A Lagos-based investment banking and research firm, Afrinvest (West) Africa Limited, has lauded the effort of the Central Bank of Nigeria (CBN) towards enhancing the potential of Nigeria’s non-oil sector to become a major source of foreign exchange (FX) earnings and the driver of economic growth.
The Central bank of Nigeria on Thursday officially announced the launch of the RT200 FX programme, in a bid to get $200 billion in FX repatriation. The programme is a set of policies, plans and programmes for non-oil exports that would enable the country attain its lofty yet attainable goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next three to five years.
According to Afrinvest, though it might be hard, “we like that the RT200 FX programme policy proposes a comprehensive approach to engendering non-oil export growth by proposing solutions from the initial stage of producing raw materials, to the process of value addition, and facilitating exports by supporting infrastructure.
“However, we note that the ultimate goal of the policy – achieving $200 billion from non-oil exports over the next three to five years ($40.0 billion per year on average) – might be a tough mark, given that the non-oil sector would have to grow 8x above the average size of $5.2 billion (between 2016 and 2020) in each of the next five years in a base case.
“That said, we are concerned that there seems to be a lack of coordination with the fiscal authorities (to the best of our knowledge) especially given that the fourth anchor proposes to establish Dedicated Non-Oil Export Terminals in response to current bottlenecks and logistics challenges at major ports and failure of some Nigerian exports to meet minimum international standards,” the firm noted in a reaction to the policy introduced last week.
It further explained that the effort of the CBN, though laudable, might not be sufficient given that the drawback to manufacturing and export promotion in Nigeria extends beyond funding to the creation of policies within the fiscal realm.
Whilst optimistic, the firm’s analysts are wary that plans to offer Naira as a rebate for non-oil commodity exporters that supply their FX earnings to the I&E window might not be sufficient to incentivise repatriation.
Although the CBN announced that the Naira4Dollar Scheme helped boost remittances from $6 million per week to over $100 million per week, the Non-Oil FX Rebate Scheme alone might not be effective if businesses source FX from unofficial sources due to supply challenges.
“This is because there might be a low incentive to sell to participants in the I&E window given the black market premium. We note that the CBN is yet to release detailed guidelines of the Non-Oil FX Rebate Scheme, and we await further guidance to fully appraise the policy,” it stated.
Afrinvest also cautioned that plans to halt the sale of FX to Deposit Money Banks by the end of 2022 might be premature given that save for the Non-Oil FX Rebate Scheme, the other anchors for the RT200 FX programme might not yield quick wins. Thus, the discontinuation, rather than a gradual weaning off, of FX supply to Deposit Money Banks (DMBs) could only worsen supply issues.
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