Although Nigeria’s economy is regarded as one of the most diversified on the African continent, its dependence on oil and gas earnings for lifeline is consistently creating anxious moment for both government and the private sector.
The anxiety stems largely from the fact that countries that depend on primary commodities and unprecessed raw materials for survival have always been at the lowest wrung of the global economic ladder.
A critical study of the Nigerian economic clearly shows that in nearly 60 years of independence, it has failed to leverage the vast natural resources and solid minerals potential to support inflows from the oil and gas sector, a major reason for its classification as not only a third world country, but also the ‘poverty capital of the world’.
This is because despite the huge successes recorded with agriculture and other natural resources in the pre and immediate post independence years, the per centage of value addition to Nigeria’s non- oil exports has remained unimpressive over the past three decades.
Little wonder why income from cocoa, palm oil and groundnuts as well as several solid minerals export have remained small compared with other nations in its economic bracket.
However, as part strategies to complement Federal Government’s efforts at diversifying Nigeria’s economy away from oil, the Central Bank of Nigeria (CBN) in December of 2017 announced a revamp of the N500 billion Export Stimulation Fund for the promotion of non-oil exports in the country using the Anchor Borrowers’ Programme model. The scheme comes on the heels of its implementation of a N50 billion direct intervention funding by the Nigeria Export Import Bank (NEXIM).
CBN, Mr. Godwin Emefiele while giving hints about the scheme at a December 8, 2017 meeting with bankers and exporters in the non-oil sector in Lagos, said the intervention was in furtherance of the country’s efforts to diversify the economy and develop alternative sources of foreign exchange to complement earnings from crude oil.
For the CBN boss, the whole idea centres around increasing the volume of non-oil exports, which will subsequently increase the amount of foreign exchange inflow into the economy.
“We want to encourage exporters with the N500 billion Export Facility to increase the volume of export earnings that is routed back to the economy to help us grow the economy,” Emefiele said
But in diversifying Nigeria’s economy, agricultural sector appears very crucial considering the huge arable land and natural endowments across the 36 states of the federation.
For some commentators who have followed several government’s interventions in the economy over the years, Emefiele, the CBN management and other stakeholders driving this initiative could not have done a better job in setting aside this lump sum in support of value -chain operators in the agricultural sector including those involved in the solid minerals sector.
According to them, it is a wake up call on both the country ‘s leaders and mangers of its economy given that the days of fossil fuel and hydrocarbons are already numbered with most recent advances in renewable energy.
With annualised interest rate of 9 per cent, the N500billion NESF has out to frontally tackle a major challenge inhibiting the competitiveness of Nigerian entrepreneurs on the international market place as they can now go out there to face African and globalised markets.
With the recent signing of the African Continental Free Trade Agreement by President Muhammadu Buhari, the coast now looks clear for Nigerian exporters to break the iron curtains that had restricted them from playing on the competitve turf outside of the West African subregion.
According to the guideline on the CBN N500billon Export Stimulation Fund and the opportunities it offers to Nigerian exporters, the country appears to have announced its presence to Africa and the rest of the world that Nigeria’s ready for business.
For Africa’s estimated 1.3billion people with a potential for $3trillion market, Africa’s largest economy is now ready to take its fair share of the continental commonwealth under the CBN N500billion ESF anchor borrowers scheme.
Already, the new programme has received the buy in of major stakeholders in the economy who argue it would in addition to encouraging the policy of value addition to agricultural produce, would end the era of primary commodity export as against the current practice of exporting unprocessed produce.
There has been increasing demand for Nigeria’s cocoa shells, husks, skins and other cocoa waste from Germany, Spain, China, Malaysia and Netherlands. But the capacity of local banks including development finance institutions to meet their ever rising funding needs remained constrained by the limited portfolio of the locl lenders
The current effort hinged on a policy of Produce, Add-Value and Export (PAVE), aims at encouraging exporters to advance beyond merely exporting raw materials to adding value to the products through processing exportable items.
In the main, the ESF Facility has been designed to help redress the declining export financing capacity of the nation’s banking industry and also reposition the sector to increase its contribution to national economic development.
Under its lending limit, term loans facility are not expected to exceed 70 percent of verifiable total cost of the project subject to a maximum of N5,000,000,000.
NESF guideline also states it shall have a tenor of up to 10 years and shall not exceed the December 31, 2027.
Working capital/stocking facility shall be for one year with the option of roll-over once subject to the approval of the CBN
To fast track its implementation, a high- -powered team comprising NEXIM, the Development Finance Department of the CBN and the Office of the Special Adviser to the CBN Governor on Agriculture was constituted to review the existing framework for the Fund to make it more effective.
Explaining the rationale for this approach, Emefiele noted that processing agricultural produce before export would create jobs for Nigerians in addition to generating revenue for the country.
Under the guideline, agricultural produce targeted for financing from thescheme include cocoa, cashew nuts, palm produce, sesame seeds and rubber which are in high demand overseas .
Nigeria’s lucrative solid minerals sector was also not left out as it is expected to benefit from the facility which would also provide more opportunities for both job creation and increasing export earnings, with the apex bank pledging to leave no stone unturned in the effort to revive moribund export oriented companies in both solid minerals agro-allied industries.
As part of measures to expand the scope of its impact, the CBN boss had already extended an olive branch to Nigeria’s undocumented exporters to explore the new funding window so as to add value to their trade with a view to earning more foreign exchange .
“To many cocoa farmers, primary rubber producers or palm oil producers who are in the villages or in the communities, we are saying that we are going to develop a framework that would make finance available to them through NEXIM and through the framework to be set up, where they can access some intervention funds”.
“So, we are saying that the source of revenue into the country should not just be oil, neither should it just be foreign portfolio investments or foreign direct investment alone,” Emefiele stated.
Also commenting on the potential benefit of the N500billion Export stimulation Fund o the economy, a former President, of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, commended the CBN for its commitment to reviving moribund manufacturing companies in the country, assuring that Nigeria’s private sector would continue to partner with it in identifying challenges and implementing its polices that boost non-oil export sector growth.
For his part, the Managing Director of the Nigeria Export-Import Promotion Bank, Mr. Abubakar Bello, expressed optimism that his bank’s collaboration with the Central Bank of Nigeria along with relevant stakeholders would soon begin to yield positive results in non-oil export sector .
In a testimonial of the strides of Nigeria’s nonoil exports recently, Executive Director of Nigerian Exports Promotion Council, Mr Olusegun Awolowo, confirmed that Nigeria needed to tap from the Netherlands’ know-how in agro-business and agro-processing.
“The Netherlands is our number one trading partner in Europe; they buy 47 per cent of our cocoa; that is just 2018 figures; it is almost 150 million dollars in raw materials.
“So, we are looking now at agro-processing; value addition; we know untapped potential of our trade to the Netherlands on cocoa oil, cocoa paste; so, we need to get them to buy that from us.
“We also know that they import a lot of aluminum; that is also where we can export and supply them.
“So we really want to take advantage of their knowledge in agro-processing because they have one of the best universities in the world for training on this.
“The idea is to develop more companies that will export to Europe; we must look forward to a new development with innovation on technology and that agreement helps us to seal that,’’ he said.
The executive director said that Nigeria was ready and was looking at getting more competitive on its goods with the signing of the African Continental Free Trade Agreement (AFCFTA).
Awolowo said that the major signatory AfCFTA was looking for was Nigeria because it is the biggest market and number one economy in Africa, adding that Nigeria must get ready for AfCFTA by getting it SMEs and MSMEs ready and competitive enough to export to the rest of Africa and Europe.
NEXIM had collaborated with the CBN to manage two intervention schemes — the Non-oil Export Stimulation Facility and the Export Development Fund, with N550billion to boost funding support for the non-oil sector.
In line with this agenda, the Central Bank of Nigeria, had also unveiled a N200 billion Export Facilitation Initiatives (EFI) targeted at boosting commodity exports in the non-oil sector of the Nigerian economy.