The Central Bank of Nigeria (CBN) has ordered banks in the country to stop processing milk imports on a credit basis, bankers said on Tuesday.
The ban which came after the apex bank last month said it would ban access to foreign currency for the imports to boost local production.
Nigeria spends between $1.2 billion to $1.5 billion annually to import milk, the CBN source revealed after saying in July it would add milk imports to its listed of restricted list for dollar sales. The bank did not say when the ban comes into force.
In a circular to lenders, the CBN said milk imports will no longer be eligible under payment terms known as “bills for collection” which allowed the importer to buy on credit. Importers would need to fund their naira accounts and open letters of credit, bankers said.
Bankers said the CBNwanted to streamline payment modes for milk imports.
Industry groups had been lobbying the government against the planned dollar curb for milk import, arguing that domestic production was not enough to meet local demand.
Nigeria relies on imports for most of what its 180 million population consumes. In 2015, the Central Bank restricted access to foreign currency for 41 items which it said can be produced locally.
The bank said its idea to add milk to the forex restriction list arose from the success of the currency restriction policy and the large amount spent on imports.
Last month the bank said it would extend low-interest loans to local milk producers to discourage imports.
The bank’s commitment to reduce imports of products that can be produced locally to conserve dollar reserves, compelled it also to offer cheap credit to rice, tomato and starch importers for the same purpose.
Nigeria has been trying to shore up dollar liquidity on its currency markets and prop up the naira which has weakened in recent weeks after a fall in oil prices and foreign investors fled in the wake of lower yields on local debt.
President Muhammadu Buhari has made diversifying the economy away from oil a central policy of the administration, but a recent recession has slowed his plans, slashed government revenue and triggered a series of currency devaluations. Buhari told the central bank this month to stop providing funding for food imports, his spokesman said.