, the country is trying to slow down the rate of imports and increase local production.
The official announcement of the ban said that the move would boost local industries, create jobs, and help in economic recovery. This is not the only action that has been taken in this regard. Last year, the government sealed the nation’s land borders with its neighboring countries.
This was to prevent the smuggling of rice and give more support to the local industries. Unfortunately, this resulted in some negative side effects. The price of rice increased significantly in the country as there was a supply shortage.
Inflation and Agriculture in Nigeria
The agricultural sector in Nigeria has proven to be tricky to navigate. While the country is the continent’s largest producer of corn, they import 400,000 tons each year to meet demand. As a result, this sharp kickback against corn import will likely have consequences.
According to Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry, brewers and farmers who make use of corn will face a shortage. Those who import corn will likely turn to the black market, and the increased rates will then trickle down to the price of corn. This is besides the fact that food inflation is at a two-year high in Nigeria.
The country has made an effort in the past to support local farmers. In June 2020, it was announced that the government would support farmers with $1.1 billion in loans to plant crops during the wet season. This was also in a move to diversify the Nigerian economy from oil, which represents a disproportionate part of the nation’s income.
The Nigerian naira has had a turbulent few months despite the country being Africa’s largest economy. Following the oil price crash in March 2020, the country made the decision to devalue its currency from 307 nairas to 360 nairas to the dollar. This was also done in respect of the International Monetary Fund, from whom the county was seeking a $3.4 billion emergency loan.
This week, the Central Bank once again devalued the naira to 381 to the US dollar. However, an official rate has not been declared, which has caused confusion among currency brokers.
According to Renaissance Capital, however, the actual rate should be between 427 naira and 491 naira to the dollar. It is therefore unknown how the situation will impact forex trading. Historically, eToro has remained the Forex platform of choice for traders in Nigeria.
Do you think this move by Nigeria will help or hurt the local economy? Can the naira recover? Let us know.