CIRCULAR ON NON-REPATRIATION WILL CRIPPLE NON-OIL EXPORT BUSINESS IN NIGERIA – RESPONSE FROM EXPORTERS
While we were eagerly awaiting an invitation from the Central Bank of Nigeria to seek the input of the real players in the industry – practising exporters -, we, Network of Practicing Non-Oil Exporters of Nigeria, were shocked to receive the apex bank’s recent circular with reference number TED/EXP/CON/NES/01/001 and dated January 13, 2021 which directs commercial banks to bar and blacklist any exporter who has not repatriated export proceeds in the last two to three years. The circular, indeed, instructs that such exporters should be barred from accessing all banking services, as contained in an earlier circular with reference number CBN/FEM/FPC/GEN/01/013 and dated October 26, 2017. As the Umbrella network for all players in Nigeria’s non-oil export value-chain, NPNEN had issued a Press statement less than two weeks ago, decrying the autocratic approach of the Central Bank of Nigeria in issuing an equally draconian directive to shipping companies not to take on board any consignment that has not yet completed the newly introduced e-NXP. This flurry of “military” instructions is even more worrisome as we believe that what Government (through its assigned agencies such as the CBN, should be doing at this time is roll out a basket of incentives capable of boosting non-oil exports and making the sector, a veritable and significant generator of the much-needed foreign exchange for Nigeria. While the CBN has the right to explore all avenues to shore up the country’s foreign reserves, it must tread carefully to avoid a ricochet effect that actually ends up sending exporters to the smugglers’ routes and thereby destroying the very intention of the bank to increase foreign exchange inflows. We hasten to advise that it is very important for the CBN understand that churning out orders, rather than calling the players to a round table where the bank’s (government’s) plans are presented and the players are given the opportunity to explain how each of the steps being mooted will affect export performance, portends a very grave danger. These wrong signals might persuade the exporting community that the federal government is not concerned about their plight and does not care about the huge losses they are currently incurring.
For the understanding of the CBN, most Nigerian exporters actually repatriate their export proceeds, but have been doing so through their “ordinary Domiciliary accounts. The CBN’s preference for export proceeds to flow into special Domiciliary accounts designated for “Export Proceeds Only”, is yet to catch ground within the export community and this is where the banks communication department needs to do more work. We believe that CBN’s corporate strategy and Communications departments should be interested in finding out why the exporters are not repatriating the funds through the special Domiciliary accounts rather than jump to the erroneous conclusion that proceeds are not being repatriated. It may interest the bank to know that this is another policy of the bank denying exporters the unfettered access to their hard-earned hard currency (when brought in through the export proceeds Dom account) which has pushed many of the exporters to avoid using this account.
NPNEN would like to, once again, extend its arm of friendship to the CBN and to all MDAs designated to develop and promote non-oil exports from Nigeria to orchestrate a roundtable (or at least, attend one that is being presently arranged by NPNEN where these issues can be tabled and ironed out. Government must understand that Nigeria’s current strength in non-oil exports is in the agro-allied sector where trade in a greater percentage of commodities being exported are controlled in the various international commodities exchanges.
The Nigerian exporter buys the commodities at terminal prices quoted on the London Commodities exchange, pays a multiplicity of unnecessary levies, taxes and tolls, and still end up in the same market with competitors who do not face these challenges. To buy the commodities, the Nigerian exporter obeys the pull of forces beyond his control. Ditto when he is selling. It would therefore be unimaginable to expect the exporter to bring the proceeds into an account where he will also not be able to have a say in the rate at which his export proceeds are sold! Clearly, until there is a convergence in the exchange rate, the price discrepancy in the parallel market will render export business unprofitable to most exporters.
Again, NPNEN wonders why the same CBN that allows diaspora remittances to be accessed by the beneficiaries and sold however and to whomever the “owner” desires, is coming at Bonafede exporters with a sledgehammer. CBN cannot turn its eyes away from the multiple other values that export business has been contributing to the nation’s socio-economic space. These include job creation and industrialization.
NPNEN therefore recommends that, in the immediate, if the CBN wants the exporters to repatriate export proceeds through the export domiciliary accounts, they should be allowed to access it freely, as provided for in the unfettered access policy that was in existence before it was stopped in 2016 (when the CBN redefined the concept of unfettered access). The bank should also revisit the exporter’s clamour over the years, for a convergence of the exchange rates of the nation’s currency. This will help in reducing the cost of procurement of commodities in the local markets, and consequently lead to profitable exportation of commodities. It is only after the CBN has done this, that it can have the moral justification to enforce the new policy.
Our recommendation for the longer term remains for a consultation-based design of a pragmatic export strategy for Nigeria that would enable the country begin to fight for a fair share of global markets, beginning with AfCFTA.