March 10, 2023/CSL Research
Based on a This Day report, the Executive Director/Chief Executive, Nigerian Export Promotion Council (NEPC), Dr. Ezra Yakusak disclosed that promissory notes valued at N308.45 billion have been approved for disbursement to 199 exporting companies under the Export Expansion Grant (EEG) Scheme. The EEG, an incentive scheme, was established to encourage the export of value-added products as against raw agricultural commodities.
There have been efforts by the federal government over the years to increase export proceeds to boost the country’s foreign exchange supply. Only recently, the CBN established the RT200FX program which technically aims at raising US$200 billion in Foreign Exchange earnings over the next 3-5 years from non-oil proceeds. The policy offers N65 for every US$1 repatriated and sold to Authorised Dealer Banks (ADBs) through the Investors & Exporters FX window for third-party use and N35 for every US$1 repatriated and sold into the I&E window for “own” use on eligible transactions.
The RT200 FX Program was unveiled in February 2022. The initiative was anchored on five pillars, namely: Value-adding Exports Facility, Non-oil Commodities Expansion Facility, Non[1]oil FX Rebate Scheme, Dedicated Non-oil Export Terminal, and Biannual Non-oil Exports. The Governor, Central Bank of Nigeria, Godwin Emefiele, speaking at the maiden edition of the biannual Central Bank of Nigeria Non-oil Export Summit, noted that the bank recorded a significant increase in non-oil export repatriation and paid eligible exporters over N3.5bn rebates in the first quarter of implementing the RT200 FX programme. He appealed passionately to the NPA, the Customs, and shipping companies in a working group to work with the bankers’ committee to resolve challenges associated with international trade.
In December 2022, the World Bank asked the Central Bank to reconsider the RT-200 Programme despite the good intentions behind it. According to the World Bank, the program has created an additional foreign exchange window further worsening the nation’s FX problems. Exporters and their agents are alleged to be involved in a scheme where settle transactions are settled outside the I&E window at the parallel rate after benefiting from the RT-200 rebate, taking advantage of the wide parallel market premium and the CBN’s N65 and N35 per US$ incentives.
Issues around the implementation program make us believe it may not be the solution to the country’s lingering FX scarcity. The parallel market premium remains wide despite over a year of the scheme’s introduction. That said, beyond CBN’s efforts at supporting export businesses, our eyes are on the Dangote refinery scheduled to commence operations this year. The refinery, which has sufficient capacity to meet local demand and exports, should boost refined petroleum exports while simultaneously offering structural tailwinds to FX liquidity.
