The Central Bank of Nigeria, under Godwin Emefiele’s leadership, has intervened in the economy beyond the traditional monetary policy. Despite its many interventions, the naira along with the economy has remained prostrate. It was so frustrating that one felt compelled to pick up the pen and veer into unfamiliar territory by writing, and getting published in various newsprints, an article on the CBN efforts at strengthening the naira. This was after Emefiele almost engaged in fisticuffs with the owner of AbokiFx, whom he accused of destabilising the naira. I wrote Stop Borrowing Dollars Borrow Sense, two weeks ago, and out of the blue, the CBN redeemed itself and launched the RT 200 fx programme and, for once, all I have for Emefiele and his team at CBN is praise.
What is in RT 200 that is praiseworthy? For the first time, they sincerely addressed the supply side of the naira/dollar equation. Some high points of the Race to $200bn in forex repatriation include the CBN being ready to prioritise and finance non-oil export businesses. 2) Banks to source the forex needs of their customers from the export window. Earlier, the CBN had stated they were stopping the current regime of banks’ forex dispensing agents. 3) Discouraged export of primary products in favour of value-added goods. 4) Upgrade of export infrastructure, e.g at dedicated non-oil export terminals. I want to believe this would include making the export of goods at our ports a seamless experience for exporters.
The target is to achieve cumulative non-oil exports of $200bn goods within five years. At an average of $6bn per annum, our cumulative non-oil export for the last five years is $30bn. This represents 15% of the $200bn target.
While it looks daunting that the five-year target is much lower than the annual export from Vietnam or Malaysia, it isn’t. We have not appreciated non-oil exports; it simply has not gained traction despite the creation of the Nigerian Export Promotion Council in 1976 and the establishment of Export Processing Zones in the 1980s. There is a need to find out reasons for the failures of past efforts so this renewed effort doesn’t go the same way.
The nation’s coolness toward exports of manufactured goods has its roots in our development history. Before oil, our exports were agrarian and we took much pride in our being either number one or number two in many agrarian produce. Our efforts at industrialisation did not include exporting manufactured goods since we had chosen import substitution industrial policy. So all manufacturing was focused on meeting the newly developed Nigerian demand for any foreign item. This choice of industrial policy is central to our inability to develop an export culture. Petrodollars further cemented the culture such that we did not notice its weaknesses.
Efforts to change the narrative during the SAP years also failed. Early in the SAP years export of cocoa beans was banned in favour of exporting semi-finished cocoa products. It did not bite and a few years later export of cocoa beans resumed. The trade infrastructure in our ports were simply there for imports and export of agrarian products, so aspiring exporters of manufactures were frustrated by the system and they gave up. They could not take advantage of the naira that should make our products competitive in world markets.
While Nigeria was failing big time in the global trade of manufactured goods other countries made giant strides. Vietnam, Bangladesh, Malaysia, Indonesia carved niches for themselves. Here in Africa, Mauritius and Ethiopia took advantage of the African Growth Opportunity Act put in place for African countries to penetrate the American market. Nigeria did not make a move, we had become an insular country consuming all we produced.
This is the concretised culture Emefiele has to demolish before he can achieve RT 200B. He has to elicit support from key institutions, some in the public domain and importantly players in the organised private sector. Without their buy-in the targets might be unobtainable. In the public sector would be the Federal Ministry of Trade whose job it is to promote Nigerian international trade. The Ministry of Foreign Affairs has a very important role to play in seeking markets abroad. Our embassies should be outposts for our manufacturers. The Nigerian Ports Authority should be in the forefront as mentioned. Tax rebates should be given to exporters of high value goods and new investments for exports should be encouraged.
Members of the Manufacturing Association of Nigeria should be the ones pushing this new export-led industrial policy because MAN members suffer from the shocks of oil price crashes and the attendant recession it brings. This time around they need to own this program to ensure its continuity. The program is simply asking MAN to generate and keep their forex. The banks are secondary players to MAN, but an important partner. A sea change in habits is being asked of Nigerian banks who are habitual rent takers. They have much to gain from this program as the forex would be domiciled in the banks. I pray the private sector really steps up to the plate and seize control of greater heights of the economy. The CBN has opened a door slightly, the door of forex acquisition and distribution, they should push it wide open and rush in.
Roles need to be switched with the private sector driven parallel market rate determining the official naira/dollar rate. The CBN would be able to build its reserves and use the reserves to intervene either by selling to the parallel market or buying up excesses from the market. This is reversing how the forex market has been conceived and run since CBN came into being. If we want to exit the poverty group of nations, where we are head prefects, we have to take these drastic steps to wean us from our subsistence and insular economy and begin to engage the world with all the fullness of our productive might.
There are low hanging fruits with which we can hurriedly engage the world in the next five years, then we move into novel areas of more complex goods. Fertiliser export was not our preferred export product but one of us has broken into the global fertiliser market, this is a low hanging fruit he has seized upon. If Malaysia can operate in the global supply chain of microchips, electronics and semiconductors, why not Nigeria? Am I being a dreamer? Well, I am a dreamer who believes Nigeria should be a trillion-dollar economy; it’s why I wrote the book— Nigeria attaining trillion dollar status. Exports of non-oil, high-value goods were given prominence in the book so my elation with Emefiele.
There will be talks of the high cost of production of manufactured goods in Nigeria because of our power and infrastructure deficiency, making our goods more expensive to produce than that of our competitors. This is where we use the economic tool of currency depreciation. Allowing for a policy of gradual naira depreciation ameliorates all these shortfalls without contravening WTO rules. Industrial estates should be prioritised in power distribution, especially the export processing zones. There should be no more talk of a strong naira as it discourages exports, this is Economics 101. On the other hand, a weaker naira allows our products to enter the global markets.
If there is a silver bullet to our economic problems, this is it. RT 200 addresses both the missing and weakest links in the economy, which is our dependence on crude oil and gas to supply the nation’s ever-growing forex needs. I pray Emefiele would do his utmost to make this program his legacy. May he not be remembered for rice pyramids but for making recessions a thing of the past in Nigeria. Paul Volcker is to this day remembered for taming inflation in the US, what will Emefiele be remembered for?
Dr Jaiyesimi writes from Sagamu and can be reached via 08123709109
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