Foreign exchange policy yields mixed results —Research report

There are indications in the markets that both the Central Bank of Nigeria, CBN and the federal government would be receiving mixed outcome in respect of the exchange rate policy. Independent survey between July 2015 and January 2016 has indicated that the foreign exchange control regime has resulted in increases in the prices of imported goods and some locally produced ones but some major consumer commodities have remained stable within the period. The apex bank had pegged official exchange rate at N199/ USD1.0 over the past one year while restricting access to the resources, shutting out many end users of foreign exchange. As a result many importers and other users of foreign exchange have resorted to the parallel market forcing exchange rate the market to hit all time low of N320/ USD1.0 by last weekend. The measures were instituted within this period by CBN Governor, Mr Godwin Emefiele, and backed up by both the Finance Minister, Mrs Kemi Adeosun, and President Mohammadu Buhari, principally to conserve foreign reserves while stimulating import substitution with local production of imported goods. Most economy observers have noted that as Nigeria grapples with currency controls and rising cost of dollars, the effects are expected to be felt on the prices of goods and services. According to a report from SBM Intelligence, a Lagos based research firm, price increases were recorded in nearly every segment of house hold goods and consumables between July and December 2015 up to January 2016, indicating that the effect of a weakening Naira is starting to take hold. The report which is a second part of an earlier research conducted for the first half of 2015 shows that microeconomic life was in a worse state in the second half of 2015. The impact of the drop in the price of crude oil and the effect of Nigeria’s currency crises is now having a ripple effect on the larger economy. According to the report tomatoes, one of the most common commodities in Nigeria, sold in Lagos at an average price of N679.50 for a paint container (6 litres; 2 kilograms) over the past six months compared to N540 in the first half of 2015 and N500 in the fourth quarter of 2014 representing an average increase of 26 per cent. Similar price hikes were also recorded in most Nigerian cities such as Abuja, Onitsha, Ibadan, Kano among other cities covered in the survey.

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