Will the CBN’s RT200 intervention increase Nigeria’s non-oil foreign exchange earnings?

CBN-Governor, Godwin Emefiele.

By KADIRI ABDULRAHMAN –

In recent times, the scarcity of foreign exchange in the Nigerian economy has worried many Nigerians. Some believe that the heavy reliance on crude oil sales, with its volatility, is responsible for the shortage of foreign exchange earnings for the Nigerian financial system that led to the depreciation of the naira.

To address this challenge, the apex bank, the Central Bank of Nigeria (CBN), in February launched a new intervention program, the “Race to $200 Billion in Foreign Exchange Repatriation”, otherwise known as RT200. , to increase the country’s foreign exchange earnings. .

R200 was designed to help reduce exposure to volatile Forex sources and gain more stable and sustainable entries. CBN Governor, Mr. Godwin Emefiele, during the presentation of the RT200, said that the program will help improve non-oil export earnings.

Emefiele explained that RT200 is a set of policies, plans and programs designed to help the country reach a goal of $200 billion from non-oil exports exclusively over the next three to five years.

He said the program, anchored on five key areas, was launched after careful consideration of available options and extensive consultation with the banking community.

“These are value-added expert facilities; Non-oil commodity expansion facility; Reimbursement program for non-oil currencies; A dedicated non-oil export terminal and bi-annual non-oil export summit,” he said, in addition to its potential to provide concessional and long-term financing to businessmen who wanted to either expand existing factories or build new ones.

According to him, its main objective is to add significant value to non-oil commodities before exporting them.

“This is because the export of unprocessed raw materials does not bring in a lot of foreign exchange.

“For example, Nigeria would produce around 770,000 metric tons of sesame, cashew nuts and cocoa. Of this number, approximately 12,000 metric tons are consumed locally and 758,000 metric tons are exported.

“Of the 758,000 metric tons that the country exports annually, only 16.8% is processed. The rest is exported in raw form, giving Nigerian farmers a tiny part of the value chain for these products,” he said.

Emefiele further stated that the global chocolate industry is valued at around $130 billion.

“Of this amount, Côte d’Ivoire, Ghana and Nigeria account for more than 72% of global cocoa exports.

“Because these countries mainly export raw cocoa beans, Côte d’Ivoire would have received $3.6 billion per year, Ghana generates $1.9 billion per year.

“Nigeria receives around $804 million a year from an industry worth over $130 billion.

“In contrast, Belgium accounted for 11% of global chocolate exports in 2019, worth $3.16 billion. Along the same lines, Germany’s chocolate exports were worth $5.14 billion in the same year,” he said in a recent media report.

Emefiele believes that the RT200 is a first step in recovering some of the currency the country rightly deserves.

He explained that the initiative was not meant to provide a solution to all of Nigeria’s export problems, adding that it was a first step to solving the problems.

“This is a first step intended to ensure that the CBN is better able to carry out its mandate effectively and efficiently, which ensures the preservation of the scarce commonwealth and the stability of the Naira. .

“Only by strengthening the productive and remunerative capacity of this economy can we truly preserve the long-term value of our currency as well as the stability of our exchange rate,” he said.

The apex bank subsequently issued guidelines for the operationalization of R200, stating that one of the main anchors of the program was the rebate program on the repatriation of proceeds from non-oil exports.

He said the rebate program was designed to incentivize exporters in the non-oil export sector to encourage the repatriation and sale of export earnings in the foreign exchange market.

There is also the Non-Oil Commodities Expansion Facility, a concessionary facility designed to significantly boost local production of exportable commodities.

The new package is akin to the Naira4Dollar program, which the CBN says has helped boost diaspora remittances from six million dollars per week to more than $100 million per week.

This Naira4Dollar scheme is designed to ensure that expanded and new factories that are funded through the Value Added Facility are not starved of raw material inputs into their production cycle, with CBN promising to pay N65 for every dollar repatriated and sold for use by third parties. , and N35 for each dollar repatriated and sold in the Investors and Exporters (I&E) window for its own use on eligible transactions only.

Shedding light on the scheme, Mr. Ozoemena Nnaji, Director of Commerce and Trade Department, CBN, said that only exporters of finished and semi-finished products are eligible for the new incentive. It was born out of the need to develop new strategies aimed at achieving more stable and sustainable foreign exchange inflows, in order to insulate the Nigerian economy from shocks and foreign exchange shortages.

“Exporters are only eligible for rebates when repatriated export earnings are sold at the I&E window. Eligible transactions eligible for incentives under the program will be the export of finished and semi-finished products wholly or partially processed or manufactured in Nigeria,” she said.

The apex bank said the RT200 appears to be paying dividends, with the apex bank raking in around $600 million in June from the program.

According to Mr. Osita Nwanisobi, Director of Corporate Communications of the bank, said through the new intervention and others like it in the past, the CBN remains committed to addressing the foreign exchange issues facing the nation through a effective demand and supply management of the challenge. .

“CBN records show that currency inflows through the RT200 FX program during the first and second quarters of 2022 increased significantly to around $600 million in June,” he said.

He also said that initiatives such as RT200 and the Naira4Dollar rebate program have helped increase foreign exchange inflows into the country.

At a conference on the RT200 in Lagos, Governor Babajide Sanwo-Olu of Lagos State also expressed confidence that the RT200 will yield the expected dividends for the national economy and commended the CBN for taking measures to promote non-oil exports to Nigeria, while using the opportunity to inform stakeholders that Lekki Ports would be open for business before the end of the year.

According to Ms. Nneka Onyeali-Ikpe, Managing Director of Fidelity Bank, recently said that the results are already visible as exporters have secured approval for more than three billion naira in incentives from the CBN through the program.

“In fulfillment of his remission pledge, the CBN Governor has approved the immediate release of export incentives of N3.5 billion to a total of 150 exporters in Nigeria’s non-oil sector, as part of the RT200 exchange rate policy,” she said.

Experts believe that the introduction of the RT200 program is one of the CBN’s most ambitious policies to rejuvenate the country’s economy.

They said the program would put the economy on a sustainable footing to deal with the current shortfall in the supply of foreign currency and the constant pressure on the exchange rate.

There are four main sources of foreign exchange inflows into the national economy, namely oil export proceeds, non-oil exports, diaspora remittances and foreign direct investment.

The Managing Director of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, commended the CBN for the initiative which would help increase foreign exchange earnings and suggested that the rebate offered under the program be extended to cover the exchange rate. difference between the official market and the parallel market.

He said the RT200 is a laudable initiative that would go a long way in boosting the country’s non-oil exports, given the ineffectiveness of the export expansion subsidy.

“Without a doubt, the RT200 program is a good initiative as it has been designed to stimulate the growth of non-oil exports in Nigeria.

“This comes against the backdrop of the lackluster implementation of the export expansion grant. But there is also the question of the suitability of the RT200 as an export incentive.

“The ambition is to reach $200 billion in foreign exchange earnings over the next 3-5 years from non-oil revenue. It is therefore important to create an enabling and stimulating environment in order to achieve the goal,” he recently said.

He was further quoted as saying that the rebate of N65 or N35 per dollar offered by the CBN could not cover the exchange rate differential between the official and parallel markets.

According to him, the payment of N3.6 billion as rebate in the first and second quarters of 2022 presupposed a commendable level of repatriated export earnings sold on the I&E window.

“On this point, we can also assume that the program encourages currency inflows and sales.

“However, it is necessary to be interested in the content of the export which brought in the repatriated income. Are they value added products? Are they processed or manufactured products?

“This will allow us to answer the very important question of whether we have succeeded in increasing job and wealth creation within the value chain of exported products,” he said in a recent article by hurry.

According to the Division Manager, Agro-Industry, Natural Resources and Project Development, Heritage Bank, Olugbenga Awe, the Nigerian economy was well diversified, down to statistics except sources of foreign exchange.

Awe, however, said Nigerian non-oil products could only increase foreign exchange earnings if they meet global standards.

As the CBN continues to operationalize and consolidate the gains of RT200, Nigerians remain hopeful that the initiative will lead to the much needed revival of the productive sector of the economy.

They also hope it will result in value-added exportable products that will positively impact the country’s foreign exchange earnings by targeting $200 billion in the short term. (NAN characteristics).