CBN to impose forex restriction on milk import
The Central Bank of Nigeria (CBN) has said it will place foreign exchange (forex) restrictions on milk importers into the country.
Addressing reporters at the end of the bi-monthly Monetary Policy Committee (MPC) meeting in Abuja yesterday, CBN Governor, Godwin Emefiele lamented that between $1.2 billion and $1.5 billion are spent yearly to import milk into the country.
“We can no longer continue to spend close to $1.2 billion to $1.5 billion, importing milk into the country, a product we can produce. To some extent, they (milk importers) should help us also to reduce the rate of herders, farmers conflict,” he said.
The apex ban also said it will start the rejuvenation of moribund textile mills in the country.
Its Director incharge of Development Finance Department in Central Bank of Nigeria (CBN), Mrs Bademosi Tinuola, made the promise at the official commissioning of a garment company, “Xirea Apparels” by Buphalo company in Port Harcourt, the Rivers state capital, yesterday.
“The present administration and the Governor of Central Bank are in support of local manufacturers. We believe in growing the economy of the country; we don’t want our country to become a dumping ground for all kinds of imported goods. Most of our industries are collapsing now because of indiscipline”
“We are presently growing cotton in the north. By October we will start to harvest our cotton to encourage textile industries. CBN imported the seeds and planted them so that we can revamp dead textile industries.
“With this very soon, the textile factory workers will go back to work, fabric staff, engineering workers will be up and working and employment rate will be higher, crime and criminality reduced and Nigeria ecinomy will begin to work again,” she assured.
At the end of the meeting, MPC members voted to: Retain the MPR at 13.50 per cent; Retain the asymmetric corridor of +200/-500 basis points around the MPR; Retain the CRR at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.
Emefiele said the CBN had held several meeting with milk importers, the first being about three years ago, after the introduction of forex restrictions on over 40 items. “About three and half years ago, when the policy on restriction of forex started, we considered including milk on the list of items under restriction from forex, but we conjectured that based on sentiment some people are bound to express, that we should be very careful. We called on the management of the oldest milk importer into Nigeria, WAMCO into Central Bank office in Lagos. We held at least three meetings with them and we told them this would have happened but we decided not to allow it to happen, that we are trying to use the opportunity to appeal to them to do backward integration. ‘Integrate backward and begin the process of development and produce your milk in Nigeria,” he said.
He said the importers “could also support the pastoralists, get them concentrated in one place instead of moving around. Provide them facilities like water, hospitals, schools. If you are in a community and you want to enjoy the proceeds of that community there is nothing wrong in providing certain things for the commiunites to blossom. The proceeds of what you get in return will be your milk to recoup your investments. Those are the kind of things we expect companies that are importing milk into Nigeria to do. Unfortunately, after three years, nothing has happened.
Emefiele wondered that “perhaps, if you had started this journey three years ago with us, perhaps the headers, farmers conflict that we see today would not have been as intense as it is this time. We would need your help at this time because we can no longer wait for you to continue to be importing this product into Nigeria because we are convinced it can be produced in Nigeria. That is our story.”
Emefiele suggested to the milk importers that they “can acquire land and begin to graze their own cows and fatten them and get the milk, and then they can also be complemented by pastoralists who own their own small holder cows under a small farming holder arrangement, they can also get milk from them.”
However, it appeard the milk importers ignored the CBN’s advice which has now led to the CBN imposing forex restrictions on milk importation. According to Emefiele, “Nigeria belongs to us, when we have policy, we want people to respect the policy of this country. The amount we spend importing milk is too high. We are saying, by doing backward integration, help us to reduce or limit herders and farmers conflict in Nigeria and we are determined to make milk production in Nigeria a viable econimc proposition.”
He said: “By the time we restrict you, if you need loan to acquire land we will give you; if you need loan to grow your grass, we will give you; to produce water, we will give you loan. But that you will continue to import milk in to the country, I think we are getting to the end of road. I will repeat, we are really getting to end of the road. The era of releasing forex for importation is coming to an end, and it will come soon than expected.”
Speaking on the desire to get banks to lend more to the real sector. He said: “There is need for CBN to look into how the banks can be refocused to do more of lending to real sector to grow the economy. The only set of institutions or persons, by law that can conduct financial intermediation, real intermediation from the surplus side to deficit sectors are banks. If they cannot provide the possibility then we have a problem.
“Weeks ago we released a guideline that prescribed the minimum lending for banks, because we will no longer allow a situation where, when banks receive deposit from customers, all they do is just bring the money to CBN or government invest in instruments after 90 days, 180 days, one year they come to CBN, we cut them a cheque and they put it as income in to their balance sheet and they declare billions of naira.
“We gave them certain carrots, or incentives. That when they lend to the consumer credit, mortgage credit, the SMEs, that we will grant them certain dispensation they would be happier about. But if they do not, we would apply certain sanctions that involve taking those 50 per cent of the unlent portion of their loans in to CRR, The deadline is September 30th.”
“After that, we are going to begin a month by month monitoring and then prescription of deposit loan ration for the banks. It’s because we all must work tougher as Nigerians to do everything that is possible to grow this economy. And the CBN in conjunction with banks who are the monetary side of policy in this county must be seen to play this role. If we don’t play this role, then we have failed in our responsibility.”
Going forward, the CBN Governor said the apex bank can introduce special auction to provide special signal, direct the focus of actors in the money market or financial market to where we want them to go. There are no plans to ban banks from TB and OMO. We need to get the banks to play their roles of financial intermediation, we will continue to prescribed this ratio, to let banks know our direction on this policy.”
At the end of the MPC meeting Emefiele said the committee “not impressed by the flow of credit from the Deposit Money Banks (DMBs) to the private sector, called on the CBN management to urgently put in place modalities to promote consumer, and mortgage lending in the economy, noting that doing this will greatly and positively impact on the flow of credit and ultimately result in output growth.
All members of the MPC voted to: Retain the MPR at 13.50 per cent; Retain the asymmetric corridor of +200/-500 basis points around the MPR; Retain the CRR at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.
Before arriving at this decision, the MPC he said, enjoined the Federal government to urgently build fiscal buffers through a more realistic benchmark oil price for the Federal Budget.
On the international front, Emefiele noted that the financial markets witnessed the rebalancing of portfolios from equities to fixed income securities, and some stock markets posting losses. In the main, the Emerging Market Developing Economies (EMDE) are expected to continue to benefit from the accommodative monetary policy stance of the advanced economies through increased capital inflows.