Export drive strategy for Nigeria’s FX crises

Certainly, if Nigeria has not made much progress in its economic growth and development strides, it is essentially because of its very high import-dependency. The petrodollar inflow since 1973 or thereabout, has impacted the lifestyles of Nigerians of all strata, weaning most people off agriculture and other vocations. Over time, the country became a mere consumption economy — where taste for foreign goods got entrenched. Local products/producers were rather disdained, with very low patronage. The consequence of this is that not a few businesses that were set up in those days floundered and folded up; and today, the industrial landscape of Nigeria is littered with the ‘carcasses’ of those failed businesses.

The ‘petrodollar lifestyle’ has meant a perpetual balance of payments disequilibrium — which leaves Nigeria with trade deficits — year in-year out. It was in this milieu that the floatation of the Naira, effective June 14, 2023, commenced — bringing the national currency into the ‘global boxing ring’ against the dollar and other notable currencies. In no time, the Naira was pushed into a tailspin; its exchange rate vis-à-vis the dollar is now reaching a hopeless level. The dollar, the currency for massive importation into Nigeria, has continued to dry up: demand for it far outstrips its supply. Nigeria, as a mono-product economy, depends almost wholly on crude oil exports for its dollar (supply) earnings. The apex bank — the Central Bank of Nigeria (CBN) — which, before June 14, could supply the forex market with hundreds of millions of dollars daily, has since practically run out of stock. 

It is therefore imperative, at this time, that the administration of President Bola Ahmed Tinubu must change style and strategy; come up with the bold initiative to pursue tenaciously an export-driven economic growth and development for Nigeria. This agenda must be coupled with a wholesome import substitution drive and true commitment to re-orientating Nigerians to patronise ‘Made in Nigeria’ goods and services.

In pursuit of this overarching plan, it would be auspicious, even if as an interim measure, to adopt and adapt some of the existing non-oil export initiatives of the Central Bank of Nigeria (CBN) and other agencies. This is because the task of turning around the Nigerian economy for meaningful progress requires the “urgency of now.” Specifically, in February 2018, the apex bank came up with what it termed “Non-oil Export Stimulation Facility (NESF)” guidelines “to diversify the revenue base of the economy and to expedite the growth and development of the non-oil export sector.” According to the CBN, “the facility will help redress the declining export financing and reposition the sector to increase its contribution to economic development.”

Core objectives of the facility include: improving access of exporters to concessionary finance to expand and diversify the non-oil export baskets; attracting new investments and encouraging re-investments in value-added non-oil exports as well as shoring up non-oil export sector productivity and creating more jobs. Other objectives include: supporting non-oil export-oriented companies to upscale and expand their export operations and capabilities; and broadening the scope of export financing instruments.

According to the CBN, eligible transactions that qualify for funding under the NESF include export of goods processed or manufactured in Nigeria; export of commodities and services, which are allowed under the laws of Nigeria; imports of plant and machinery, spare parts and packaging materials required for export-oriented production that cannot be sourced locally. NESF is also accessible for resuscitation, expansion, modernization and technology upgrade of non-oil export industries. CBN’s reports show that some hundreds of billions of Naira had been taken up under this facility by February 2022 when it came up with yet a more robust initiative for non-oil export drive in the country.

Specifically, the apex bank in 2022 came up with an all-embracing policy to address inadequate foreign exchange (FX) supply in the economy. Tagged ‘Race to US$200 billion in FX Repatriation (RT200FX) Programme’, to stimulate non-oil exports, the target was to achieve a $200 billion FX income in the next three to five years. The CBN said: “We have all been witnesses to the ever-changing fortunes of oil-exporting countries. Even those that have been reputed to manage their oil proceeds well also suffer from major shocks once oil prices plummet. In order to avoid these sudden adjustments to our economic life, we need to focus on strategies that can help us earn more stable and sustainable inflows of foreign exchange.

“The RT200 FX Programme is therefore a set of policies, plans and programmes for non-oil exports that will enable us attain our lofty yet attainable goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next 3-5 years.” A major anchor of the programme is the non-oil export proceeds repatriation rebate scheme. The rebate scheme is designed to incentivize exporters in the non-oil sector to encourage repatriation and sale of export proceeds into the FX market. It is borne out of the need to develop new strategies aimed at earning more stable and sustainable inflows of FX, in order to insulate the Nigerian economy from shocks and FX shortage.

Some of the specific objectives of the scheme include: enhancing foreign exchange inflow; diversifying the sources of FX inflow; increasing the level of contribution of non-oil exports. Others are: ensuring stability and sustainability of FX inflows as well as supporting export-oriented companies to expand their export operations and capabilities. Features of the scheme include payment of N65 for every $1 repatriated and sold at the Investor and Exporter (I & E) window to Authorised Dealer Banks (ADBs) for other third-party use; and N35 for every $1 repatriated and sold into I & E for own use on eligible transactions only.

Unsurprisingly, the RT200 scheme became an instant success, such that, by the end of 2022, it had generated $6 billion, according to the CBN. Indeed, partly owing to the initiative, the Nigerian Export Promotion Council (NEPC) during the first quarter 2023 (that is one year of RT200), reported that over 167 non-oil products worth $1.345 billion were exported from Nigeria. Giving a quarterly update on NEPC, its Executive Director, Dr Ezra Yakusak said “these products range from manufactured, semi-processed, solid minerals and raw agricultural commodities.

“The first quarter 2023 also shows that Nigerian products are gradually shifting from its traditional export of raw agricultural commodities to the export of semi-processed and manufactured goods.” Further breakdown of the products showed that of the top-ten products exported in the first quarter of 2023, Urea, Cocoa Beans, Sesame Seed, Soya Beans/meal and Cashew nuts/kernels were top five.” Further details show that ninety-seven (97) countries, spread across five (5) continents of the world, imported Nigerian products during the period under review; the top 5 (five) countries being Brazil, China, Japan, India and the Netherlands.

However, a crucial concern about Nigeria’s non-oil export drive remains export products quality and standardisation — two areas that have caused not a few Nigerian non-oil export items to be rejected or abandoned at their (countries of) destinations. In May this year, for instance, the director-general, National Agency for Food and Drug Administration and Control (NAFDAC), Moji Adeyeye, a professor, had lamented that “over 70 percent of food exports from Nigeria are rejected abroad, with huge financial losses to exporters and the country.” The NAFDAC boss however said “the rejection (of the export items) in some European countries and the United States of America may soon become a thing of the past, if collaboration between the agency and other government agencies at the ports is strengthened.”

The point, however, remains valid that meeting international quality and standards requirements is critical for successful participation in the global (exports) market. Thus, more than ever before, the relevant agencies must begin to ensure that Nigerian exporters adhere to global standards, to minimise limiting their access to lucrative markets. No doubt, building capacity and providing support for quality control mechanisms, certifications, and compliance with international standards will boost the competitiveness of Nigerian non-oil exports.

This is also why the synergy and cooperation advocated by the NAFDAC boss is very crucial at this time. In this regard, the new partnership between the NEPC and the National Orientation Agency (NOA) to create awareness for “Export4Survival” throughout Nigeria is most auspicious. This initiative which began in September 2022 is part of the strategic collaboration to promote the export of ‘Made-in-Nigeria’ products and to increase foreign exchange earnings for the country.

All said, however, export-led economic growth and development for Nigeria does not (and should not) in any way imply the abandonment of the oil and gas sector. Rather, in its application of the comparative advantage and factor endowment, Nigeria should emphasise value addition to its crude oil and gas. The current scenario of importing refined products from elsewhere must be quickly reversed. In the spirit of export drive, focus should turn to the export of numerous derivatives of the refining process of crude oil. Same goes for the organised exploration and mining of numerous solid minerals that abound in commercial deposits across Nigeria. Now is the time to effectively diversify the country’s forex earnings.