Not a ‘silver bullet’: Experts weigh in on Emefiele’s new fiscal policy incursion, RT200 FX

• Halting FX sales to banks on IMF threats
• Practising trial and error policy summersaults
• Call for private sector inclusion at trade policy making table

Governor Godwin Emefiele, Central Bank of Nigeria (CBN) honcho, simply gave it away as, perhaps, one of his many adventures in the fiscal policy space, when he announced another leg in the dogged pursuit of his chosen role as a ‘development’ central banker, the RT200 FX Programme, designed to see Nigeria accrete $200 billion within three to five years from non-oil exports.
Last Thursday in Abuja, as chairman of the Bankers Committee, when he took the microphone to address journalists, just like he always does at the end of every Monetary Policy Committee (MPC) meeting, and spoke of this new RT200FX programme, aptly named “Race to $200 billion” he also said, “Let me note very importantly that the RT200 Programme is not intended to be a silver bullet to all our problems in the export segment of the economy.” This quick recourse to a caveat is what some trade experts and analysts have picked on to say they hope that it is not yet another fiscal policy adventure the outcome of which might be off the mark.
Emefiele’s incursion into fiscal space is legendary. Many senior officials at the apex bank will tell you the man had no choice. The fiscal side has punched way below its weight since President Muhammadu Buhari took over government from former President Goodluck Jonathan in 2015. Many analysts say Emefiele is actually bold taking on some of these responsibilities, especially because going wrong is okay, but going horribly wrong could put him out like a king dancing naked. When his tenure is over he is bound to go home with the toga, ‘The Interventionist Governor’ stuck on him like a spandex fabric.
But Emefiele’s announcement of a new policy to drive non-oil exports is not exactly new, experts and even participants, at a similar meeting he is already looking forward to in April, have said.
Indeed, it is almost four years since Emefiele, as governor of the CBN, which he still is, assembled trade experts, exporters and stakeholders in Lagos to discuss an export-led transformation of the economy – engine for sustainable inclusive growth. Experts say nothing concrete appears to have emerged from the conclusions at that gathering, leading some of them with the impression that every policy developed by the monetary and fiscal authorities is never followed to the letter in terms of execution.
The CBN is known to have adopted many policies and strategies to see that Nigeria earns a more stable and sustainable foreign exchange inflows, the outcomes which now make it look like there are external forces pressuring experimentation with these policies.
It is also this that has led a myriad of economic analysts to fault the bank’s meddling with the fiscal side of the economy by dissipating energy in creating funds and spending on so-called interventionist projects. The basis for this position may not be far-fetched as the bank has again come up with this new race it now wants to run – RT200 FX Programme for a lofty repatriation of FX into the economy.
Announcing the new race in Abuja at the end of the Bankers’ Committee meeting, which he chaired, Emefiele, also the governor of the Central Bank of Nigeria (CBN), said the programme stands for the “Race to $200 billion in FX Repatriation.” The RT200 FX Programme, according to Emefiele, is a set of policies, plans and programmes for non-oil exports that will enable Nigeria to attain “our lofty yet attainable goal of $200 billion in FX repatriation, exclusively from non-oil exports, over the next 3-5 years”.
Emefiele also revealed that the scheme will take effect immediately as stakeholders and exporters will converge for a meeting on the way forward in April. He also said the apex bank will provide concessionary and long-term loans with a 10-year tenure and 2-year moratorium for businesses interested in expanding existing plants or building new ones for the sole purpose of adding significant value to the non-oil commodities before exporting them.
“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 the preservation of our scarce commonwealth, and the stability of our national currency, the Naira. It is only by boosting the productivity 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 explained.
It is obvious that Nigeria’s fiscal policy drive or implementation is weak, which has prompted the CBN to partially assume fiscal responsibility by driving the economy on two ends and dissipating energy in creating funds and spending on all manner of projects.
The primary responsibility of the CBN, as contained in the CBN Act, principally centres on ensuring monetary and price stability, including not just the inflation rate, which has doubled from 9.5 percent in 2015 to above 15 percent in December of 2021, with the apex bank known to attempt the use of a contractionary policy strategy to try and rein it in single digit, of which it has failed abysmally to achieve; but also Exchange rate.
Over the years, foreign exchange inflows into Nigeria have been hampered by some inadequacies around the exchange rate, which has, in turn, led to declines in diaspora remittances inflow, as well as foreign direct and foreign portfolio investments, respectively. As a result, Nigeria’s major FX sources have remained, proceeds from oil exports, non-oil exports, diaspora remittances and foreign portfolio investments and foreign direct investments, accordingly, which were adversely affected by the coronavirus pandemic.
In the meantime, the apex bank governor noted that most of these sources are unreliable sources that are perennially prone to exogenous vicissitudes of global economic developments. As he stated, “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 and 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.”
Some economic experts offering mixed sentiments while weighing in on this new interventionist move by the apex bank, lauded the programme, but some others others have continued to call for a structure and system to be created to allow for the private sector, as well as exporters to be seen and heard at the table of decision making while charting a way forward on what best global practice can be adopted to ensure there is a solid structure which will see the continuous and free flow of FX into the economy.
John Isemede, a former director-general of the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA and an international trade expert, sharing his view on the initiative told Business A.M. that, “The programme by the bank is not a bad idea. But then, the question we are currently seeking clarifications on is whether this scheme is an extension of the December 2018 meeting or not. We had a similar session with the CBN and the Bankers Committee on 8th-9th December 2018 in Lagos. Is the CBN taking over some functions of our banks, that is, from being the apex bank to adding wholesale/retail banking business in Nigeria? Banks are registered to do certain things that the CBN is not supposed to.
“When devaluations happen across the FX space, which affects banks’ earnings from FX, who pays the differences? If I import my goods and there is devaluation or I export in naira while a devaluation takes place, who pays for the differences in currency? The CBN should seek measures to correct these anomalies.
“What is intervention when there are no backward integration plans on how we can process goods and export to get FX that will soon shake all the banks? With this CBN position, who can predict the banking stocks and why the fear or banning of the 45 items, after signing agreements with other nations, knowing that we have no capacity, chains or infrastructure to compete, no coordination and tools; and then experts are sidelined. What we need now are new tariff measures like the ECOWAS CET project of 2015-2019,” Isemede stressed.
Elsewhere, the apex bank chief also said the bank will halt the sales of FX to banks as these institutions must begin sourcing forex from export proceeds beginning from December 2022; hence the need to support non-oil exporters in the country. He said the decision was in line with the bank’s new commitment to boost the country’s foreign reserves through proceeds from non-oil exports.
Mallam Garba Kurfi, managing director, APT Securities and Funds Limited, one of Nigeria’s leading stockbroking, financial advisory and private equity firms in Lagos, told Business A.M. that, “It is a good policy because it has incentives and private companies respond well to incentives, especially to the means of production, manufacturing and exporting. The Policy will encourage these banks to be more competitive to sources of FX. However, there is a need to allow part of the oil proceeds to go through the banks at the take-off stage before they gradually stand on their own. Meanwhile, there is a need to allow market forces to dictate the exchange price.”
For John Anyanwu, a professor of economics, and a retired lead research economist, at the African Development Bank, AfDB, expressing his view on the latest development, said: “I do not know whether the rebate scheme is selective as I know about people who have remitted thousands of dollars to Nigeria from abroad since the introduction of the policy without receiving a dime. This type of behaviour is one reason I have desisted from commenting on Nigerian policies. The policy of selling forex to banks has been a huge failure as it has only succeeded in enriching banks.
“Many banks flouted the guidelines and were milking those buying forex and the CBN closed its eyes. In saner climes, heads should be rolling by now. The plan to stop selling forex to banks is a mere afterthought, driven by IMF threats and, of course, the usual policy somersaults and trial and error policy,” he stated.
Isemede, the trade expert, further noted that, “The CBN needs to develop the structure and template on which this exports business must run on. There is no trade policy under this plan by the apex bank. We signed the AfCFTA for free trade and movement of goods but if businesses have to go through the banks for FX and other trade documentation, then it does not align with the international trade and investment diplomacy and policy. This is because there are risks involved and so doors should be opened to allow for the private sector to come to the table for a jaw-jaw.”
Meanwhile, on the plans to establish a dedicated non-oil export terminal to tackle the problems of port congestion and also improve operations and earnings in foreign exchange, Emefiele said the bankers’ committee will partner with state governments that have existing ports to achieve this goal, adding that the committee would provide a significant part of the funding needed for the project.