CBN Intervention and non-oil foreign exchange

Economic diversification is a vital determinant of economic growth and development by which a country moves to a more diverse production and commercial structure for sustenance according to emerging global imperatives.

Lack of economic diversification is often associated with increased susceptibility to external threats that can undermine prospects for long-term economic growth of a country.
 
Exports have been described as factors for overall development. They multiply the earnings of the country, thereby creating an avenue for growth by raising the national income of the country. 

The Nigerian Economy is still far from diversifying from crude oil export and as such the crude oil subsector continues to be the single most important sector of the economy.

The Nigerian budget is usually designed based on the Oil benchmark price in the global market, which tends to threaten the Gross Domestic Product (GDP) if the Oil price in the global market is unfavourable.

Hope is now rising, that CBN Governor, Godwin Emefiele and his proactive management team have made deft moves to ensure successful diversification through the floodgate of foreign exchange earnings from the Non-oil sector. Nigeria’s contribution to global trade could significantly increase as the new non-oil receipt programme of the Central Bank of Nigeria (CBN) holds beautiful promises of successful implementation.
 
Africa accounts for only three percent of global trade. With non-oil exports accounting for less than 15 percent of Nigeria’s Foreign Exchange earnings, Fiscal policies to raise the volume of trade is a welcome development.

In the light of the current and emerging global economic structure and trend, diversification is crucial and imperative to enhance the productivity and output of non–oil products as well as provide markets for the products. This is especially because the non-oil exports have played some roles that clear all doubts about the effectiveness of the export promotion strategies that have been adopted in the Nigerian Economy.

Unfortunately, however, the Nigerian Economy is still far from diversifying from crude oil export and as such the crude oil subsector continues to be the single most vital sector of the economy.
 
Over the last couple of years, the CBN has been attached to managing the demand side of the foreign exchange market, and the results have been suboptimal. The CBN governor, Emefiele, announced the introduction of the RT200 Foreign Exchange (FX) programme, targeted at raising $200 billion from non-oil exports over the next three to five years. One of its drives has similarities with the Naira4dollar scheme, which is also aimed at boosting Africa’s largest economy’s average income and its Gross Domestic Product (GDP), a measurement of the monetary value of final goods and services of a country.
 
The “RT200 FX Programme” stands for “Race to $200 billion in Foreign Exchange repatriation” with oil receipts. The major source of Nigeria’s Foreign Exchange earnings is under pressure due to discharging challenges in Nigeria’s oil sector. Emefiele sees the RT200 as a major route to elevating non-oil Foreign Exchange earnings. Some of Nigeria’s products with significant export earning potentials include Cotton ($2.6bn annually), Leather ($750m annually), Soya ($5bn), and Sugar ($2.5bn annually), among others.

The third tool, the non-oil Foreign Exchange discount scheme, aims to reward non-oil exporters that repatriate Foreign Exchange earnings back into the Internal and External window to increase liquidity in the market. It has similarities with the Naira4Dollar Scheme, which has increased remittances to $100m/week from only $6m, according to the CBN.

The fourth tool, which will involve the building of dedicated non-oil export terminals, seeks to hasten the export process. To achieve its realisation, the CBN has called on state governments with existing ports to establish a dedicated export terminal and infrastructure network. States with current seaports in Nigeria include Lagos, Rivers, Cross River and Delta.
 
The final tool is a biannual non-oil export summit held April. The summit aims at discussing the issues, challenges, and opportunities in the non-oil segment of the Nigerian economy, using the SWOT (Strength, Weakness, Opportunities, Threats) analysis. Participants at the summit included bankers, customs officials, the Nigerian Ports Authority, the Nigerian Export Promotion Council, cargo airlines, clearing agents, shipping lines, insurance practitioners, and logistics companies, among others.

Dambatta, a veteran journalist writes via [email protected]