While the FX restriction on those 43 items was on, all these items are still being imported into Nigeria through the back door, but because they are on the embargo list, those who import them cannot source for FX from the CBN, hence, getting their FX from the black market.
1) This has created a very high demand for FX from the black market in the midst of limited supply, thus, escalating the cost of the dollar and causing severe damage to the value of the Naira. The exchange rate is determined by demand and supply.
2) The high cost at which they get the dollar make these items when imported, very very expensive than they should be.
Now that the CBN has now allowed FX to be sourced from them through the I&E window for these items, all those who had been getting the dollar from the black market will move to the I&E window to source for cheaper dollars.
This will:
1) Create a low demand for the expensive dollar at the black market which will help to crash the dollar, stabilize and increase the value of the naira by eliminating that negative pull effect that the black market has on the official exchange rate at the I&E window.
2) Significantly reduce the prices of these imported items since the importers can now bring them into the country at cheaper dollar rates sourced through the I&E window.
3) Local manufacturers of goods like rice and cement will have to bring down their prices in order to be able to compete with those imported into the country.
4) Consumer price index (CPI) and Inflation will be significantly brought down within a short time.
Peoplesmind
