Recently on February 10, 2022, the Central Bank of Nigeria, at the end of its 364th Bankers’ Committee meeting unveiled “RT200 FX programme, a new FX policy which according to the Governor of the country’s apex bank, Godwin Emiefele is “a set of policies, plans and programmes for non-oil exports that will enable Nigeria to attain its lofty yet attainable goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next three to five years.
Since the advent of the COVID-19 pandemic, global economies have experienced lots of challenges including a fall in global oil prices and production levels. Despite considerable achievements in revamping the economy with several intervention programmes, the economy still faces an FX problem that has invariably impacted Nigeria’s FX earnings resulting in the further devaluation and depreciation of the Naira.
Last year, the CBN from time to time, intervened with several FX boosting policies to deal with the twin problem of the inadequacy of FX supply and constant pressure on the exchange rate. These include (Naira for Dollar, Ban of FX sales to BDC, disrupting the publication of parallel market rates such as Aboki FX website, among other efforts} to boost FX remittance. Yet the result has been somewhat minimal. Putting into context, the CBN highlighted four major sources of FX inflow into the economy: Proceeds from Oil exports, Proceeds from Non-oil exports, Diaspora Remittances, and Foreign Direct/Portfolio Investments.
Recall that in the latest monthly Economic Report from the bank, non-oil exports have averaged over USD450mn in the six months leading to October 2021, way below its pre-pandemic monthly run-rate of over USD700mn. On the back of the backdrop, the CBN, in conjunction with bank executives, introduced a new FX policy called “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 to boost FX repatriation amounting to the tune of US$200 billion over the next 3-5 years through non-oil exports, one of Nigeria`s four major sources of FX inflow. To achieve this, the CBN has outlined five key anchors to serve as a focal point to drive this initiative: value-adding export facility, non-oil commodities expansion facility, non-oil FX rebate scheme, dedicated non-oil export terminal, and a biannual non-oil export summit.
The first anchor, the value-adding export facility, aims to provide long-term concessionary funding to businesses to expand their existing plants or erect new factories, thereby increasing the value of our non-oil export. Priority will be given to firms that export finished/semi-finished goods, not raw materials. Given that historically, according to the CBN governor, raw material export proceeds has not been significant enough, amounting to a paltry US$804mn in a US$130bn industry.
The second anchor is geared towards the expansion of non-oil export. In line with the first anchor, this facility will ensure that the expanded and new factories are not starved of inputs of raw materials in their production cycle. With an anticipated increase in demand for some raw materials, for example, feedstock, the CBN has taken a proactive step to boost its production and availability to ensure that the prices do not inflate.
Another anchor of the RT200 FX programme is the non-oil foreign exchange (FX) rebate scheme. This is quite similar to the Naira4Dollar scheme introduced last year to increase dollar remittance, with the CBN giving out N5 for every dollar inflow through any money transfer platform. In this case, there will be a special rebate scheme to non-oil exporters of semi-finished and finished produce who can show verifiable evidence of export proceeds repatriation sold directly to the I & E window for the benefit of other FX users and not for funding its operations. This initiative is to boost liquidity in the FX market.
Also, the CBN seeks to partner with interested state governments with existing ports to establish a dedicated export terminal with world-class infrastructures needed for non-oil exports to hasten the export process. The Bankers Committee will majorly fund this initiative; however, the selected state government responsibilities will be revealed in due course. Currently, only Lagos, Delta, Rivers, and Cross River states are eligible for this scheme as they all have existing infrastructures.
Finally, a biannual non-oil export summit will be introduced. This summit will bring together all the relevant stakeholders in the export business. Participants will include bankers, customs officials, cargo airlines, shipping lines, logistics companies, insurance practitioners, among others, 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. The inaugural event is scheduled for the first week of April 2022.
In our opinion, this is a welcome development as this programme will help develop our local industries (agriculture and manufacturing) to boost our non-oil export and global trade, leading to increased FX earnings for the country. However, to realize the full impact of this programme, all hands must be on deck from all concerned authorities, i.e., the fiscal and monetary authorities, to forestall any form of encumbrances such as insecurity and structural bottleneck that may arise during implementation.