95% rise in Nigeria’s monthly import bill unhealthy for economy- experts
CBN Governor, Godwin Emefiele
Financial experts have expressed worries over the 95 per cent growth rate of Nigeria’s monthly import bill within a 12- year period, saying the development was unhealthy to the nation’s fledging economy.
Recent figures released by the Central Bank of Nigeria CBN, show that the country’s average monthly import bill increased by 95 per cent to N588 billion over a period of12 years.
Some financial experts, who spoke in the condition of anonymity, urged the Federal Government to urgently address the devastating consequences of continued importation of petroleum products, especially given the current fragile state of the nation’s economy, which has been in recession for nearly two years.
The experts say there was urgent need to adopt deliberate measures to curtail the capital flight associated with the continued importation of refined petroleum products, which they argued possibly constitutes the single largest item of import after restrictions on the importation of vehicles, rice and fish.
According to the experts, the proposed establishment of a refinery by the Dangote Group to refine over 650 million barrels of crude oil per day by 2019, which might further increase by 2020, was good, but might create more problems in the long run.
They argued that in addition to licensing more modular refineries, efforts should also be made to encourage other investors with both the financial muscle and technical know-how to establish more refineries to further boost the country’s refining capacity in line with efforts to liberalise the downstream sector of the petroleum industry.
“Nigeria will continue to have pressure on her external reserves so long as she continues to import refined petroleum products, especially given that her foreign exchange earnings have declined significantly due to the fall in the price of crude oil at the international markets”, they further argued.
Governor of CBN, Mr. Godwin Emefiele, had said while delivering a keynote lecture at the 2017 annual general conference of the Nigeria Bar Association NBA, which held in Lagos, however advocated policies to reduce the nation’s monthly import bill to check its negative effects on her foreign exchange earnings.
Emefiele spoke on the topic: “The Dilemma of Monetary Policy during a Recession: Potential Options for Nigeria”.
He attributed the sharp decline in the nation’s foreign exchange earnings to the sharp increase in the nation’s monthly import bill with a devastating effect on the economy.
For instance, CBN’s foreign exchange earnings fell from as high as US$3.2 billion monthly in 2013 to as low as $580 million per month at some point. Despite these, the demand for foreign exchange has risen significantly”, he said.
Available records also show that in 2005 when Nigeria had oil prices at about $50 per barrel for an extended period of time, her monthly average import bill was $12.4 billion, which is in sharp contrast to the average import bill in the first five months of 2017, which was about $588.1 billion per month.
He said: “There is need for three policy measures for engineering economic growth and curbing inflation. These include: rebuilding the nation’s infrastructure; Jumpstarting agriculture and agribusiness; pursuing non-oil exports; formulation and implementation of import-reducing policies”.
“Given the persisting drop in oil prices, we need to take bold and decisive actions at fundamentally changing the structure of our economy. Throughout this speech, I have talked about the damaging effects of Nigeria’s unsustainable propensity to import. In line with Winston Churchill’s admonition to ‘never let a good crisis go to waste,’ the CBN believes that it is high time we started looking inwards and stopped supporting the importation of items that we can produce locally using Nigeria’s hard-earned foreign exchange”.
“While such policies may seem controversial, its variants have proven to be highly effective in other climes and even here in Nigeria. Here at home, variants of this policy were used to achieve significant sufficiency in cement, a product whose importation could have been costing us over $3.2 billion in forex reserves annually. In effect, therefore, this policy needs to be supported not just in response to the pressure on the naira but as an opportunity to change the economy’s structure, resuscitate local manufacturing, and expand job creation for our citizens”.
He wondered why Nigeria should continue allocating scarce forex to rice importers when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the country’s rice belts are wasted, as farmers fall deeper into poverty.
According to him, few decades ago, Nigeria was one of the world’s largest producers of palm oil but today she imports nearly 600,000 metric tonnes while Indonesia and Malaysia combine to export over 90 per cent of the global fish demand.