PERSPECTIVE
Ebenezer Onyeagwu
One of the biggest challenges facing policymakers across the globe is how to reinvigorate their economies following the COVID-19 pandemic, which disrupted global supply chains and decimated demand leading to losses across various economic sectors. Consequently, policymakers have had to leverage fiscal and monetary tools to stimulate growth. The programmes and initiatives deployed in each economy depend on the needs, challenges, and dynamics at play.
For Nigeria, expanding non-oil export has remained a matter of strategic economic importance requiring continual intervention. The impact of the pandemic on oil demand and, by extension, the price of crude oil in the international commodities market further exposed Nigeria’s over-dependency on crude oil earnings and its susceptibility to oil-related vagaries. The events that characterised the pandemic also highlighted the limited range of the country’s exports to foreign markets. While non-oil export is increasingly becoming a major source of foreign exchange earnings for Nigeria, accounting for 11.32 per cent of total exports in 2021, oil still contributes about 76 per cent of the country’s total exports, according to the National Bureau of Statistics (NBS).
The expectation is that export diversification programmes and initiatives will intensify as Nigeria continues to re-orient its export profile and boost foreign currency earnings. In 2020, the Federal Government rolled out an NGN50 billion Export Expansion Facility Programme (EEFP) under the NGN2.3 trillion National Economic Sustainability Plan. The programme is designed to increase Nigeria’s export capacity in the near term and export volumes in the medium term by supporting exporters, especially micro, small and medium entrepreneurs (MSMEs). The EEFP targets sixteen programmes in five areas, including capacity building, financing, market development, infrastructure, and institutional strengthening, and will be implemented by the Nigerian Export Promotion Council (NEPC).
The Central Bank of Nigeria (CBN) has played a significant role in boosting financing options for non-oil export value chains through several ongoing initiatives. Its NGN500 billion Non-oil Export Stimulation Facility is designed to enhance access of exporters to concessionary finance and attract new investments in value-added non-oil exports production, while the NGN300 billion Real Sector Support Facility (Differentiated Cash Reserve Requirement Facility) seeks to increase the flow of credit to the real sector of the economy. The apex bank’s sector- and segment-specific programmes include Commercial Agricultural Credit Scheme (CACS), Creative Industry Financing Initiative (CIFI), CBN/BoI SME/Manufacturing Intervention Fund, and Micro Small and Medium Enterprises Development Fund (MSMEDF).
This year, the CBN launched the race to $200 billion in foreign exchange repatriation (RT200 FX) initiative to raise $200 billion in foreign exchange earnings from non-oil export over the next three to five years. The programme arises from the need to diversify Nigeria’s export earnings from oil while addressing declining foreign exchange earnings. The initiative is anchored on five pillars, including a value-adding exports facility, a non-oil commodities expansion facility, a non-oil FX rebate scheme, a dedicated non-oil export terminal and a biannual non-oil export summit. This implies that the CBN will incentivise the private sector in the non-oil value chains using a range of tools available under the five pillars.
Reinvigorating the Nigerian economy calls for measures to reduce the country’s dependence on oil exports. It requires expanding the array of the country’s value-added products that are exported to foreign markets. When combined with the promise of the African Continental Free Trade Area (AfCFTA), more non-oil exports translate into enterprise and industry level competitiveness with positive implications for job creation and technological development while enabling the country to earn and save much-needed foreign currency.
Ebenezer Onyeagwu is the Group Managing Director/CEO of Zenith Bank Plc.
This opinion was first published in the Zenith Economic Quarterly Vol. 18 No. 2 April 2022, in his column “CEO Insight”.
