Mr Godwin Emefiele, Nigeria’s Central Bank boss, on February 10, 2022, announced the launch of a new policy that will address the country’s current foreign exchange scarcity challenges.
Dubbed as the RT200 FX programme, the Central Bank of Nigeria (CBN) hopes to attract $200 billion in foreign exchange repatriation through activities in the non-oil sector over the next three to five years. The programme’s central aim is to leverage the potentials of the non-oil sector to pool enough export revenue to close the nation’s widening foreign exchange gap and, consequently, boost reserves.
Arguably known as an oil-dependent nation, Nigeria’s crude oil revenue has not been efficient enough to cater for the country’s growing needs.
With rising crude oil prices in the international market owing to the current tussle between Russia and Ukraine and the myriad of economic sanctions that follow, Nigeria’s oil production status may be incapable of taking advantage of the price hike.
With low crude oil production, supply and freight bottlenecks, coupled with irresponsible flaring of valuable gas in millions of metric tons, Nigeria’s opportunity to benefit from the current trend seem pretty narrow.
Seeing that the country’s overdependence on this single product has continued to yield disappointing results, the CBN has taken a bold step to rethink Nigeria’s economic management, whose outlook appears plausible to many.
Indeed, incentivising supply-side activities that attract more foreign exchange into the nation seems a more worthy playbook rather than dabbling into other structural, pro-fiscal concerns that may further heat up the economy.
For instance, the CBN has noted that the Naira4Dollar scheme helped boost diaspora remittances from $6 million per week to over $100 million per week.
Hence, with the new RT200 FX programme, it is hoped that activities in the non-oil sector will also help boost FX supply to the tune of about $40 billion per year, on average, within the next three to five years.
The RT200 FX programme has been anchored among five cardinal sub-schemes: the Value-Adding Exports Facility, Non-Oil Commodity Expansion Facility, Non-Oil FX Rebate Scheme, Dedicated Non-Oil Export Terminal and the Biannual Non-Oil Export Summit.
The new policy derives its inspiration from the central aim of its creation, which is to incentivise the ramp-up of non-oil export growth that will be funnelled into all stages of the sector’s production and services.
Essentially, through this new programme, the apex bank will extend easy loan facilities to upscale the country’s production of raw materials, encourage the production of value-added products from source, and facilitate exports by supporting infrastructural development.
By this RT200 FX programme, the CBN’s commitment will help to address the supply side of the nation’s naira-dollar imbalance by prioritising and financing non-oil export business, promoting the supply of FX through the banks, encouraging the production of value-added products to upscale revenue potentials from exports, and develop the nation’s export infrastructure, particularly at dedicated non-oil export terminals.
The financing scheme includes the provision of loans by the CBN through the banks to producers and manufacturers of high-end, value-added and finished goods exports at 5 percent for 10 years, including a 2-year moratorium.
Furthermore, the infrastructural development programme under the scheme will feature the CBN’s funding intervention through the banks to aid the construction of dedicated non-oil export terminals to eliminate supply bottlenecks and other delay experiences by the exporters.
Promising as the new programme sounds, there are various concerns about the plan’s ability to actualise its expected objectives.
One area, which the government usually fails to address, is the proper dissemination and education of the public about their policies and programmes. Providing sufficient access to policy details through official and non-official channels is as important as the policy itself.
Hence, improper education of the public, especially those involved in the non-oil export business, about the benefits of the scheme and the expectations from the key players in the non-oil export business will negatively affect appropriate participation in the scheme by the business community.
Nigeria must rethink its consumption culture to see this new policy through. Owing to historical patterns that accrue to the import substitution industrialisation strategy programme, Nigeria’s trade infrastructure at the ports has been suited for import and export of primary products, which makes exporters of finished and semi-finished products experience a hard time with their trade.
Read also: How CBN can make RT200 FX policy hit its target – Experts
Therefore, the CBN’s new export promotion programme must refashion the export infrastructure to accommodate the new template that encourages the export of non-oil produce to generate sufficient revenue for the country.
Current unfavourable macroeconomic fundamentals have heated the nation’s business climate and negatively biased investors’ sentiments.
Manufacturers are now averse to investing in an environment with high production costs and a decaying infrastructural landscape.
Attracting investors in the manufacturing and export of non-oil products will require a committed effort to prioritise sufficient power distribution towards industrial locations and export processing districts throughout the country.
There are beliefs that the policy may not hold enough water as naira offerings as a rebate for dollar repatriation through the official I&E window may not be attractive enough to serve as an incentive to non-oil exporters.
This is especially true since the rebate scheme seems not robust enough to offset the differences in the FX premium between the official and unofficial rates due to current supply shortages.
The issue of policy consistency also lingers in the knowledge characteristic of the Nigerian government. Should Mr Emefiele round off his tenure as the CBN boss, will the next governor continue to support and provide augmenting policies to sustain this novel course.
All told however and despite our reservations, we need to restate that there is much to commend in this new venture by the CBN under its current Governor. Properly implemented, the new forex policy has the capacity to take Nigeria to the promised land.
