Naira falls to N730/$ at open market, a new record low

BY EMEKA EJERE

Expectations are high that the RT 200 Forex Programme of the Bankers Committee and the Central Bank of Nigeria (CBN) will achieve its aim of stabilising the nations foreign exchange market if deliberate efforts are made to follow it through.

The CBN had last week released implementation guidelines for its newly created RT200 Non-oil Export Proceeds Repatriation Rebate Scheme, highlighting its exporters responsibilities and benefits.

According to the circular signed by the Director of Trade and Exchange Department, Dr. Ozoemena Nnaji, exporters of eligible non-oil commodities will receive N65 for every $1 repatriated and sold at the Investors and Exporters (I & E) Window through authorised dealer banks (ADBs) for third-party use.

Others who repatriate and sold through the window for self-use on eligible transactions will also receive a rebate of N35 per dollar, the document stated.

It would be recalled that the CBN Governor, Godwin Emefiele, recently unveiled the scheme, which is aimed at raising $200 billion from processed and semi-processed non-oil exports in the next three to five years, saying the policy direction would ultimately lead to the self-sufficiency of the commercial banks in foreign exchange needs in the coming years.

Emefiele had said, The RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable us attain our lofty yet attainable goal of US$200 billion in FX repatriation, exclusively from non-oil exports, over the next 3-5 years.

The apex bank had put Deposit Money Banks (DMBs) on notice that it would stop selling forex to them by the end of 2022, arguing that 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.

The RT200 initiative is anchored on five key areas which are; value-adding export facility, non-oil commodity expansion facility, non-oil export rebate scheme, non-oil export terminal financing and bi-annual non-oil export summit.
Similar step was taken by the apex bank last year with the Naira-4Dollar Scheme, which lures recipients of diaspora remittances with reward of N5 for every dollar wired through the official window.

The CBN believes that the rebate would narrow the arbitrage between the official and parallel markets, a differential which is responsible for the low participation at the official window by exporters.

Data published on the FMDQ website where forex is officially traded showed that the naira closed at N416.67 to a dollar at the close of business Friday. This implies a N0.17 or 0.04 per cent devaluation from N416.50 it exchanged hands with the hard currency on Thursday.

In the past weeks, the currency has been trading within the range of N416.00 and above, with the N416.67 benchmark being the lowest rate the domestic unit has touched at the official market segment with this period.

The local currency experienced an intraday high of N410.00 and a low of N444.00 before closing at N416.67 at the close of business on Friday, with a total foreign exchange of $115.26 million supplied at the market segment.

However, the currency has been considerably stable at parallel market since the opening of business this week. Exchangers at the Uyo street market said the naira was exchanged at N576.00 to a dollar and sold within the range of N581.00 and N582.00 to a dollar on Friday.

The same rate it has been trading since the beginning of the week. Similar scenario played out at the Abuja black market, where dealers traded the local unit with the hard currency at N575.00 and sold within the range of N577.00 to a dollar on Friday.

Hitting the target

Meanwhile, the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), an economic and business advocacy think tank, Dr Muda Yusuf, has lauded the RT 200 FX Programme.

Yusuf, in a statement, said though ambitious, the initiative is laudable as the management of the supply side of forex would greatly impact the economy.

“The reality is that supply-side policies are even more critical and impactful than demand management interventions in the foreign exchange market. Over the last couple of years, the CBN has been fixated on managing the demand side of the foreign exchange market and the outcomes have been suboptimal,” he said.

The CPPE CEO said for the initiative to succeed, given the peculiar operating environment of Nigeria, the CBN should consider such factors as fixing structural constraints impeding non-oil exports, reviewing the pricing regime in the I&E window, giving exporters access to export proceeds, expanding the scope of forex supply strategies and allowing forex-generating MDAs to sell at the I&E window.

Structural issues are very vital for driving the growth and competitiveness of non-oil exports. Structural variables are not within the purview of the CBN or the Bankers Committee. The fiscal authorities have much bigger roles to play in fixing the structural constraints which have been impeding non-oil exports productivity and competitiveness for decades.

Therefore, collaboration with fiscal authorities is a critical success factor for the realisation of the RT 200 outcomes.

On CBN’s plan to stop the sale of foreign exchange to banks, Dr Yusuf called for caution and urged the apex bank to ensure a much deeper and stronger I&E window before enforcing the action to avoid disruptions to the Nigerian business environment and economy.

CPPE would like to caution that the apex bank should rigorously think through this proposition before implementation because of the likely systemic shocks, business disruptions, macroeconomic dislocations and weakening of investors.

Similarly, the Director-General of the Lagos Chamber of Commerce and Industry, (LCCI), noted that the RT200 FX Programme would need additional policy improvement with export infrastructure, financing for exporters and others to achieve the desired result.

Almona, in a statement, added that the CBN also needs to educate the public, especially potential exporters on the benefit of the scheme so as to enhance the participation of the business community.

Praising the scheme, Almona observed that a major challenge in Nigerias export chain is the unstructured procedures that cause delays, corruption, and rejection of exports and advised that it requires critical export infrastructure, international trade diplomacy, and adequate funding to succeed.

These facilities should be well directed to process targeted products in which Nigeria has some comparative advantage such as sesame, cashew, cocoa into finished goods, she said.
The reason for the low FX revenue from exports is due to the export of primary unprocessed commodities. Nigeria must take bold steps to establish a trading system that supports the seamless flow of trade. It must establish the necessary infrastructure, create needed awareness toward exploring the African Continental Free Trade Area (AfCFTA).

On his part, a professor of Economics at the University of Benin, Hassan Oaikhenan, said for the programme to achieve its goals, the CBN must shore up the value of the Naira.

“The rapidly depreciating Naira serves to encourage the phenomenon of currency substitution in which economic agents prefer to hold the more stable hard currency,” Oaikhenan said.

“The question that follows is will an exporter, in response to the incentives that are spelt out in the programme, be willing to repatriate the foreign exchange earned? It is doubtful.

“Until deliberate policies are taken to broaden the sources of foreign exchange in the economy and to diversify it from borrowing and from crude oil, every effort in that regard, will have little potential to make the much needed big dent on the scarcity of foreign exchange in the economy.

“I had thought that the CBN should by now be appraising the successful nature or otherwise of the policy of giving N5 incentive for every dollar that is received from abroad by beneficiaries of remittances from abroad.

“That, in my opinion, should serve as the basis for the CBN to proceed to embark on the RT200 Forex Programme.”

 

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