The Central Bank of Nigeria (CBN), in what it described as the beginning of a “new journey”, has commenced the implementation of a set of policy actions to raise $200 billion in foreign exchange (FX) earnings from non-oil export in the next three to five years.
The target, which will be driven in partnership with the Bankers’ Committee, is inspired by the bank’s aspiration to end its role as the sole supplier of FX. The bank, through streams of coordinated activities, seeks to make the deposit money banks (DMBs) self-sufficient in meeting the FX needs of their customers by the end of this year.
The five new policies being implemented under RT200 FX Programme 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.
Introducing the scheme at the Bankers’ Committee press briefing, yesterday, Governor of CBN, Godwin Emefiele, said the country could not continue to rely on earnings from “commodity whose production quantity and price it cannot control” to fund its import obligations. Thus, he said, efforts must be made to return to the pre-crude era when import bills were paid from non-oil commodity export earnings.
“After careful consideration of the available options and wide consultation with the banking community, the CBN is, effective immediately, announcing the Bankers’ Committee RT200 FX Programme, which stands for the Race to US$200 billion in FX Repatriation. The RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable us to attain our lofty yet attainable goal of US$200 billion in FX repatriation exclusively from non-oil exports, over the next 3-5 years,” Emefiele said.
Among the objectives, Emefiele said, is making deposit DMBs self-sustaining in FX operation as it was in the 1960s and 1970s when banks did not depend on the CBN to fund their FX businesses. Before the end of the year, he said, banks should be able to generate enough FX to meet the demand of the customers.
“Before or about the end of this year, we will tell them don’t come to the CBN for dollars again. Go and generate your import funds by funding people who want to generate export proceeds. When the export proceeds come, we will fund them at five per cent. When those proceeds come, banks can sell to their customers that want millions of dollars. But to say they will continue to come to the CBN for dollars, we will stop that. We will stop it,” Emefiele said, stressing that relying on capital importation or oil earnings to fund importation was unsustainable.
“It is dangerous to put our hope in earnings we cannot control or earn from a source that comes in when things are good for us. But the moment they suspect that things are no longer good and when we need them the most is when they choose to leave us. We cannot as a country depend on that alone. We cannot, should not as a country, rely on that to fund our import obligations. We have to go back to the pre-crude oil period where we funded our import obligations from export earnings. Today, the journey begins. That journey to re-establish ourselves again.”
Non-oil FX Rebate Scheme, according to the governor, is a “special local currency incentive for non-oil exporters of semi-finished and finished produce who show verifiable evidence of exports proceeds repatriation sold directly into the I & E (Investors’ and Exporters’) window to boost liquidity in the market.”
The scheme is a replica of the Naira4Dollar Scheme, which Emefiele said has helped to boost remittances from $6 million per week to over $100 million. Whereas Naira4Dollar Scheme rewards recipients of remittance with N5 for every dollar received, Emefiele said Non-oil FX Rebate Scheme would be determined in due course.
When it comes to full operation, Emefiele, disclosed, individuals who export creative services such mobile apps would also benefit from the incentive, which is expected to expand FX earnings.
“Although this rebate programme is with immediate effect, the detailed guideline of this scheme will be communicated next week. Our plan is to graduate the percentage of the rebate depending on the level of value addition into the product being exported,” he said.
In recognition of the perennial congestion cited at the existing ports, the CBN boss said, Dedicated Non-oil Export Terminal, would see the Bankers’ Committee working with state governments for the purpose of construction of an alternative port facility that would facilitate the actualisation of the new target.
He noted: “The Value-Adding Export Facility will provide concessionary and long-term funding for businesspeople who are interested in expanding existing plants or building brand new ones for the sole purpose of adding significant value to our 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. For example, 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.”
The apex bank is also eyeing another facility to be known as Non-Oil Commodities Expansion Facility. Emefiele disclosed that this would be a concessionary facility designed to significantly boost local production of exportable commodities and “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”.
“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 maximize the potential and impact of this facility, we would 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,” he added.