In line with its commitment to facilitate the objective of the Federal Government of Nigeria (“FGN”) to diversify the economy and reduce overdependence on the oil sector, the Central Bank of Nigeria (the “CBN”) has announced the commencement of the Export Facilitation Initiative (the “Initiative”). The Initiative is aimed at encouraging the development of the non-oil sectors of the Nigerian economy by boosting commodity exports in those non-oil sectors. This was announced in a circular issued by the CBN to all banks dated 13 June 2019 (the “Circular”).
The Initiative will focus on developing the value chains of cashew, cocoa, palm oil, sesame seed and shea (“Commodities”) to enhance foreign exchange earnings. Although the operational requirements of the Initiative are yet to be released, the CBN revealed that the Commodities will be funded under the approved guidelines of Agricultural/ Small and Medium Enterprises Investment Scheme, (“AGSMEIS”), Non-Oil Export Stimulation Facility and Real Sector Support Facility-Differentiated Cash Reserves Requirement (“RSSF-DCRR”), in line with the approved limit in the Export Facilitation Initiative Funding Framework (the “Framework”).
Facilities provided under the Framework will attract a 9% interest rate across all categories of the Commodities productions and exports; however, the tenors will vary according to Large and Mid-Sized Players (Facility A) for Land Acquisition and Cultivation, Large and Mid-Sized Players (Facility B) for Milling and Refining Capacity and Small Holder Farmers (Under Clusters Via Aggregation).
With the recent crude oil price volatility, the introduction of the Initiative is a welcome development, which is expected to reduce Nigeria’s dependence on oil as a major source of foreign exchange earnings.
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