In this piece, JOSEPH INOKOTONG chronicles efforts by the Central Bank of Nigeria (CBN) to ensure Nigeria achieves the goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next three to five years.
The Central Bank of Nigeria (CBN), in the past seven years, has embarked on a number of initiatives to grow the country’s economy under the watch of Governor Godwin Emefiele. The effort has received commendations from many quarters due to the enduring positive impacts the measures have wrought on the economy in the short, medium, and long terms.
Indeed, the CBN’s drive to earn more Foreign Exchange (FX) for the country has started yielding fruits barely a few weeks after the programme was launched. The policy thrust centers on placing the apex bank in better stead to carry out its mandate in an effective and efficient manner that guarantees the preservation of the nation’s scarce resources, and the stability of the Naira.
As disclosed by the Managing Director/Chief Executive Officer, Fidelity Bank Plc, Mrs. Nneka Onyeali-Ikpe, at a virtual press briefing last week Thursday, after the 364th Bankers’ Committee Meeting, exporters have repatriated about $60 million from proceeds of finished and semi-finished goods. And in fulfillment of its promise of a rebate, the CBN Governor approved the immediate release of N3.5 billion export incentives to a total of 150 exporters in Nigeria’s non-oil sector, under the newly introduced RT200 foreign exchange policy.
Code named RT200 FX Programme, which stands for the Race to $200 billion in FX Repatriation, is a set of policies, plans, and programmes for non-oil exports that will enable Nigeria to attain the lofty goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next three to five years. It was unveiled personally by the Central Bank of Nigeria Governor Godwin Emefiele on February 10, 2022, after wide consultation with the Banking Community.
The RT200 FX Programme has five components as announced by Emefiele. The key anchors are 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.
To achieve its objectives, the Value-Adding Export Facility will provide concessionary and long-term funding for business people who are interested in either expanding existing plants or building brand new ones for the sole purpose of adding significant value to the non-oil commodities before exporting same. This could be better appreciated when one understands that the export of primary unprocessed commodities does not yield much in foreign exchange.
For example, Nigeria reportedly produces 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. Unfortunately, out of the 758,000 metric tonnes that the country exports annually, only 16.8 per cent is processed. The rest are exported as raw, thereby giving Nigerian farmers a tiny part of the value chain in these products.
Interestingly, the global chocolate industry is valued at about $130 billion. Of this amount, Cote D’Ivoire, Ghana, and Nigeria account for more than 72 per cent of global cocoa exports. Due to the fact that these countries mainly export raw cocoa beans, Cote D’Ivoire is reported to have received $3.6 billion annually, Ghana generates $1.9 billion annually and Nigeria gets about US$804 million per year from an industry that is worth over $130 billion. In contrast to West African countries, Belgium accounted for 11 per cent of global chocolate exports in 2019, at a value of $3.16 billion. In the same vein, Germany’s chocolate exports were worth $5.14 billion in the same year.
Worried by these unsavory developments, therefore, and taking cognizance of these alarming disparities between exporters of raw commodities and exporters of semi-finished or finished products, the CBN believes that the Value-Adding Export Facility is a first step to getting back some of these foreign exchange that the country rightly deserves. It is expected that this facility will also accommodate the demand of the youths 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, attires, etc. “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,” Emefiele promised.
The Non-Oil Commodities Expansion Facility is also a concessionary facility designed to significantly boost local production of exportable commodities. It is tailored 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. Indeed, a massive boost in the production of such commodities would also help dampen and moderate the prices of these commodities so that the expected increase in demand for them does not put much pressure on aggregate prices in the market.
In order to maximize the potential and impact of this facility, the CBN plans to replicate what other successful export-based economies have done by first prioritising and targeting certain commodities. “We would create a geographic prioritization 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”, Emefiele further stated.
Another key anchor of the RT 200 FX Programme is 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 Investors and Exporters (I & E) window to boost liquidity in the market. This is akin to the Naira4Dollar Scheme, which the CBN said has helped boost remittances from a mere $6 million per week to over $100 million per week. This aspect of the bargain was fulfilled last week. The CBN had promised to pay N65 for every one Dollar repatriated and sold at the I & E foreign exchange window for other third party use, and N35 for every one Dollar repatriated and sold into I & E for own use on eligible transactions only. The apex bank plans to graduate the percentage of the rebate depending on the level of value addition to the product being exported.
The construction/establishment of a dedicated Non-Oil Export Terminal, a third anchor of the RT 200 Programme, is designed in recognition of the perennial problems of port congestion, which exporters cited as a major impediment to improved operations and foreign exchange earnings.
According to the African Centre for Supply Chain Practitioners, Nigeria loses about $14.2 billion annually due to congestion at its ports. Paraphrasing an article by the Financial Times of December 2020, the congestion has become so bad that while it costs $3,500 to ship a 40-feet container from China to Lagos, which is a distance of 22,000 kilometers, it costs $4,000 to move the same container from the port to mainland Lagos, a distance of only 12 kilometers.
Emefiele said “During our stakeholder engagements with various segments of exporters, we heard several heartbreaking accounts of how containers spent several months in the ports just waiting to be shipped, resulting in loss of perishable goods or well-established foreign customers. If we are to reach our goal of $200 billion in non-oil exports, then we can neither ignore nor wish away this problem. We must confront it head-on and provide a solution. That is why we are today throwing a challenge to all State Governments that have existing ports and are willing to partner with the Bankers Committee to establish not only a dedicated export terminal but also the entire ecosystem of world-class infrastructure needed for non-oil exports. Over the next three months, the Bankers Committee will be collecting and analysing detailed proposals from interested State Governments in order to decide which one we can partner with. The Bankers Committee will be arranging a significant part of the financing that will be needed for this port while the selected State Government will have responsibilities that will be spelt out in due course.”
In the CBN’s estimation, the dedicated port would be capable of creating over 100,000 direct and indirect jobs and provide a huge boost to the quest for significant improvement in non-oil export earnings in Nigeria. Mr Emefiele emphasised that under this arrangement, loans to companies wishing to either expand or build new plants that would generate verifiable export proceeds for the economy shall remain at five per cent per annum for 10 years loans inclusive of two years moratorium.
In recognition of the lessons learnt from rounds of consultation with non-oil exporters, the CBN believes that a more formal, predetermined, and regular forum would be necessary to discuss the issues, challenges, and opportunities in this segment of the economy. That is why it announced the introduction of a Biannual Non-Oil Export Summit, the first of which it said would be organized during the first week of April 2022. The Summit would bring together all the relevant stakeholders in the export business including bankers, customs officials, the Nigerian Ports Authority (NPA), the Nigerian Export Promotion Council (NEPC), clearing agents, cargo airlines, shipping lines, logistics companies, insurance practitioners, etc.
According to the CBN Governor, “This gathering will be one where for every complaint, problem, issue, challenge or difficulty that is presented or identified, there will be one or several agencies or practitioners that can articulate options for solving that problem. I believe that the ideas harnessed from such summits would be invaluable in helping us reach our ultimate goal of $200 billion in non-oil exports per annum.”
He did not mince words by reiterating his resolve and determination of accomplishing the set goals, although he was mindful that the objectives may appear unattainable to some. Citing examples, he averred that many countries that are much less endowed than Nigeria are doing it. “Consider for example that agriculture exports alone from the Netherlands was about $120 billion last year. Yet, Netherlands has a landmass of about 42,000 square kilometers, which is much smaller than the landmass of Niger State alone, at over 76,000 square kilometers,” Emefiele pointed out.
Giving further insight to what the initiative stands to achieve he explained “Let me note very importantly that the RT200 Programme is not intended to be a silver bullet to all our problems in the export segment of the economy. Rather it is a first step meant to ensure that the CBN is better able to carry out its mandate in an effective and efficient manner, which guarantees the preservation of our scarce commonwealth, and the stability of our national currency, the Naira. It is only by boosting productivity and earning capacity of this economy that we can truly preserve the long-term value of our currency, as well as the stability of our exchange rate.”
The introduction of the RT200 Programme is arguably, one of the most important interventions, and far-reaching policies enunciated by the CBN to rejuvenate the country’s economy and place it on a sustainable pedestal to cope with the present inadequacy of FX supply and constant pressure on the exchange rate.
Of all the four major sources of FX inflow into Nigeria – Proceeds from oil exports, non-oil exports, Diaspora remittances, and Foreign Direct/Portfolio Investments – most of them are unreliable sources that are perennially prone to external global economic developments. The ever-changing fortunes of some oil-exporting countries, including 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 economic life, the need to focus on strategies that can help the country earn more stable and sustainable inflows of foreign exchange necessitated the introduction of the programme. Credit must be given to Mr Emefiele for initiating the programme and as he noted, “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.”
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