RT 200 FX: The CBN’s Plan to Increase Forex Inflows.
JOSEPH INOKOTONG recalls efforts by the Central Bank of Nigeria (CBN) to guarantee Nigeria meets the aim of $200 billion in FX repatriation from non-oil exports over the next three to five years in this post.
Under Governor Godwin Emefiele’s supervision, the Central Bank of Nigeria (CBN) has embarked on a number of efforts to boost the country’s economy during the last seven years. Many people have praised the initiative because of the long-term favorable effects the policies have had on the economy in the short, medium, and long term.
Indeed, the CBN’s campaign to generate additional Foreign Exchange (FX) for the economy has begun to bear fruit only a few weeks after the program’s inception. The policy focus is centered on better preparing the central bank to carry out its duty in an effective and efficient way that ensures the preservation of the nation’s precious resources and the stability of the Naira.
According to Mrs. Nneka Onyeali-Ikpe, Managing Director/Chief Executive Officer of Fidelity Bank Plc, at a virtual press briefing last week Thursday, following the 364th Bankers’ Committee Meeting, exporters have repatriated approximately $60 million in proceeds from finished and semi-finished goods. In addition, in order to meet its promise of a refund, the CBN Governor authorised the immediate disbursement of N3.5 billion in export incentives to a total of 150 non-oil exporters in Nigeria under the newly implemented RT200 foreign exchange policy.
The RT200 FX Programme, which stands for the Race to $200 billion in FX Repatriation, is a combination of non-oil export policies, strategies, and programs that would allow Nigeria to achieve the high target of $200 billion in FX repatriation, entirely from non-oil exports, during the next three to five years. It was personally launched on February 10, 2022, by Central Bank of Nigeria Governor Godwin Emefiele, following extensive engagement with the banking community.
According to Emefiele, the RT200 FX Programme consists of five components. The 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 are the major anchors.
To achieve its goals, the Value-Adding Export Facility would offer concessionary and long-term financing to businesses interested in expanding existing factories or developing brand new ones for the express purpose of adding considerable value to non-oil commodities before exporting them. This is more understandable when one considers that the export of primary unprocessed commodities does not generate much foreign cash.
Nigeria, for example, is said to generate around 770,000 metric tonnes of sesame, cashew, and cocoa. Around 12,000 metric tonnes of this total are eaten domestically, whereas 758,000 metric tonnes are exported. Unfortunately, just 16.8 percent of the country’s yearly exports of 758,000 metric tonnes are processed. The remainder are shipped in raw form, providing Nigerian farmers a minuscule share of the value chain in these products.
Surprisingly, the worldwide chocolate business is worth over $130 billion. Cote d’Ivoire, Ghana, and Nigeria account for more than 72% of total world cocoa exports. Because these nations mostly export raw cocoa beans, Cote D’Ivoire is believed to have received $3.6 billion per year, Ghana earns $1.9 billion per year, and Nigeria receives around US$804 million per year from an industry worth more than $130 billion. Unlike West African countries, Belgium accounted for 11% of worldwide chocolate exports in 2019, valued at $3.16 billion. In the same year, Germany’s chocolate exports were valued at $5.14 billion.
Worried by these unsavory developments, and mindful of the alarming disparities between raw commodity exporters and semi-finished or finished product exporters, the CBN believes that the Value-Adding Export Facility is a first step toward reclaiming some of the foreign exchange that the country rightfully deserves. This facility is anticipated to meet the needs of the youngsters who are already creating value via the use of e-commerce and online means for the provision and export of software, financial services, financial technology, Nigerian fashion and clothing, and so on. “We would accept such enterprises under this facility as long as their exports are documented using Form NXP and the FX profits are repatriated and verified,” Emefiele pledged.
The Non-Oil Goods Expansion Facility is another concessionary facility aimed at greatly increasing local production of exportable commodities. It is designed to ensure that enlarged and new factories supported by the Value-Adding Facility do not run out of raw commodity inputs during their production cycle. Indeed, a significant rise in the production of such goods would assist to damper and regulate their prices, ensuring that the predicted increase in demand for them does not put undue pressure on market aggregate prices.
To maximize the potential and effect of this facility, the CBN intends to follow in the footsteps of other successful export-based economies by first prioritizing and targeting certain commodities. “We would establish a geographic prioritizing of crops across the country in order to achieve production efficiency through the construction of special zones that will cater to certain commodities.” “Because long-term foreign exchange profits are predicated on national competitive advantage, a prioritizing structure based on crops that Nigeria is best equipped to produce would be critical,” Emefiele added.
The introduction of the Non-Oil FX Rebate Scheme, a special local currency rebate scheme for non-oil exporters of semi-finished and finished produce who show verifiable evidence of export proceeds repatriation sold directly into the Investors and Exporters (I & E) window to boost liquidity in the market, is another key anchor of the RT 200 FX Programme. This is similar to the Naira4Dollar Scheme, which the CBN claims has increased remittances from $6 million per week to more than $100 million per week. This part of the transaction was completed last week.
The CBN had agreed to pay N65 for every dollar repatriated and sold at the I & E foreign currency window for other third-party use, and N35 for every dollar repatriated and sold into I & E for personal use only on qualified transactions. The apex bank intends to grade the refund percentage based on the extent of value added to the exported goods.
The construction/establishment of a specialized Non-Oil Export Terminal, the third pillar of the RT 200 Programme, is intended to address the persistent issue of port congestion, which exporters identified as a key hindrance to better operations and foreign exchange revenues.
According to the African Centre for Supply Chain Practitioners, Nigeria loses around $14.2 billion per year due to port congestion. According to a December 2020 Financial Times report, congestion has gotten so terrible that although shipping a 40-foot container from China to Lagos costs $3,500, a distance of 22,000 kilometers, it costs $4,000 to transfer the same container from the port to mainland Lagos, a distance of only 12 kilometers.
“During our stakeholder meetings with various segments of exporters, we heard multiple painful instances of how containers sat at ports for several months just waiting to be delivered, resulting in the loss of perishable commodities or well-established overseas clients,” Emefiele said. We cannot ignore or wish away this challenge if we are to meet our target of $200 billion in non-oil exports. We must face it front on and find a solution.
That is why we are issuing a challenge today to all state governments with existing ports who are ready to collaborate with the Bankers Committee to develop not only a specialized export terminal but also the whole ecosystem of world-class infrastructure required for non-oil exports. The Bankers Committee will gather and analyze comprehensive proposals from prospective State Governments over the following three months in order to choose which one we can work with. The Bankers Committee will provide a large portion of the finance required for this port, while the chosen State Government will have obligations that will be outlined in due time.”
According to the CBN, the specialized port would be capable of producing over 100,000 direct and indirect employment, as well as providing a considerable boost to Nigeria’s desire for significant increase in non-oil export profits. Mr Emefiele emphasized that under this arrangement, loans to enterprises looking to develop or build new factories that will create demonstrable export revenues for the economy will continue at 5% per year for ten years, with a two-year moratorium.
In light of the lessons learned from previous rounds of consultation with non-oil exporters, the CBN feels that a more official, planned, and regular venue is required to examine the difficulties, challenges, and possibilities in this sector of the economy. That is why it announced the establishment of a Biannual Non-Oil Export Summit, the first of which will be held in the first week of April 2022. The Summit will bring together all essential export players, such as bankers, customs authorities, the Nigerian Ports Authority (NPA), the Nigerian Export Promotion Council (NEPC), clearing agents, cargo aircraft, shipping lines, logistics businesses, insurance practitioners, and so on.
“This gathering will be one where for every complaint, problem, issue, challenge, or difficulty that is presented or recognized, there will be one or more agencies or practitioners who can articulate possibilities for overcoming that problem,” said the CBN Governor. I believe that the ideas generated by such summits would be crucial in assisting us in meeting our eventual aim of $200 billion in non-oil exports each year.”
He did not mince words in emphasizing his drive and desire to achieve the established goals, despite the fact that he was aware that the aims may look impossible to some. Using examples, he said that numerous countries with far fewer resources than Nigeria are accomplishing it. “Take, for example, farm exports from the Netherlands, which totaled almost $120 billion last year.” “However, the Netherlands has a landmass of roughly 42,000 square kilometers, which is far less than Niger State’s landmass of about 76,000 square kilometers,” Emefiele pointed out.
“Let me emphasize that the RT200 Programme is not intended to be a silver bullet to all of our challenges in the export part of the economy,” he said, explaining what the program aims to achieve. Rather, it is a first step to ensure that the CBN can carry out its duty in a more effective and efficient manner, ensuring the preservation of our precious commonwealth and the stability of our national currency, the Naira. Only through increasing the economy’s production and earning capacity will we be able to really safeguard the long-term worth of our currency and the stability of our exchange rate.”
The RT200 Programme is likely one of the most significant interventions and far-reaching policies enunciated by the CBN to revitalize the country’s economy and establish it on a sustainable pedestal to deal with the current deficiency of FX supply and persistent pressure on the exchange rate.
The majority of the four key sources of FX inflow into Nigeria — proceeds from oil exports, non-oil exports, diaspora remittances, and Foreign Direct/Portfolio Investments – are unreliable and subject to external world economic trends. The ever-changing fortunes of certain oil-exporting countries, especially those regarded to handle their oil earnings properly, are also subjected to huge shocks when oil prices fall.
To prevent these abrupt changes in economic life, the program’s launch was prompted by the need to focus on techniques that can assist the country earn more steady and sustained inflows of foreign cash. Mr Emefiele deserves credit for beginning the initiative, and he stated that “we would need to adopt the best practices of other nations and guarantee that we safeguard ourselves a little bit from events that are beyond our immediate control.”
Go home
Visit our YouTube Page