Business

CBN: Boosting non-oil export to accelerate growth

As the economic uncertainty in the wake of the COVID-19 crisis continues to linger, the Central Bank of Nigeria (CBN) is intensifying efforts to help the country achieve export diversification, writes TONY CHUKWUNYEM

 

Given that Zenith Bank’s annual international trade seminar is aimed at helping Nigeria to drive non-oil export projects – a subject that is clearly close to the heart of the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, it is one of the events that industry watchers can always predict that the apex bank governor is likely to attend.

 

 

As Emefiele stated in his speech at this year’s edition of the event held on April 20, he was pleased with the organisers of the seminar, because, according to him, they were focused on growing the nation’s non-oil export, “which, if well harnessed, can enable greater growth and improved foreign inflows for the Nigerian economy.”

 

Taking advantage of AfCFTA

 

Noting that the COVID-19 crisis had bolstered the case for the country to diversify its economy and create new trade opportunities for its citizens, he highlighted some of the steps that the regulator had taken to improve the productive capacity of businesses and enable them take advantage of export opportunities in Africa, especially with the expected full implementation of the African Continental Free Trade Area (AfCFTA) agreement.

 

He said: “We have set up a N500 billion non-oil export stimulation facility with the Nigerian Export Import Bank (NEXIM).

 

This initiative will also help to enable greater exports of processed agriculture commodities into other markets in Africa and in the global market. “Improving the business environment in Nigeria is also vital if we are to harness the gains from AFCFTA.

 

The Central Bank, through our Trade Monitoring System (TRMS) portal, is also helping to reduce the time it takes to complete the export documentation process, as faster turnaround time could help to reduce delivery time for goods destined for exports and enable businesses expand their output.

 

Today, businesses can complete their NXP applications on the TRMS portal in 30 minutes relative to two years ago, where it could take as much as two weeks to complete the process. “We are also working with stakeholders in repositioning the Nigerian Commodity Exchange, which would help to support greater trade for operators in these vital sectors earlier mentioned.

 

Once the exchange becomes fully operational in the 2nd half of the year, international buyers of raw and processed agricultural commodities will be able to enter into forward contracts with domestic suppliers on the exchange and they can be assured of not only the quality of the goods sold through the exchange    but on the expected date of delivery.

 

 

We believe these forward contracts will help to support improved productivity for farmers and agro-processors, it will also help to improve access to credit for these entities using the forward contracts as collateral.”

 

He further stated: “Supporting greater trade within Africa would also require the presence of a viable payment settlement system. In this regard, the CBN is working with key stakeholders in the African continent, particularly the Afrexim Bank to improve the underlying payment infrastructure to support greater intra-regional trade, through the Pan African Payments and Settlement System (PAPSS).

 

This initiative will enable payments in our local currency for goods in other African countries and vice versa, without the need for a third-party currency.

 

This initiative will help to reduce the cost of cross border trade, improve convertibility of the Naira, and increase trade opportunities for Nigerian businesses in Africa.”

 

Emefiele, who urged existing exporters to endeavor to repatriate their export proceeds as required by law to improve foreign exchange inflows into the country, said CBN guarantees that exporters will have unfettered access to their export proceeds.

 

 

Indeed, in his speech at the special summit on the economy held in late February this year, which was organised by the CBN/ Bankers’ Committee, in collaboration with other organisations in the wake of Nigeria’s surprise early exit from recession, Emefiele had disclosed that the apex bank was planning to intensify its efforts to boost non-oil exports as one of the key measures to sustain economic recovery. Specifically, he said: “CBN intends to support measures that will improve our non-oil export earnings significantly. As a result, we intend to aggressively implement our N500 billion facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.”

 

ESF and RRF

 

CBN had, in 2016, introduced the N500 billion Non-oil Export Stimulation Facility (NESF), as well as the N50 billion Export Rediscounting and Refinancing Facility (RRF) to engender growth in the non-oil sector of the economy and drive its foreign reserve accretion.

 

The apex bank said at the time that it introduced NESF to diversify the revenue base of the economy and to expedite the growth and development of the non-oil export sector, adding that the facility will help redress the declining export financing and enable the sector increase its contribution to economic development.

 

According to the regulator, the objectives of the facility include improving access of exporters to concessionary finance to expand and diversify the non-oil export baskets; attracting new investments and encourage reinvestments in value-added nonoil exports production and non-traditional exports; shoring up non-oil export sector productivity and create more jobs; supporting non-oil exportoriented companies to upscale and expand their export operations as well as capabilities and broaden the scope of export financing instruments.

 

N200bn export facilitation initiative

Apart from the ESF and the RRF, however, the Bankers’ Committee, in collaboration with CBN had, in April 2019, announced a N200 billion Export Facilitation Initiative(EFI) to boost production and export of five cash crops: cocoa, oil palm, shea butter, sesame seed and cashew. Announcing the plan to journalists at a press conference, the Chief Executive Officer, United Bank for Africa (UBA), Mr. Kennedy Uzoka, said the N200 billion would be extended as loans to companies producing any of the five cash crops, at single digit interest rate for up to ten years tenor. He said: “As you know we have always talked about Nigeria been a mono economy, oil only, and many seminars have happened with so many resolutions.

 

But the committee believes we have not made much progress in this direction. “In terms of the policies that drive exports, we believe that a lot of them have to be changed.

 

And we know about the congestion at the port. So, we looked at all these things and we    broke them into immediate, medium and long term because some we cannot address within a short period. Fortunately, CBN has different kind of funds.

 

We looked at the existing funding structure so that we don’t reinvent the wheel, and see which of these funds can address the current challenges. And we did find a lot.”

 

In fact, the framework for EFI showed that, under the initiative, farmers and value chain industries that are into cocoa, cashew, palm oil, Shea and sesame seed would be able to get funding with a single interest rate of nine per cent spanning between one year and 10 years tenor.

 

It stated that commodities were to be funded under the approved guidelines of some of the CBN’s intervention programmes such as the Agricultural/Small and Medium Enterprises Investment Scheme (AGSMEIS), Non-Oil Export Stimulation Facility (NESF) and the Real Sector Support Facility- Differentiated Cash Reserves Requirement (RSSF-DCRR). In addition, the EFIFF stipulated that small holder farmers operating in clusters along with medium and large sized companies were eligible to apply.

 

10 key commodities

 

As industry watchers would recall, following his reappointment for a second term in office in June 2019, Emefiele, while unveiling his agenda for 2019-2024, had announced that one of the key areas that the apex bank would pay particular attention to, was on how to build on the success of its intervention programmes in the agricultural sector, to help diversify the country’s export earnings. He said:

 

 

“Building on the success of our Anchor Borrowers Programme (ABP) and other intervention programmes geared towards supporting the growth of our agriculture and manufacturing sectors, we intend to boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely: rice, maize, cassava, cocoa, tomato, cotton, oil-palm, poultry, fish, and livestock/dairy.

 

“Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next five years if efforts are made to expand cultivation and processing of these items in Nigeria. So far, we have held series of engagements with importers and producers of these products.

 

Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2 billion in 2018 to $12 billion by 2023.”

 

Conclusion

 

With climate change and the need for nations to adopt non-fossil fuels being one of the most discussed issues in the world these days, there is thus no doubt that CBN, under Emefiele’s leadership, is right to be stepping up export diversification measures.

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