Nigeria ranked 97 out of 153 countries in 2023 on the Competitive Industrial Performance Index, partly because of the governments foreign exchange (FX) access restrictions and import bans, according to the World Bank.
This was revealed in its latest Nigeria Development Update for December 2023, titled: Turning the corner: From reforms & renewed Hope. The report, produced bi-annually, assesses immediate economic developments and prospects in Nigeria.
The report said: While the FX restrictions did not explicitly prohibit importing the 43 categories of goods on the restriction list, they created a significant hurdle. Since importers could not obtain FX through official channels to cover the cost of their imports, they turned to the more expensive parallel markets and resorted to smuggling the imported products into the country”.
Partly because of these restrictions, Nigeria ranked 97 out of 153 countries in 2023 on the Competitive Industrial Performance Index, 44 places below South Africa (ranked 53) it further stated.
Recall that on 23 June 2015, the CBN prohibited 40 items, later 43, from accessing foreign exchange in the Nigerian market, including rice, cement, etc. In a circular released by the Central Bank of Nigeria, (CBN), the restrictions pushed importers into the parallel market, increasing demand for foreign exchange and prices.
Additional pressures widened the gap between the parallel market and the official rate and caused the prices of affected goods to rise. The European Union stated that the measure had significant consequences on the economy and peoples standard of living.
Economic analysts speculated that restricting foreign exchange access widened the gap between the parallel market and the investors and exporters window, and reduced the GDP.
This gap means that investors cant invest. They have to import capital at an official rate and are forced to operate on market conditions, which erodes their profit and investment. No investment means reduced productivity and reduced disposable income; the GDP suffers, and peoples quality of life drops, said Fadeelah Abiru, economic analyst at Marble Capital.
The Competitive Industrial Performance Index, produced by the United Nations Industrial Development Organisation, ranks about 150 countries and economies according to their performance. It comprises indicators benchmarking countries ability to produce and export products competitively. The three Competitive Industrial Index dimensions are the capacity to produce and export manufactures, technological deepening and upgrading, and world impact. Nigeria dropped two places in 2023, after ranking 95 in 2021.
Experts say that foreign investors will consider other countries with a highly competitive index for their investments.
The United Nations Industrial Development Organisation (UNIDO) said that the competitiveness of the manufacturing industry is one of the basic determinants of the long-term sustainable growth of a nation and can be used as a tool to design and assess policies.
Experts have said that the industrial ranking reveals that Nigerias restrictions on FX were ineffective.
According to an economic expert, Agiri Ibrahim, For the restriction of FX to be successful, certain conditions should be in place. There was no point in it, when local production wasnt supported. Are people patronising locally produced goods? Restricting Forex without putting these measures in place is like building a house without a foundation, he stated.
