Boosting Non-Oil Sector’s Capacity through CBN’S RT200 FX Programme

The Central Bank of Nigeria’s RT200 FX Programme which encourages banks to source their forex from the export proceeds market, where they may match their import demands with export proceeds will tackle the twin problem of the inadequacy of FX supply and constant pressure on the exchange rate, writes Festus Akanbi

Sequel to the recent unveiling of the Nigerian Banking Committee’s robust foreign exchange repatriation policy, The RT200 FX Programme, members of the Nigerian business community has continued to seek clarifications on a policy that promises to enhance the capability of the non-oil sector as a formidable foreign exchange earner.

The Governor of CBN, Mr Godwin Emefiele, had described the programme as 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.

The Programme

The RT200 Programme will have the following five key anchors: 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.

Under the programme, the CBN, working with the Money Deposit Banks, is to fund the construction of dedicated non-oil export terminals, to eliminate the delays currently experienced by exporters.

Like every other policy that touches on international trade, the RT200 Programme has continued to attract reviews from business groups and individuals seeking to take advantage of the new window of opportunity being created by the apex bank in conjunction with the nation’s bankers committee.

The Nigerian forex market has witnessed a slew of policy changes as the regulatory authorities intervene from time to time to deal with the twin problem of the inadequacy of FX supply and constant pressure on the exchange rate.

Speaking at the special press briefing at the end of the 364th Bankers’ Committee meeting on the launch of the bank’s new forex repatriation scheme ‘RT200 FX Programme’ in Abuja, Emefiele had stated that banks must begin to source their forex from the export proceeds market, where they may match their import demands with export proceeds, insisting the decision was by the CBN’s commitment to increase the country’s foreign reserves through non-oil export profits.

On its part, the CBN, which announced its readiness to provide loans to farmers who want to expand their plantations, however, warned that raw produce exporters will no longer be eligible for foreign exchange (forex) rebates, with Emefiele explaining that granting forex rebates to exporters of raw produce “has the capacity of creating inflation”.

Emefiele said: “If you want to import your plant and machinery, we will give you all the foreign exchange you need to import the plant because we know that when we give the foreign exchange to import the plant it is probably going to be like a one-off and after that, we will now begin to generate that same FX that we use in importing. We will generate exponential funding for that FX to fund other peoples’ obligations,” pointing out that entrepreneurs can now go to a bank and get a loan at 5% through any of the bank’s actions.

Ensuring Rates at I&E Window are Market Reflective

Given the sensitive nature of the foreign exchange market, the charge given to banks to rely on proceeds from non-oil exports for their foreign exchange needs has continued to attract reactions from economic affairs commentators. One of them is the CEO of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, who warned that if the CBN stops the sale of dollars to banks the effects would be profound and possibly unbearable.

He said: “If the CBN stops sales of forex to the banks, the shocks on the economy would be very profound and possibly unbearable. To attract foreign exchange from other sources, the CBN needs to ensure that the rates at the Importers and Exporters window are market reflective and flexible. The significance of the FDIs and FPIs and diaspora inflows should not be diminished.”

He said: “The CBN is currently the custodian of the major forex supplies from crude oil sales. Therefore, there should be a window for the CBN to remain a major participant otherwise the shocks on the economy will be unbearable.”

LCCI calls for Policy Improvement

On her part, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona, said the Central Bank of Nigeria’s new RT200 FX Programme to attract $200 billion in FX repatriation would need additional policy improvement with export infrastructure, financing for exporters and others to achieve the desired result.

She added that the CBN also needs to educate the public, especially potential exporters on the benefit of the scheme to enhance the participation of the business community.

Almona stated that a major challenge in Nigeria’s export chain is the unstructured procedures that cause delays, corruption, and rejection of exports. She said the scheme required critical export infrastructure, international trade diplomacy, and adequate funding to succeed.

“These facilities should be well directed to process targeted products in which Nigeria has some comparative advantage such as sesame, cashew, cocoa into finished goods.

“The reason for the low FX revenue from exports is due to the export of primary unprocessed commodities.

“Nigeria must take bold steps to establish a trading system that supports the seamless flow of trade.

“It must establish the necessary infrastructure, create needed awareness toward exploring the African Continental Free Trade Area (AfCFTA),” she said.

She believes the CBN needs to do more than the targeted credit facility, explaining that there are many credit facilities extended to farmers and manufacturers that may suffer non-repayment due to the high cost of production.

Therefore she insisted that Beyond the loans to support value addition to our exports, there is an urgent need to improve the export infrastructure at our ports.”

She urged that the federal government create more digital platforms to reduce the human interface for exports and formulate the right policies, citing that the FG should also accelerate the plan to build domestic export warehouses by the Nigerian Export Promotion Council (NEPC).

Meanwhile, Nairametrics, a financial advisory firm quoted two economists as cautioning the CBN against hasty withdrawals from forex sales to banks and the fact that the policy will bring discipline to the market.

A financial analyst at Quantum Economics, Olumide Adesina, said the policy could be a move to a more flexible exchange rate system that would affect hot money (FPI) to the Nigerian economy.

He said: “The (anticipated) move by the Central Bank of Nigeria to suspend the allocation of FX to DMB, will accelerate a market-driven exchange rate mechanism that can most likely showcase the true value of the naira, thereby attracting foreign portfolio investors, that have in recent years primarily stayed offboard due to stringent capital inflows.

A financial manager at Opera NG, Pascal Nkwodimmah, stated that the CBN’s efforts in boosting export proceed could give the apex bank confidence to adopt a flexible exchange rate. He said, “the implication of this CBN policy is positively pointing toward a floating exchange because of its effort to encourage non-oil exports that will be transacted through the import and export window. The CBN intention is to allow the price of FX to be determined within the market.”

Since the first quarter of 2020, Nigeria has faced an exchange rate crisis triggered by the drop in oil prices. It started after two of the world’s largest oil producers, Saudi Arabia and Russia, disagreed on how to proceed concerning oil supply cuts, which triggered a price war that pushed oil prices to crash to as low as under zero dollars.

It is hoped that the new initiative from the Bankers’ Committee will engender the spirit of competitiveness among banks since their access to foreign exchange will largely depend on proceeds from non-oil markets.