By Rafiu Ajakaye 

LAGOS, Nigeria 

Currency restrictions, imposed by the Nigerian government to prop up the sagging naira, aren't working, economists told Anadolu Agency on Tuesday.

The Central Bank of Nigeria imposed a series of restrictions on the export of cash in 2013, and then reinforced them with a circular published in June 2015.

The restrictions include limits on access to foreign exchange for importers, and caps on both business and personal travel allowances (BTA and PTA). 

In a circular on June 23, the CBN directed banks and other financial institutions to not give foreign exchange to importers of 40 items,  which included rice, wheel barrows, head pans, cement, margarine, palm kernel and vegetable oil, meat and processed meat products, vegetable and processed vegetable products, poultry, private airplanes/jets, Indian incense, toothpicks and canned fish in sauce (geisha/sardines), among others.

The list of the items was extended in later circulars. In another circular dated July 1. The central bank has also ruled that items under restrictions cannot be funded at the interbank market from the proceeds of exports and currency-change sources.

"The objective, of course, is to ensure naira stability and to preserve the external reserves of Nigeria," Lagos-based Ola Belgore, financial analyst and managing director at AfrInvest, told Anadolu Agency.

Belgore said capping the BTA and PTA was to prevent people from sourcing foreign currencies at the official rate - with the naira now officially pegged at about 197 to a dollar - and then selling same at the black market to make profits.  A dollar goes for between 230 and 270 naira in the black market. The naira has depreciated by N42 against the dollar on the black market since June.

But Belgore said that the restrictions were not working.

"As to the question whether the objective is being achieved, the answer is no. The restriction has had a negative impact on the value of the naira and the image of the country, as most foreign investors would prefer a market-driven valuation than a regulated market," according to the analyst.  "This is part of what led to the removal of the Nigeria bonds from the JP Morgan Emerging market bond index."

Belgore added however that the policy might yield some gains "in the long term," as local production of the "excluded items would create employment and increase Nigeria's GDP.

Ololade Ososami,  a tax and financial analyst in Lagos, said the bid to stabilise exchange rate using forex restrictions appears to have failed as the real value of the currency is seen at the black market where it continues to fall against the dollar.

She warned of dire consequences for the economy.

"The implications of this change in monetary policy is that businesses will end up generating lower taxable profits, which will ultimately lead to the payment of less tax and reduced government revenue," Ososami asserted.

"Furthermore,  the rising cost of imports (which is what sustains consumption In Nigeria) will lead to higher inflation, which deters economic growth. It therefore appears that government is attempting to use monetary policy to tackle a problem that should be tackled by fiscal policy. For instance, rather than starving businesses of foreign exchange in order to boost local production, the government could consider giving greater incentives to local producers whilst increasing taxes on importing."