A Lagos-based investment bank and research firm, Afrinvest (West) Africa Limited, has hailed the efforts of the Central Bank of Nigeria (CBN) to enhance the potential of Nigeria’s non-oil sector to become a major source currency (FX) profits and the engine of economic growth.
Nigeria’s central bank officially announced the launch of the RT200 FX program on Thursday, with the aim of securing $200 billion in foreign exchange repatriation. The program is a set of policies, plans and programs for non-oil exports that would see the country achieve its ambitious but achievable goal of $200 billion in foreign exchange repatriation, exclusively from non-oil exports, over the next next three to five years.
According to Afrinvest, although it can be difficult, “we like that the policy of the RT200 FX program offers a comprehensive approach to generate non-oil export growth by offering solutions from the initial phase of production of raw materials, to the process adding value, and facilitating exports by supporting infrastructure.
“However, we note that the policy’s ultimate goal – reaching $200 billion in non-oil exports over the next three to five years ($40.0 billion per year on average) – could be a difficult task. , given that the non-oil sector is projected to grow 8 times above the average size of $5.2 billion (between 2016 and 2020) in each of the next five years in a base case.
“That said, we are concerned about the lack of coordination with tax authorities (to our knowledge), especially as the fourth anchor proposes to establish dedicated non-oil export terminals in response to bottlenecks. “current bottlenecks and logistical challenges at major ports and failure of some Nigerian exports to meet minimum international standards,” the company noted in reaction to the policy introduced last week.
He further explained that the CBN’s effort, while commendable, might not be enough given that the downside of promoting manufacturing and exports in Nigeria extends beyond start-up financing. tax policies.
Although optimistic, analysts at the firm are wary that plans to offer the Naira as a discount to non-oil commodity exporters who supply their foreign exchange earnings to the I&E desk may not be enough to incentivize repatriation.
Although the CBN has reported that the Naira4Dollar program has helped boost remittances from $6 million per week to over $100 million per week, the non-oil currency repayment program alone may not be effective if companies source foreign exchange from unofficial sources due to supply issues.
“This is because there might be little incentive to sell to I&E window participants given the black market premium. We note that the CBN has yet to issue detailed guidelines on the non-oil currency redemption program, and we are awaiting further guidelines to fully assess the policy,” he said.
Afrinvest also warned that plans to halt the sale of foreign currency to depository banks by the end of 2022 may be premature given that except for the non-oil currency redemption program, the other points of anchoring the RT200 FX program may not yield quick wins. Thus, stopping, rather than phasing out, the supply of foreign exchange to depository banks (DMBs) could only aggravate supply problems.