Friday, March 29, 2024
HomeBanking & FinanceBoosting domestic production with $200b FX target

Boosting domestic production with $200b FX target

RT200 Programme is not intended to be a silver bullet to all our problems in the export segment of the economy. 

The domestic economy will benefit with the ongoing implementation of the Central Bank of Nigeria (CBN) Race To $200 billion policy that places more emphasis is boosting local production of goods and services.

The three to five year policy plan is expected to also boost Nigeria’s foreign exchange earnings, reduce imports, boost exportation of domestic products and enhance economic recovery. The policy implementation enhances consumer spending and accelerates investments into the economy. 

There is no doubt that Nigeria is in dire need of investments to quicken economic recovery following the devastating impact of Covid-19 pandemic. 

While the foreign capital investments are awaited, expansion of domestic economy through local production of goods is advocated.

Real sector operators are also being encouraged by the Central Bank of Nigeria to generate export proceeds to boost dollar liquidity in the economy.

This policy plan aligns with the “RT200 FX Programme”, which stands for the “Race to $200 billion in FX Repatriation” policy of the apex bank announced in February.

CBN Governor, Godwin Emefiele said the RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable Nigeria attain its lofty yet attainable goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next three to five years.

READ ALSO: Interswitch Group Highlights Role in Fintech Ecosystem

Emefiele said the RT200 FX Programme is one of the strategies that can help Nigeria earn more stable and sustainable inflows of foreign exchange.

He said the RT200 Programme implementation will be supported by 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 to be held in April, 2022.

He explained that RT200 Programme is not intended to be a silver bullet to all our problems in the export segment of the economy.

“Rather it is a first step meant to ensure that the CBN is better able to carry out its mandate in an effective and efficient manner, which guarantees preservation of our scarce commonwealth, and the stability of our national currency, the Naira. It is only by boosting productive and earning capacity of this economy that we can truly preserve the long-term value of our currency, as well as the stability of our exchange rate”.

Emefiele added that the Value-Adding Export Facility will provide concessionary and long-term funding for business people who are interested in expanding existing plants or building brand new ones for the sole purpose of adding significant value to our non-oil commodities before exporting same.

He said the Non-Oil Commodities Expansion Facility will also be a concessionary facility designed to significantly boost local production of exportable commodities.

Continuing, he said 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 exports proceeds repatriation sold directly into the Investors & Exporters window to boost liquidity in the market.

The World Bank and International Monetary Fund (IMF) have consistently encouraged governments across countries to take steps that would support their economies thrive in the face of Covid 19 pandemic. 

Partnership with state governments 

Emefiele also said the apex bank will be working with state governments with interest in building air and sea ports terminals to support export of goods to earn dollars for the economy.

He said these policy plan is to  support growth by taking unprecedented measures to prevent the economy from going into a tailspin.

“Our first objective was to restore stability to the economy by providing assistance to individual households, SMEs and businesses that had been severely affected by the pandemic, as well as by the lockdown measures,” he said.

According to Emefiele, working with banks and participating financial institutions, the CBN has granted over N3 trillion in intervention loans that have undoubtedly been one of the critical ingredients for our economic recovery and employment generation. He said the CBN would be reviewing intervention programs going forward to ensure that they continue to achieve the desired results.

Banks respond 

Commercial banks are adjusting their business plans to include support CBN in achieving the policy implementation plan.

For instance, Fidelity Bank, Access Bank, Zenith Bank and United Bank for Africa have all reaffirmed their commitment to actively support the CBN efforts to achieve its goal of $200bn forex reparriation target.

Hassan Imam, executive director, Northern Businesses, Fidelity Bank Plc, said bank would continue to take steps to bridge the knowledge gap in the non-oil sector space by facilitating the necessary processes and documentation for the new policy, with the goal of increasing FX repatriation through exportation.

He reiterated his bank’s readiness to support government’s economic imperatives to boost revenue in non-oil sector of the economy.

“As you know Nigeria is currently an import-dependent economy with so much pressure on our currency and the source of revenue as a nation is petrol dollar. So, the initiative of the CBN is to leverage on our non-oil products especially in agriculture like hibiscus flower, cashew nut sesame and many other products for exports”.

Interest on intervention loans reduced

To support growth of the real sector, the CBN has also cut  interest rates on all intervention facilities from nine to five per cent per annum.

The regulatory forbearance would allow banks restructure loans given to sectors severely affected by the Covid-19 pandemic and strengthen the Loan to Deposit Ratio (LDR) policy, which has resulted in a significant rise in loans provided by financial institutions.

In a circular released at the weekend, the apex bank said the move was to  address the effect of the Covid-19 pandemic on the Nigerian economy.

CBN Director, Financial Policy and Regulation Department, Chibuzo Efobi, explained that in uncertain times, there was always way to ensure that businesses survived, including granting forbearance.

He said the regulatory forbearance also includes restructuring of credit facilities impacted by Covid-19.

In the circular addressed to all banks and other financial institutions, Efobi said the extension of five per cent per annum interest rate on all CBN intervention facilities was for one year adding that the policy took effect retrospectively from February 28, 2022.

CBN’s data showed that total gross credit to businesses rose from N19.4 trillion to N23.5 trillion in the last one year, representing  over 21.1 per cent increase.

In a state of the economy and financial sector report, the apex bank said agriculture, manufacturing, power and healthcare took the lion share of the loans disbursed.

The loans to benefit from the interest rate cut include  N1 trillion facility in loans to boost local manufacturing and production across critical sectors of which 53 major manufacturing projects, 21 agriculture related projects and 13 service projects are being funded.

The list also include the N100 billion intervention fund for pharmaceutical companies and healthcare practitioners meant to expand and strengthen the capacity of the healthcare institutions will also benefit from the fund.

The N50 billion target credit facility for affected households and small and medium enterprises will also benefit from the forbearance policy will equally benefit from the policy shift.

The CBN also earlier approved regulatory forbearance for restructuring of credit facilities in the Other Financial Institutions (OFIs) sub-sector in order to further mitigate the impact of the pandemic on households, businesses and regulated institutions.

It said OFls were granted leave to consider temporary and time limited restructuring of the tenor and loan terms for households and businesses affected by Covid-19, subject to the issued guidelines for restructuring affected credit facilities in the OFI sub-sector.

Other specific policy measures, outside loans, undertaken to stabilise the economy and businesses in the face of the pandemic include reduction of the monetary policy rate from 13.5 to 11.5 per cent to improve the flow of credit to households and businesses.

The CBN said it will continue to monitor developments and implement appropriate measures to safeguard financial stability and support stakeholders impacted by the Covid-19 pandemic.

The CBN increased the required minimum LDR to 60 per cent in July 2019 and further reviewed it forward to 65 per cent later in the year.

The LDR policy was meant to ensure that banks lend at least 65 of their deposits to Micro Small and Medium Enterprises (MSMEs) or be sanctioned.

The apex bank noted a significant increase in the size of gross credit by Deposit Money Banks to customers, hence retained it at 65 per cent in January 2020.

Although the policy contributed to increasing lending to the economy but did not substantially bring about a reduction in the cost of funds. This means that, despite increased access to credit, Nigerians are still paying as much interest rates to the commercial banks.

The CBN in pursuit of its expanded mandate, as well as developmental finance function provided for in Section 31 of the CBN Act (2007), has over the years intervened in critical sectors to safeguard the Nigerian economy. These interventions are not peculiar to Nigeria as most critics would portray it to be.

Available records show that the CBN has introduced no less than 38 intervention programmes, agriculture being one of them, including the recent 100 for 100 Policy on Production and Productivity (PPP).  The purpose is to increase local production and boost the economy of the country where a lot of government owned institutions are crippled by corruption and mismanagement.

Thus, the bank has about 38 purpose-driven interventions that are functionally based, well-thought-out and born out of the critical issues within the economic space.

Development Consultant and Lead Consultant, Industry and Private Sector Development, ECOWAS Commission,  Prof. Ken Ife, said the interventions by the CBN  in the economy,  are timely and with consequent positive results.

He said programmes like the Anchor Borrowers Programme (ABP), Targeted Credit Facility (TCF), Real Sector Support Facility (RSSF), Healthcare/Pharmaceuticals Facility, Electricity Stabilisation Facility, 100 for 100 PPP and RT 200 Forex programmes all have significant impacts in the lives of Nigerians and Nigeria as a whole. 

Ife also added that Nigeria’s economy jumped out from recession in just one quarter (December 2020) and this was only possible because of the quantitative monetary and fiscal policies responses, including of course, a higher order of targeting of CBN’s domestic finance intervention at the real sector of the economy.

Emefiele stated that the  RT200 Programme is not intended to be a silver bullet to all Nigeria’s problems in the export segment of the economy. 

Rather it is a first step meant to ensure that the CBN is better able to carry out its mandate in an effective and efficient manner, which guarantees preservation of our scarce commonwealth, and the stability of our national currency, the Naira. 

“It is only by boosting productive and earning capacity of this economy that we can truly preserve the long-term value of our currency, as well as the stability of our exchange rate,” he said.

- Advertisment -spot_img
- Advertisment -spot_img

Most Popular

Recent Comments