With Nigeria clearly facing challenges benefitting from the recent surge in the price of oil (the commodity that accounts for the bulk of the country’s foreign exchange earnings), the Central Bank of Nigeria (CBN) believes that its new scheme, the RT200 FX programme, will play a major role in helping to raise non-oil FX earnings, writes TONY CHUKWUNYEM
As part of the Central Bank of Nigeria’s (CBN) drive to help grow the country’s economy by ending its dependence on oil, the apex bank, especially under the leadership of the current Governor, Mr. Godwin Emefiele, has introduced several intervention programmes aimed at boosting non-oil exports.
A notable example of such intervention programmes, for instance, is the N500 billion Nonoil Export Stimulation Facility (NESF), which was merged with the N50 billion Direct Intervention Fund from the Nigeria Export- Import Bank (NEXIM). According to the CBN, since the full implementation of the programme commenced in December 2017, it has boosted activities with regard to the export of value added products in the nonoil sector, such as cocoa, cashew nuts, palm produce, sesame seeds, solid minerals and rubber. Indeed, in the communiqué it issued at the end of its meeting in November, the CBN’s Monetary Policy Committee (MPC) stated: “The bank has disbursed a total of N145.99 billion under its Non- Oil Export Stimulation Facility (NESF). The CBN has revised the guidelines, working with Nigerian Export-Import Bank to improve access to the intervention and stimulate non-oil export growth in Nigeria.”
Targeting $200bn in FX repatriation
However, on February 10, this year, the CBN showed it was intensifying its efforts to boost non-oil export earnings when, Mr. Emefiele, during the press briefing held at the end of the Bankers’ Committee meeting, announced that the regulator, in collaboration with banks, had with immediate effect, introduced a fresh initiative in a bid to reduce the nation’s exposure to volatile sources of foreign exchange and to earn more stable inflows. Emefiele said the scheme, codenamed, “Race to $200 billion in FX Repatriation (RT200 FX Programme),” consisted of a set of policies, plans and programmes for non-oil exports which would help the country attain its goal of $200 billion in FX repatriation, exclusively from non-oil export transactions over the next three to five years. The CBN Governor explained that the new initiative would have five key anchors namely, valueadding exports facility; non-oil commodities expansion facility; non-oil FX rebate scheme; dedicated non-oil export terminal, as well as a biannual non-oil export summit. Specifically, he said that the new drive to boost non-oil export earnings was informed by the inadequacy of FX supply and constant pressure on the exchange rate, noting that the country’s four major sources of FX inflow: Proceeds from oil exports, proceeds from non-oil exports, diaspora remittances, and foreign direct/portfolio investments had been negatively impacted by the Covid-19 crisis. Emefiele also pointed out that most of the sources of FX inflows were unreliable and perennially prone to the vicissitudes of global economic developments. He said: “I believe that the lessons we have learnt from our policies on remittances can be applied in improving some aspects of FX inflow into the country. For example, 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.” On the value-adding export facility of scheme, he said the CBN would provide concessionary and long-term funding for business people who are interested in expanding existing plants or building brand new ones for the sole purpose of adding significant value to non-oil commodities before exporting the same. “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 per cent 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,” Emefiele said. In addition, he explained that the non-oil commodities expansion facility, which is also a concessionary facility designed to significantly boost local production of exportable commodities, was aimed at ensuring 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. As the CBN Governor put it, “a massive boost in the production of such commodities will also help dampen/moderate the prices of these commodities so that the expected increase in demand for them does not become a pressure point for aggregate prices in the market. “In order to maximise the potential and impact of this facility, we would create a geographic prioritisation of crops across the country to achieve production efficiencies through the development of special areas that will cater to specific commodities.
“Since sustainable foreign exchange earnings are dependent on national competitive advantage, a prioritization framework based on crops which Nigeria is best suited to produce will be essential.” According to Emefiele, the third incentive- non-oil FX rebate scheme, is 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 Investors and Exporters’ (I & E) window to boost liquidity in the market. He said: “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. “Our plan is to graduate the percentage of the rebate depending on the level of value addition into the product being exported.” He promised that the guideline for implementation of the rebate scheme would be released by the CBN the following week.
Rebate scheme implementation guideline
In fact, the apex bank released guidelines for the implementation of the rebate scheme on Friday. According the guidelines, the CBN said that while exporters, who qualify for rebate under the scheme, would be paid N65 for every $1 repatriated and sold at the Investors and Exporters’ (I&E) window to Authorized Dealer Banks (ADBs) for other third party use, exporters who repatriate and sell forex into the I&E window for own use for eligible transactions, will be paid N35 for every $1 repatriated. However, the guidelines said the spread will not be more than 10 kobo. It also said the payment of the incentive will be made on a quarterly basis, adding that “the accounts of exporters that qualify for rebates shall be credited latest one week after the end of the quarter.” The banking watchdog warned that any authorised dealer bank that attempts to circumvent the intent of the scheme will have its forex dealership license suspended for 24months. Similarly, the CBN said that any exporter that presents fraudulent document(s) or tries to undermine the scheme would be banned from accessing the incentive for 24 months and all the bank accounts of such an exporter will be frozen-placed on “Post No Debit (PND)”-for the same period. On eligibility criteria of the scheme, the apex bank said beneficiaries that are eligible for the incentive include, only exporters of finished and semi- finished goods whose repatriated export proceeds are sold at the I&E window.
Expectedly, the RT200 FX programme has drawn reactions from several analysts. For instance, commenting on the initiative, analysts at FBNQuest stated: “We see the RT200 fx programme by the CBN as laudable, given Nigeria’s weak agroprocessing industry. With non-oil exports accounting for less than 15 per cent of Nigeria’s fx earnings, government backed policies to raise the value of trade is a welcome development. “Given that the African continent accounts for only three per cent of global trade, the RT200 fx programme, if successful, could significantly raise Nigeria’s contribution to global trade and raise the country’s average income and GDP.” They, however, pointed out that for the programme to succeed, “attention must be given to structural challenges in the agro sector including security, storage, and logistical infrastructure. and the Land Use Act among others.”
Indeed, the consensus among analysts is that despite the CBN’s good intentions, the success of the programme will mainly depend on the ability of the fiscal authorities to effectively tackle challenges such as insecurity, infrastructure deficit and the Land Use Act.