By Godwin I. Emefiele
Supporting greater trade within Africa as well as with the global community is indeed vital to the CBN’s objectives of enabling greater economic growth and creating employment opportunities for our growing population in Nigeria. Trade enables specialization, economies of scale and it also provides significant rewards to those who are innovative, as they can sell their goods and services to an expanded market.
The COVID-19 pandemic and its resulting implications on crude oil prices in 2020, which led to a significant decline in government revenues, as well as in our foreign exchange earnings, served to strengthen the case that we must diversify our economy and create new trade opportunities for Nigerians, as part of our recovery efforts. Fortunately, the Nigerian economy was able to emerge out of the recession in the 4th quarter of 2020, following two quarters of negative growth. This was due to significant interventions by the monetary and fiscal authorities in Nigeria, aimed at stimulating consumption expenditure. However, a strong and well-balanced recovery will require additional contributions from the private sector in supporting greater growth of our non-oil exports. The volatility in the oil markets which has exposed the Nigerian economy to significant exogenous shocks, along with the growing trajectory towards lesser use of fossil fuels in the near future, by some advanced and emerging market countries, makes it imperative that we work to significantly improve our non-oil exports earnings.
We believe that the African Continental Free Trade Agreement (AFCFTA) offer significant opportunities for the Nigerian private sector to expand into new markets, and seek new export opportunities, particularly in the area of Manufacturing, ICT, Agriculture and Financial services, given our growing advantage in these areas relative to our counterparts in other parts of Africa. Full implementation of the AFCFTA, is expected to give Nigerian firms preferential access to markets in Africa worth $504.17billion in goods & $162bn in services. I believe that we should seize this opportunity to ensure that Nigeria serve as a significant hub for international and domestic manufacturing companies seeking to serve the West, Central and East African Markets.
In addition, we have a very young energetic, technological savvy population that have been leveraging technological applications to improve service delivery in the areas of finance, logistics and agriculture to consumers in Nigeria. I believe the AFCFTA will provide an opportunity for these young talented Nigerians to expand their services across the African region. Developing trade portals that could support instant sales of goods manufactured in Nigeria to consumers in other parts of Africa is one aspect that can help to support the creation of jobs in Nigeria and improve foreign exchange inflows for the country. Our banks are already playing a significant role in expanding across the African continent. I would like to encourage them to also leverage their presence in other parts of Africa, to support Nigerian businesses seeking to expand into new markets in Africa, by providing trade facilities to those with strong potentials for growth.
At the CBN we have taken considerable steps to improve the productive capacity of businesses, which would enable them take advantage of export opportunities in Africa. Our intervention programs in the agriculture and manufacturing sectors, are helping to enable businesses expand their scale of production, which is meeting growing domestic demand for goods, but also providing goods for the export market. In addition, we have set up a N500bn non-oil export stimulation facility with the Nigerian Export Import Bank (NEXIM). This initiative will also help to enable greater exports of processed agriculture commodities into other markets in Africa and in the global market.
Improving the business environment in Nigeria is also vital if we are to harness the gains from the AFCFTA. The Central Bank through our Trade Monitoring System portal (TRMS) is also helping to reduce the time it takes to complete the export documentation process, as faster turnaround time could help to reduce delivery time for goods destined for exports, and enable businesses expand their output. Today, businesses can complete their NXP applications on the TRMS portal in 30 minutes relative to two years ago, where it could take as much as two weeks to complete the process.
We are also working with stakeholders in repositioning the Nigerian Commodity Exchange, which would help to support greater trade for operators in these vital sectors earlier mentioned. Once the exchange becomes fully operational in the 2nd half of the year, international buyers of raw and processed agricultural commodities will be able to enter into forward contracts with domestic suppliers on the exchange, and they can be assured of not only the quality of the goods sold through the exchange, but on the expected date of delivery. We believe these forward contracts will help to support improved productivity for farmers and agro-processors, it will also help to improve access to credit for these entities using the forward contracts as collateral.
Supporting greater trade within Africa would also require the presence of a viable payment settlement system. In this regard, the CBN is working with key stakeholders in the African continent, particularly the Afrexim Bank to improve the underlying payment infrastructure to support greater intra-regional trade, through the Pan African Payments and Settlement System(PAPSS). This initiative will enable payments in our local currency for goods in other African countries and vice versa, without the need for a third-party currency. This initiative will help to reduce the cost of cross border trade, improve convertibility of the Naira, and increase trade opportunities for Nigerian businesses in Africa.
Although Nigeria stands to gain from expanded trade, I believe it is also important that we pay attention to the cost that expanded trade through the AFCFTA could have on local businesses and communities. Smuggling of goods produced in non-African countries into Nigeria, and abuse of rules of origin have often resulted in significant job losses and displacements of workers in key sectors of our economy such as agriculture and manufacturing. It is vital that we work with the governing body of the AFCFTA in addressing these concerns, as it has profound implications on unemployment and security in Nigeria.
We would also like to urge existing exporters, that they endeavour to repatriate their export proceeds as required by law. The CBN guarantees that exporters will have unfettered access to their export proceeds. and we do expect that exporters would reciprocate the good gestures of the Bank by repatriating their export proceeds to improve foreign exchange inflows into the country.
The initiatives being put in place by the CBN would help to ensure that Nigerian businesses are able to take advantage of the growing opportunities in the African Market. Ensuring that procedures on rules of origin are strictly adhered to by other African countries would also help to reduce the negative effects that come with the implementation of the AFCFTA. Nevertheless, it is vital that we all work together to support increased growth of our non-oil exports as it would help to enable greater economic growth and improve our foreign exchange earnings.
• Emefiele is the governor of the Central Bank of Nigeria