The decision of the Central Bank of Nigeria (CBN) to introduce the RT200 FX Programme, targeted at increasing the non-oil foreign exchange earnings has attracted a boost.
The programme that would encourage new incentives will have a positive impact on Nigeria’s economy.
Last week, the Central Bank of Nigeria (CBN) introduced the RT200 FX Programme, targeted at increasing the non-oil foreign exchange earnings of the country over the next three to five years using a set of policies.
Speaking at the end of the first Bankers Committee meeting for 2022, the governor of the CBN, Godwin Emefiele stressed the need for the country to reduce its reliance on oil proceeds for its foreign exchange needs.
Asides this, he said non-oil exports need not focus only on raw materials, saying there is need to add value to the non-oil natural resources of the country, noting that doing that would significantly increase the foreign exchange earnings of the country.
As a country with a heavy import bill, Nigeria’s major foreign exchange earnings come from oil exports supplemented by proceeds from non-oil exports, diaspora remittances as well as foreign direct and portfolio investments.
According to the CBN governor, these sources of forex had been adversely affected by the Covid-19 pandemic with most of them unreliable and prone to exogenous vicissitudes of global economic developments.
“We have all been witnesses to the ever-changing fortunes of oil-exporting countries. Even those that have been reputed to manage their oil proceeds well also suffer from major shocks once oil prices plummet.
“In order to avoid these sudden adjustments to our economic life, we need to focus on strategies that can help us earn more stable and sustainable inflows of foreign exchange.
“We would need to follow the best practices of other countries and ensure that we protect ourselves a little bit from factors that are beyond our immediate control, ”he said.
The CBN governor noted that the race to $200 billion forex repatriation tagged the RT200 FX programme, which is a set of policies, plans and programmes for non-oil exports, had been decided on after careful consideration of the available options and wide consultation with the banking community.
The RT200 Programme is hinged on five key anchors namely Value-Adding Exports Facility, Non-Oil Commodities Expansion Facility, Non-Oil FX Rebate Scheme, Dedicated Non-Oil Export Terminal and Biannual Non-Oil Export Summit.
The Value-Adding Export Facility is expected to provide concessionary and long-term funding for businesspeople who are interested in expanding existing plants or building brand new ones for the sole purpose of adding significant value to our non-oil commodities before exporting same.
Emefiele noted that this is important because the export of primary unprocessed commodities does not yield much in foreign exchange.
“In Nigeria today, we produce about 770,000 metric tonnes of Sesame, Cashew and Cocoa. Of this number, about 12,000 metric tonnes are consumed locally and 758,000 metric tonnes are exported.
“The unfortunate thing though is that out of the 758,000 metric tonnes that is exported annually, only 16.8 percent is processed. The rest are exported as raw sesame, raw cashew, and raw cocoa, thereby giving Nigerian farmers an infinitesimal part of the value chain in these products.
“We believe that the Value-Adding Export Facility is a first step to getting back some of these foreign exchanges that we rightly deserve. Indeed, we expect that this facility will also accommodate the demand of our youth population who are already adding value in using e-commerce and online methods for the provision and export of software, financial services, financial technology, Nigerian fashion and attires, and the likes.
As long as these exports are captured with Form NXP and the FX proceeds are repatriated and verifiable, we will accommodate such businesses under this facility, ”he added.
He added, “There is also the Non-Oil Commodities Expansion Facility, which will also be a concessionary facility designed to significantly boost local production of exportable commodities. This facility will be designed to ensure that expanded and new factories that are financed by the Value-Adding Facility are not starved of inputs of raw commodities in their production cycle.”
Emefiele had also announced the introduction of the Non-Oil FX Rebate Scheme, a special local currency rebate scheme for non-oil exporters of semi-finished and finished produce who show verifiable evidence of exports proceeds repatriation sold directly into the I & E window to boost liquidity in the market.
“Analogous to the Naira4Dollar Scheme, which has helped boost remittances from only $6 million per week to over $100 million per week, we shall establish the modalities for granting a rebate for each dollar that non-oil exports proceeds that an exporter sells into the market, for the benefit of other FX users and not for funding its own operations.
“Asides this, the Bankers Committee is also looking towards partnering at least three states in the country in establishing and building dedicated non-oil export port terminals which would address the current challenges that exporters currently face in the country, “he said.
Meanwhile, analysts have applauded the move to boost non-oil exports and FX inflows in the country. However, some analysts have also expressed reservations on the CBN policy.
For instance, Analysts at Cordros Research, in an emailed note said, “While we laud the CBN’s efforts at improving non-oil exports, we think the $200 billion target is not realistic over the medium term.
“Indeed, total non-oil exports averaged $5.17 billion annually between 2016 and 2020. Furthermore, we think the presence of structural bottlenecks and administrative challenges at the ports will continue to undermine the competitiveness of Nigeria’s non-oil exports in the global market.”
On his part, the Chief Executive of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said while the target is ambitious, it is one that is laudable.
“The reality is that supply side policies are even more critical and impactful than demand management interventions in the foreign exchange market. Over the last couple of years, the CBN has been fixated on managing the demand side of the foreign exchange market and the outcomes have been suboptimal,” he said.
Yusuf noted that structural issues are very vital for driving the growth and competitiveness of non-oil export, he noted that this is not within the purview of the CBN or the Bankers Committee.
“The fiscal authorities have much bigger roles to play in fixing the structural constraints which have been impeding non-oil exports productivity and competitiveness for decades.
Therefore, collaboration with fiscal authorities is a critical success factor for the realization of the RT 200 outcomes. Complementarity between the fiscal and monetary authorities is therefore imperative for the success of this scheme,” he noted.