The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, last week, hit the bull’s eye when he said that monetary policy alone would not reset the nation’s challenged economy. According to the CBN boss, the non-oil sector is critical to Nigeria’s economic recovery. Emefiele disclosed this at the Third Bi-Annual Non-oil Export Summit in Lagos with the theme: ‘RT200: Challenges and Prospects to Success.’
The RT200 is a special CBN local currency rebate for non-oil exporters of semi-finished and finished products who show evidence of export proceeds repatriation sold directly into the Investors and Export (I&E) Window to boost liquidity in the market. The policy is also aimed at increasing Nigeria’s foreign reserves by $200billion in foreign earnings from non-oil proceeds within the next 3 -5 years.
Figures from the CBN show that in the last 18 months, the policy had repatriated $7.3billion or 40 per cent of non-oil inflows, or $1.7billion in the first quarter (Q1) 2023. According to statistics reeled out by the CBN Governor, most countries in the world are turning to export earnings and proceeds repatriation to bolster their foreign reserves, maintain a robust balance of payments and a stable source of foreign exchange inflows. In Ghana, for example, export earnings are by law, mandated to be repatriated to the country, at least 40 per cent of which must be converted to the local currency within 15 working days of repatriation.
Exporters hold the remainder in Foreign Exchange Account (FEA). However, in the case of Nigeria, developing the non-oil export has become expedient given that the sector is key to generating foreign exchange and boosting the production base of the economy. However, for the sector to make the necessary impact, there is need for an innovative, supportive and complementary macroeconomic policy actions that will drive a market-based financing system. To revamp the economy, Nigeria needs to return to the path of a sustainable growth trajectory by taking aggressive steps to diversify the economy.
Besides, unfolding global economic development suggests that monetary policy is reaching its limits and needs complementary help from other sectors of the economy. Undoubtedly, this is where innovative, creative ideas hold the key to the recovery of the economy. Therefore, the incoming government will ensure that monetary policy complements fiscal policy.
This is the right time to intensify the diversification of the economy through huge investment in the non-oil sector. The emphasis should be on how to boost productivity, reduce consumption and grow the country’s exports and Gross Domestic Product (GDP). Government should equally exploit other sources of revenue to cushion the effects of dwindling oil revenue and money spent on debt servicing. These sources include agriculture and agro-processing industries, solid minerals, tourism and the creative industry. Last year, the CBN and the Bankers’ Committee agreed to commit N500 billion in loans to export-oriented companies to boost non-oil export earnings. No doubt, this initiative will promote exports, reduce imports and make the country less dependent on oil earnings. The loan is part of the CBN’s RT200 programme aimed at raising $200 billion in Foreign Exchange (FX) from non-oil proceeds over the next 3-5 years.
If the country must boost the volume of export repatriation, there is urgent need to support those in non-oil sector. This will enable them process their goods in line with global best practices. Some Nigeria’s products are at times rejected at the international market due to poor quality and packaging. Nevertheless, the profile of non-oil exports has been promising. According to data from the National Bureau of Statistics (NBS), while oil and gas exports accounted for 80 per cent of total revenue in the second quarter( Q2) 2022, non-oil export earnings contributed 73 per cent of the revenue in the 2023 Budget estimates.
Also, data from the CBN showed that Nigeria earned $2.59billion from non-oil export in Q1 2021. The good news is that 200 exporters accounted for 95 per cent of the $4.2billion that the country earned from non-oil exports last year. Similarly, statistics from the Nigeria Export Promotion Council (NEPU) indicated that non-oil exports generated $2.6billion in half year of 2022. This represents an increase of 62.57 per cent compared to about $1.60billion and $981.44million recovery in the first-half of 2021 and 2020, respectively. This is despite global economic slowdown that affected businesses within the period. Pre-shipment inspection data also showed that half-year non-oil performance in 2020/2021 was the highest since 2018.
Altogether, Nigeria’s economic survival depends to a large extent on the ability of the public and private sectors to invest heavily on non-oil exports. At the same time, let Nigerians be aware of the immense opportunities in the sector. Beyond that, let the government strengthen the value of the naira by jettisoning the unsustainable and unrealistic dual exchange rate regime.