Logistics, Funding Trail On Nigeria’s Export – Stakeholders
Nigeria has set the race to achieve a $200 billion in foreign exchange repatriation in the next five years to boost its external reserves, address shortfalls in foreign exchange as well as improve the foreign trade deficit.
A recent report by the National Bureau of Statistics(NBS) shows the country recorded an N1.94 trillion deficit in foreign trade transactions in 2021, from the N7.37 trillion deficit recorded in 2020.
Monetary policy alone cannot bear all the burden of the expected adjustments needed to manage FX demands, the Central Bank of Nigeria(CBN) says.
According to the apex bank, these problems call for urgent design and steadfast implementation of other supportive, structural, and complementary policies that are broad-based, coordinated and focused on complementing the work of the monetary authority.
“This is the time for all of us to work together to reposition Nigeria on a growth trajectory by making diversification of the economy a serious business,” says CBN.
In collaboration with the Bankers’ Committee, CBN introduced the ‘RT 200 FX Programme’ to enhance non-oil export proceeds.
The scheme is designed to incentivize exporters in the non-oil export sector to repatriate and sell their export proceeds in the local foreign exchange market and earn a rebate.
According to CBN, the country Nigeria has paid eligible exporters over N3.5 billion in rebates.
Last week, at the maiden of the RT 200 Non-Oil Export Summit 2022, on the theme, ‘Setting the Roadmap Toward Achieving RT200 and Non-Oil Exports for Development’, stakeholders identified logistics constraints and funding gaps as key issues in non-oil export.
A key takeaway from the summit was for the stakeholders to set up a working committee comprising the representative of CBN, Bankers’ Committee, Nigeria Ports Authority, Nigeria Customs Service, Shipping lines and other agencies of government, and within the next 90 days provide a clear approach to tackling the issues raised while harmonising the solutions provided.
Data from the CBN shows foreign reserves have fallen by $1.86 billion from January this year, to $38.66 billion as of June 16. The depleting external reserves, among others, are being impacted by crude oil price, diaspora remittance, supply chain disruption and foreign investments inflows, the stakeholders noted.
The increasing oil price is supposed to be benefiting Nigeria, a major oil exporter among the Organization of the Petroleum Exporting Countries blocks. But the CBN Deputy Governor, Edward Adamu, says recent increases do not equate to higher revenue nor do they improve the external reserves of the country’s economy.
Nigeria’s economy, which is under heightened inflationary pressure, hits 11 month high in May at 17.71 per cent. Experts see this as a drawback to the CBN tightening monetary policy.
Lately, an NBS report shows that Foreign Direct Investment(FDI) has also not done well in recent years. Projected to trend around $900 million in 2022 and $860 million in 2023, FDI lowered to $698.7 million in 2021, the lowest in ten years, NBS reported of late.
The deficit trade balances being recorded over time, have led to the settling for external borrowing through Eurobonds and multilateral loans to push up external reserves.
In providing context to the logistics constraints of non-oil export, the Group Managing Director of Access Bank Plc, Mr Herbert Wigwe, bemoaned Nigeria’s weak infrastructure to support non-export trade.
He highlighted, among others, the challenges in non-oil export trade including poor logistics and longer time in export processing, leading to about one-third of products lost.
“Nigeria’s trade balance stood at N1.9 trillion as of December 2021,” the Access Bank boss cited.
In ranking 110 out of 160 countries, according to the Logistics Performance Index(LPI), Wigwe said the position suggests that Nigeria has a “massive challenge” to export.
He also cited the Global Competitive Index to have put Nigeria at 130 ranking among 160 countries.
“We are suffering a major infrastructural deficit,” he said. For Nigeria to be ranking this number is a “big disgrace,” it means the country now compares with poorer nations.
Wigwe suggested that part of the solutions could be to encourage local ownership and indigenous shipping lines as against foreign lines; discourage some existing monopolies; create more and upgrade storage facilities; increase financing to exporters; and create proper terminal and air cargo for export.
Nigeria needs to execute and implement the National Single Window initiative, the Managing Director of the NPA, Mr Mohammed Bello-Koko, asserted.
According to him, the single platform will enable the country to digitalise, integrate and harmonise all the workings of the various agencies connected to external trade to share data, and receive payment, among others.
To boost export trade, the CBN, Deposit Money Banks(DMBs) and other participating financial institutions have disbursed a total of N3 trillion. Among which are N948 billion from the Anchor Borrowers scheme to 4,478,381 smallholder farmers cultivating about 5.2 million hectares, even as households and businesses have benefited from the CBN’s targeted credit facility, totalling N368.79 billion disbursed to 778,000 beneficiaries, comprising 648,052 households.
The stakeholders also stressed the need to properly fine-tune plans on the ongoing Lekki Deep Port, to link it with road networks and rail lines.
Funding gap exists largely in the export as well as import trade, the Managing Director of Zenith Bank, Mr Ebenezer Onyeagwu, said while disclosing some of the monies disbursed for various purposes to aid export trade.
He said as of April this year, CBN source showed N37.1 trillion loans have been disbursed. The Nigerian Export-Import Bank(NEXIM) disbursed N144 billion; Nigerian Incentive-Based Sharing for Agriculture Sector, N255 billion; Commercial Agriculture Loan Scheme, N716 billion; Anchor Borrowers, N920 billion; and CBN and Bank of Industry(BOI) Small and Medium-sized Enterprises(SMEs) and manufactures intervention fund, N135 billion.
This gives a total of N2.34 trillion, or six per cent of the N37.1 trillion, the Zenith Bank boss explained. He, however, argued that if RT 200 will become a reality, of the $200 billion five-year targets, it logically flows that $40 billion must achieve each year, stressing that any short of the figure will not augur well.
“Therefore we can see fundamentally that there are gaps. We have a long way to go,” Onyeagwu said.
While Nigeria is deeply faced with internal instability arising from insecurity, herdsmen attacks, and the rising cost of transportation, among others, contribute to export trade.
The stakeholder suggested, in the medium to long term, that deep-sea ports be set up outside Lagos to complement other efforts.
A deep-sea port outside Lagos, combined with an economic zone with the port will solve logistics, and gas-powered will solve gas issues and reduce cost, they submitted.
The CBN had said the lessons learnt from its remittances are now being applied in improving access to FX inflow into the country to overcome the inadequacy of FX supply and constant pressure on the exchange rate.
According to the apex bank, the major thrust in this aspect is the introduction of the RT 200 FX Programme, which is laced with five key anchors: value-adding export facility; non-oil commodities expansion facility; non-oil FX rebate scheme; dedicated non-oil export terminals and biannual non-oil export summit.
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