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HomeTop NewsWorld Bank wants CBN to replace forex restrictions on goods with tariff

World Bank wants CBN to replace forex restrictions on goods with tariff

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…seeks phase-out of CRR as monetary tool

By Oludare Mayowa

The World Bank has asked the Central Bank of Nigeria (CBN) to review all foreign exchange and import restrictions on nonfood goods and replace them with tariffs.

As part of a six-monthly report on Nigeria’s economic development, the World Bank raised exchange rate management as the first of six policy areas where it was advising the monetary and fiscal authorities to take action within three to six months.

It said Nigeria should “Facilitate imports of staple foods and medicines by removing them from the list of FX restrictions, and replace import bans with tariffs that align with the ECOWAS Common External Tariff.”

Nigeria should “Facilitate imports of staple foods and medicines by removing them from the list of FX restrictions, and replace import bans with tariffs that align with the ECOWAS Common External Tariff.”

On the foreign exchange management, the World Bank asked the CBN to provide a clearer and more predictable foreign exchange management system “in order to reduce real exchange rate misalignments.”

The global lender said the CBN should make the Autonomous Foreign Exchange (NAFEX), which is now the anchor for official transactions more flexible in order to reduce real exchange rate misalignments and boost Nigeria’s competitiveness.

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The World Bank also said CBN should “narrow the spread between the NAFEX rate and the parallel market rate, with a positive effect on inflation dynamics.”

The naira weakened against the dollar on the parallel market on Tuesday, closing at N505 to the dollar and also declined at the NAFEX window by 0.23 percent as the dollar was quoted at N411.75 against the last close of N410.80.

It said the CBN should clearly define monetary policy priorities and objectives, with price stability specified as the primary goal.

Other suggestions to the regulatory bank include; resumption of naira denominated open-market operations (OMOs) based on a transparent issuance schedule and signal to markets that OMOs will use short-maturity securities to control banking system liquidity.

“Reduce CBN subsidized lending to medium and large corporates, expanding the scope for commercial banks to intermediate funds at a risk-adjusted lending rate.

“Phase out excessive reliance on the cash-reserve ratio as a high-frequency liquidity control tool and an instrument to finance quasi-fiscal CBN operations.

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