The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), an economic and business advocacy think tank, Dr Muda Yusuf, has lauded the RT 200 Forex Programme of the Bankers’ Committee and the Central Bank of Nigeria (CBN).
The initiative aims to strengthen the supply side of foreign exchange in the Importers and Exporters window by attracting $200 billion inflow exclusively from non-oil exports over the next three to five years.
It is anchored on five key areas which are; value-adding export facility, non-oil commodity expansion facility, non-oil export rebate scheme, non-oil export terminal financing and bi-annual non-oil export summit.
Dr Yusuf, in a statement, said though ambitious, the initiative is laudable as the management of the supply side of forex would greatly impact the economy.
“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.
The CPPE CEO said for the initiative to succeed, given the peculiar operating environment of Nigeria, the CBN should consider such factors as fixing structural constraints impeding non-oil exports, reviewing the pricing regime in the I&E window, giving exporters access to export proceeds, expanding the scope of forex supply strategies and allowing forex-generating MDAs to sell at the I&E window.
“Structural issues are very vital for driving the growth and competitiveness of non-oil exports. Structural variables are 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 realisation of the RT 200 outcomes.
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“The current pricing regime in the Importers and Exporters (I&E) window of the foreign exchange market is at variance with the objectives of the RT 200. It will be a major impediment to the achievement of the race to the $200 billion export proceeds vision. Exporters are currently not encouraged to remit export proceeds at the current official rate of N416/$. It is a pricing regime that inherently penalises exporters and it is a major demotivating factor to investment in the non-oil export sector. Therefore, the CBN should take urgent steps to ensure that the exchange rate regime in the I&E window is market reflective. The pricing regime should be flexible and reflect the demand and supply dynamics. This is the biggest incentive that the apex bank can give to the non-oil export sector. It will be more impactful than any rebate that the CBN could be contemplating.”
Continuing, he said, “Exporters in the economy must be allowed unfettered access to their exports proceeds. The current policy regime on export proceeds is stifling, restrictive and repressive. It is inhibiting export initiatives, enterprise and growth. Regulations around export proceeds should be immediately relaxed in the spirit of the RT 200. Exporters must be able to sell their proceeds at a mutually agreed exchange rate to either the banks, importers or the BDCs as the case may be. The apex bank should institute a willing buyer-willing seller framework for export proceeds.
“CBN should expand the scope of its new foreign exchange supply strategies and incentives to cover other sources of foreign exchange inflows into the economy. These sources include; Foreign Direct Investments (FDI), Foreign Portfolio Investments (FPI), Diaspora remittances, diplomatic missions in the country, development partners, multilateral agencies, oil companies, international aid agencies and donor agencies. Inflows from these sources should be completely liberalised through a market-driven I&E window.
“Foreign exchange generating MDAs should be encouraged to sell their forex at the I&E window at a market reflective exchange rate. Some of these agencies include the Nigeria Ports Authority and the Nigeria Maritime Administration and Safety Agency,” he said.
On CBN’s plan to stop the sale of foreign exchange to banks, Dr Yusuf called for caution and urged the CBN to ensure a much deeper and stronger I&E window before enforcing the action to avoid disruptions to the Nigerian business environment and economy.
“CPPE would like to caution that the apex bank should rigorously think through this proposition before implementation because of the likely systemic shocks, business disruptions, macroeconomic dislocations and weakening of investors’ confidence. A much deeper and robust I&E forex window should be in place before the CBN can contemplate termination of its forex market interventions,” he said.
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