The Central Bank of Nigeria (CBN) has announced that it will stop selling foreign currency (forex) – US dollar, euro, pound sterling, among others – to banks by the end of 2022.
In its place, CBN announced the introduction of what it called The RT200 Programme, saying it was ripe for the banks to source for their forex by funding entrepreneurs with ideas, skills and support to make them responsive and attract foreign currencies to Nigeria.
This was disclosed by CBN Governor Godwin Emefiele at the Bankers’ Committee press briefing on Thursday.
Experts said the new policy by the CBN if properly handled, would reduce pressure on the naira, increase productivity, expand exports, attract foreign exchange to the country and create job opportunities for the people.
The experts said there was no shortcut to foreign direct investment, recalling that they had earlier told the government that stopping disbursement of forex to bureau de change operators alone will not save the naira and that the way to resolve the problem must be all-encompassing, including holding banks to account.
The apex bank said 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.
Emefiele, in his speech, said “After careful consideration of the available options and wide consultation with the banking community, the CBN is, effective immediately, announcing the Bankers’ Committee “RT200 FX Programme”, which stands for the “Race to US$200 billion in FX Repatriation.”
The CBN governor said the new policy was directed at the non-oil export sector.
“The RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable us to attain our lofty yet attainable goal of US$200 billion in FX repatriation, exclusively from non-oil exports, over the next 3-5 years,” he said.
The apex bank boss noted that the country could not continue to depend on FX earnings to fund its import from a product it could not determine in both price and quantity.
Emefiele further disclosed that the CBN would be reviewing its intervention programmes going forward to ensure that they continue to achieve the desired results.
“Although interest rates on our various intervention facilities were expected to revert to 9 per cent effective March 1, 2022, we are announcing that the rates would remain at 5 per cent for another year in view of the promising trajectory we have established in economic growth and job creation.
“In effect, the concessionary interest rate of five per cent on our intervention facilities would now be extended until March 1, 2023,” he said.
Why banks must generate their forex
The CBN governor said the commercial banks do not have a choice but to begin to explore ways of generating their forex.
“I said to them at the meeting that the era is coming to an end when your customer has a demand for $200 million and you move all the requests to the CBN.
“Before, or about latest, the end of this year, we will tell them don’t come to the central bank for foreign exchange again. Go and generate your export proceeds, fund people who want to generate export proceeds and when they come in, you can sell to your customers that want $200 million.
“Maybe when we see the record of export proceeds you have generated, we will give you 10 per cent of it.
“So, you must go and join the race to build your foreign exchange from your export customers to fund your import customers,” he said.
How success of ‘Naira-4-Dollar’ policy inspired new move
Emefiele disclosed that the recent policy on naira- for-dollar led to a significant improvement in diaspora inflow from an average of US$6 million per week in December 2020 to an average of over US$100 million per week by January 2022.
The naira-for-dollar scheme, which started on March 8, 2021, was originally scheduled to end on May 8, 2020. But the apex bank said the scheme would continue indefinitely. With the scheme, diaspora remittance recipients are rewarded with an extra N5 for every dollar wired through the official routes.
The apex bank governor said: “I believe that the lessons we have learnt from our policies on remittances can be applied in improving some aspects of FX inflow into the country.
“As we know, there are four major sources of FX inflow into Nigeria; proceeds from oil exports, proceeds from non-oil exports, diaspora remittances, and foreign direct/portfolio investments.
“Most of them are unreliable sources that are perennially prone to exogenous vicissitudes of global economic developments.”
What the new policy means
The Value-Adding Export Facility will provide concessionary and long-term funding for businesspeople who are interested in expanding existing plants or building brand new ones for the sole purpose of adding significant value to Nigeria’s non-oil commodities before exporting the same.
He said this is important because the export of primary unprocessed commodities does not yield much in foreign exchange.
“In Nigeria today, we produce about 770,000 metric tons of sesame, cashew and cocoa. Of this number, about 12,000 metric tons are consumed locally and 758,000 metric tons are exported.
“The unfortunate thing though is that out of the 758,000 metric tons that are exported annually, only 16.8 per cent is processed. The rest are exported as raw sesame, raw cashew and raw cocoa, thereby giving Nigerian farmers an infinitesimal part of the value chain in these products.
“For example, the global chocolate industry is valued at about US$130 billion. Of this amount, Cote D’Ivoire, Ghana and Nigeria account for more than 72 per cent of global cocoa exports.”
Our correspondent reports that the Non-Oil Commodities Expansion Facility will also be a concessionary facility designed to significantly boost local production of exportable commodities.
It will be designed to ensure that expanded and new factories that are financed by the Value-Adding Facility are not starved of inputs of raw commodities in their production cycle.
Also, the Non-Oil FX Rebate Scheme is 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 I & E window to boost liquidity in the market.
According to Emefiele, “Analogous to the Naira4Dollar Scheme, which has helped boost remittances from only $6 million per week to over $100 million per week, we shall establish the modalities for granting a rebate for each dollar that non-oil exports proceed that an exporter sells into the market, for the benefit of other FX users and not for funding its operations.
“Although this rebate programme is with immediate effect, the detailed guideline of this scheme will be communicated next week. Our plan is to graduate the percentage of the rebate depending on the level of value addition into the product being exported.”
The third anchor of the RT200 Programme is the construction/establishment of a Dedicated Non-Oil Export Terminal.