The CBN Non-Oil Export Stimulation Facility
The CBN non-oil export stimulation facility – IT is heartening that the Central Bank of Nigeria (CBN) has decided to bring back the N500 Billion export stimulation loan proposed two years ago and the N50Bn direct intervention funding under the management of the Nigeria Export-Import (NEXIM) Bank. The loan is for the diversification of the revenue base of the economy and the boosting of non-oil exports, for sustainable economic development and increased Foreign Exchange earnings.
The CBN Governor, Godwin Emefiele, who disclosed the plan for the resuscitation of the facility during a recent meeting with non-oil exporters and producers, said the Government decided to step up the development intervention to boost exports that are of great value in the non-oil sector of the economy. Under the new arrangement, NEXIM Bank will work with the CBN development finance department and the Governor’s adviser on agriculture to put a framework in place for the disbursement of the loan. Some of the non-oil exports that will benefit from the loan and direct intervention funding are cocoa, cashew nuts, palm produce, sesame seeds, solid minerals and rubber.
Any initiative targeted at reviving the non-oil sector of the economy should be encouraged and supported with reasonable funding. According to the National Bureau of Statistics (NBS), Nigeria, in 2015, recorded the lowest exports in three years.
The value of exports, the Bureau said, declined from N16.304Bn in 2014 to N9.729Bn in the fourth quarter of 2015, representing a decline of 40.3 percent. Recently, the Nigerian Export Promotion Council (NEPC) stressed the need to scale up non-oil exports so that the country can compete favorably in the global market.
When the CBN launched the N500Bn non-oil Export Stimulation Fund (ESF) two years ago, it disclosed that the purpose of the fund was to provide concessionary finance to non-oil exporters, provide long-term funds at single- digit interest rates, assist export productivity and create more jobs.
Other objectives of the fund included the expansion of the diversification programme of the Government, especially in the area of non-oil exports for sustainable economic development. It was also to broaden the scope of export financing instruments.
It is good news that a guideline has been released for the operation of the fund. Under it, the CBN will invest in N500Bn debenture to be issued by NEXIM Bank in line with Section 31 of the CBN Act. In effect, this makes the Apex Bank the sole investor, having invested half a trillion Naira for the purpose of funding non-oil exports. It also gives the CBN the power to determine the lending limit and application rates, as well as the review of the operating guideline as may be deemed necessary.
On its part, NEXIM Bank will be the managing agent in charge of the day-to-day management and administration of the fund, but it will render periodic returns to the CBN. We hope that access to this fund will not be made difficult for eligible non-oil exporters. All encumbrances that could unreasonably block access to the fund should be removed. The guideline says that eligible exporters should liaise with commercial banks and Development Finance Institutions (DFIs).
We welcome the condition that the fund is only available to export-oriented companies duly registered in Nigeria with verifiable export off take contract agreements with importers overseas. In addition, such companies must have satisfactory credit reports. Any company already indebted to the Assets Management Corporation of Nigeria (AMCON) may also be eligible for the loan but with special clearance of the CBN. This is also a good idea because many insolvent companies are piling up debts by looking for loopholes in financial institutions with liberal lending policies.
It is also good that the CBN has said that eligible transactions must cover export of goods wholly or partly processed or manufactured in Nigeria, and export of commodities and services which are permissible and excluded under existing export prohibition list, import of plant and machinery, spare parts and packaging materials required for export oriented production that cannot be produced locally, as well as export value chain support services such as transportation, warehousing and quality assurance infrastructure, modernization and technology upgrade of non-oil export industries. These will be a boost to big time local manufacturers looking for incentives in the export, import market.
They should, therefore, take advantage of this opportunity provided by the CBN, especially since the facility comes under both short-term and medium-term categories, with repayment period spread starting every 90 days for short-term borrowers, and over a ten-year period, with a two-year moratorium, inclusive of interest rate of nine percent for medium-term borrowers. The amount available to each borrower will not exceed 70 percent of the total cost of the project or transaction.
At no time has diversification of the economy become more expedient than now. The recent uncertainty in the international oil market has not only significantly reduced the revenue accruing to the government, it has also adversely affected development in other critical sectors. Therefore, reviving non-oil exports should begin with full speed and utmost commitment. Nigeria is endowed with non-oil exports like cocoa, rubber, palm produce, sesame seeds and solid minerals that are yet to be harnessed and exploited for exports. Proper management of the facility and ensuring that only the intended persons access the funds will help to achieve the targets of the funds.