BY EMEKA EJERE
The Central Bank of Nigeria (CBN), is playing active role in the country’s efforts at diversifying the nation’s economy and develop alternative sources of foreign exchange to complement earnings from crude oil.
According to the apex bank, the move is aimed at increasing the volume of non-oil exports, which will subsequently increase the amount of foreign exchange inflow into the economy.
Although Nigeria’s economy is regarded as one of the most diversified in Africa, its dependence on oil and gas earnings for lifeline is creating anxiety, as countries that depend on primary commodities and unprocessed raw materials for survival have always been at the lowest wrung of the global economic ladder.
In December 2017, the CBN as part of strategies to complement Federal Government’s efforts at diversifying Nigeria’s economy away from oil, announced a revamp of the N500 billion Export Stimulation Fund (ESF) for the promotion of non-oil exports in the country using the Anchor Borrowers’ Programme model. The scheme came on the heels of the apex bank’s implementation of a N50 billion direct intervention funding by the Nigeria Export Import Bank (NEXIM).
While giving hints about the scheme at a December 8, 2017 meeting with bankers and exporters in the non-oil sector in Lagos, the suspended CBN governor, Mr. Godwin Emefiele, said the intervention was in furtherance of the country’s efforts to diversify the economy and develop alternative sources of foreign exchange to complement earnings from crude oil.
“We want to encourage exporters with the N500 billion Export Facility to increase the volume of export earnings that is routed back to the economy to help us grow the economy,” Emefiele had said
With annualised interest rate of 9 per cent, stakeholders believe the N500billion ESF has come to frontally tackle a major challenge inhibiting the competitiveness of Nigerian entrepreneurs on the international market place as they can now face African and global markets.
For Africa’s estimated 1.3billion people with a potential for $3trillion market, Africa’s largest economy is now ready to take its fair share of the continental commonwealth under the CBN N500billion ESF anchor borrowers scheme, stakeholders said.
The programme has received the buy in of major stakeholders in the economy who argue it would in addition to encouraging the policy of value addition to agricultural produce, end the era of primary commodity export as against the current practice of exporting unprocessed produce.
There has been increasing demand for Nigeria’s cocoa shells, husks, skins and other cocoa waste from Germany, Spain, China, Malaysia and Netherlands. But the capacity of local banks, including development finance institutions to meet their ever rising funding needs remained constrained by the limited portfolio of the local lenders.
The current effort hinged on a policy of Produce, Add-Value and Export (PAVE), aims at encouraging exporters to advance beyond merely exporting raw materials to adding value to the products through processing exportable items.
The ESF facility has been designed to help redress the declining export financing capacity of the nation’s banking industry and also reposition the sector to increase its contribution to national economic development.
Under its lending limit, term loans facility are not expected to exceed 70 percent of verifiable total cost of the project subject to a maximum of N5,000,000,000. The ESF guideline also states it shall have a tenor of up to 10 years and shall not exceed the December 31, 2027. Working capital/stocking facility shall be for one year with the option of roll-over once subject to the approval of the CBN.
To fast track its implementation, a high- -powered team comprising NEXIM, the Development Finance Department of the CBN and the Office of the Special Adviser to the CBN Governor on Agriculture was constituted to review the existing framework for the Fund to make it more effective.
Explaining the rationale for this approach, Emefiele noted that processing agricultural produce before export would create jobs for Nigerians in addition to generating revenue for the country.
Under the guideline, agricultural produce targeted for financing from the scheme include cocoa, cashew nuts, palm produce, sesame seeds and rubber which are in high demand overseas.
Nigeria’s lucrative solid minerals sector was also not left out as it is expected to benefit from the facility which would also provide more opportunities for both job creation and increasing export earnings, with the apex bank pledging to leave no stone unturned in the effort to revive moribund export oriented companies in the solid minerals and agro-allied industries.
Commenting on the potential benefit of the N500billion ESF for the economy, a former President, of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, commended the CBN for its commitment to reviving moribund manufacturing companies in the country, assuring that Nigeria’s private sector would continue to partner with it in identifying challenges and implementing its polices that boost non-oil export sector growth.
On his part, the Managing Director of the Nigeria Export-Import Promotion Bank, Mr. Abba Bello, expressed optimism that his bank’s collaboration with the CBN along with relevant stakeholders would soon begin to yield positive results in non-oil export sector.
In a testimonial of the strides of Nigeria’s non-oil exports Executive Director of Nigerian Exports Promotion Council, Mr Olusegun Awolowo, confirmed that Nigeria needed to tap from the Netherlands’ know-how in agro-business and agro-processing.
Awolowo said: “The Netherlands is our number one trading partner in Europe; they buy 47 per cent of our cocoa; that is just 2018 figures; it is almost 150 million dollars in raw materials.
“So, we are looking now at agro-processing; value addition; we know untapped potential of our trade to the Netherlands on cocoa oil, cocoa paste; so, we need to get them to buy that from us.
“We also know that they import a lot of aluminum; that is also where we can export and supply them. So we really want to take advantage of their knowledge in agro-processing because they have one of the best universities in the world for training on this.
“The idea is to develop more companies that will export to Europe; we must look forward to a new development with innovation on technology and that agreement helps us to seal that’’.