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Understanding CBN Perspectives On Road To $200 Billion

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By Barnabas Eke (Lagos)

With the current unstable accruals in the Foreign Exchange (FX) Reserves; dwindling from $39,650 billion in April to $38,540 billion in May 2022, and compounded by the volatile exchange rate of the Naira, the newly introduced monetary policy intervention by the Central Bank of Nigeria (CBN) referred to as ‘Road To $200 billion’ (RT200), promises to be the masterstroke strategy to shore up the nation’s exchange rate and boost the FX Reserves.

No doubt, this is one of the manifest efforts, in the recent past, by the CBN to tangibly promote diversification of the economy given that crude oil sale dominates sources of FX inflow to the economy. 

The policy, therefore, gives impetus to investors in the non-oil sector whose products are meant to be exported. Apart from the value addition of these products, they must also comply with international standards before the exporter would be qualified to earn the maximum benefits equal to the earnings of competing exporters of rival products from other countries.

According to the CBN policy guidelines for RT200 released in February 2022, it is a non-oil exports proceeds repatriation rebate scheme that is part of the apex bank’s effort to reduce exposure to volatile sources of FX and to earn more stable and sustainable inflows of FX into the country.

The  shift in strategy, at this point, is vital given the fact that the volatility of sources of FX impacts the exchange rate of the Naira, the accruals to FX reserves as well as the inflationary trends in the country.

The policy “aims to raise $200 billion in Foreign Exchange (FX) earnings from Non-Oil Proceeds over the next 3-5years” according to CBN documents. A major anchor of the program is the Non-OIl Export proceeds repatriation Rebate Scheme. The rebate scheme is designed to incentivize exporters in the Non-Oll export sector to encourage repatriation and sale of export proceeds into the FX Market.

The policy is borne out of the need to mainstream export-bound non-oil sector products as a means of earning more stable and sustainable FX inflows to insulate the Nigerian economy from shocks and FX shortages. The desired outcome would be to enhance Foreign Exchange inflow, diversify the sources of FX inflow, increase the level of contribution of non-oil exports to economic growth and Gross Domestic Product, ensure stability and sustainability of FX inflows, and support export-oriented companies to expand their export operations and capabilities.

In order to ensure value addition under the non-oil exports, the approved products, goods, and services must be finished and semi-finished goods wholly or partly processed or manufactured in Nigeria, permissible and excluded under the existing export prohibition list. 

The incentives available to qualified companies in the scheme are derived from quarterly payment by the CBN of N65 for every US$1 repatriated and sold at the Investors’ and Exporters’ ( I & E) Window to Authorized Dealer Bank (ADB) for other third-party use, and N35 for every US$1 repatriated and sold into (I & E) window for the Exporter’s use on eligible transactions only. Of course, the incentive payments for every dollar repatriated and sold at the designated banks encourage repatriation of profits and discourage capital flights just as it ensures adequate account of repatriated FX to fund economic growth rather than being frittered away in the open FX black market.

However, this is not an all-comers’ participation affair. Consequently, there are certain operational safety nets embedded in the scheme to ensure that it is not abused or derailed. It is also designed to boost the revenue base of dedicated exporters of non-oil products, goods, and services through payments of rebates for each repatriated dollar.

One of the safety nets of the scheme is that although it is categorically stated that “the CBN (Trade & Exchange Department) shall be responsible for the day-to-day administration of the Scheme”, the ADBs are reposed with further gatekeeping functions.

 For instance, all applications/requests for participation are routed through the ADBs which scrutinize them to ascertain compliance with CBN specifications, the veracity of documents submitted, determination of eligibility of products and exporters (applicants), as well as the verification and confirmation of participating exporter (s) due for payment of rebate by the CBN. The exporters must also receive credits on agreed amounts through their accounts domiciled with the ADBs. 

The complementing but overlap of functions between the Apex Bank and the ADBs adds credibility to the overall process. The apex bank is responsible for the policy measures and issuing of updates from time to time while also taking into consideration the recommendations of the ADBs in the process of effecting payment of rebates to beneficiaries.

The CBN can also impose sanctions on any ADBs found guilty of any infractions or attempts to circumvent the intent of the Scheme. Sanctions may include suspension from the FOREX dealership license for a period of 24 months. The apex bank can also sanction any Exporter who presents fraudulent document(s) in an attempt to undermine the scheme with a ban from accessing the incentive for upwards of 24 months. 

The banks are expected to play pivotal roles in assuring that the policy objectives of RT200 are realized on or before the cut-off time of the scheme in 2026. To this effect, the CBN has reposed on the ADBs the responsibilities of interfacing with the apex bank and Exporters. Under this role, the ADBs oversee that application procedures and eligibility criteria conform with the standards and meet qualifications specified by the apex bank. In other words, ADBs must not only ensure that potential exporters provide verifiable documented proof of their eligibility and that of their products but are also ascertainable and authenticated by the banks for recommendation to CBN. In addition, banks process requests, render periodic reports on disbursements of rebates and make regular recommendations on the operational guidelines to the CBN.

Barely two months after its introduction, statistics released in April 2022 by the Bankers Committee indicate that 150 exporters have repatriated $60 million in export proceeds which qualified them for the quarterly payments of N3.5 billion FX rebate and the rebates have been ordered to be released to them by the CBN Governor, Godwin Emefiele. This was confirmed by the Managing Director/Chief Executive, Fidelity Bank Plc, Mrs. Nneka Onyeali-Ikpe in her briefs after the Bankers Committee meeting on the performance of the RT200 program in the 1st quarter of 2022. 

The outlook is eliciting positive interest across the industry. To future-proof the scheme, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, advises the CBN to take cognizance that critical export infrastructure, international trade diplomacy, and adequate funding are prerequisites for sustaining and optimizing the scheme. 

It is hoped that similar suggestions will be accommodated by the CBN, and hopefully, constitute parts of the considerations to look out for in the CBN’s future updates on the guidelines.

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