Nigerian exporters may have discovered a way of evading the CBN’s RT 200 directive to sell forex in the official market.
The Central Bank of Nigeria (CBN), in addressing the supply side of the naira/dollar currency quagmire in the Nigerian foreign exchange market, introduced the Race to $200 billion (RT 200) in February 2022. The program aimed at raising over $200 billion in non-oil export forex repatriation within 5 years from exporters.
Since it was designed to incentivize exporters in the non-oil export sector to repatriate and sell their export proceeds in the local foreign exchange market and earn a rebate, the CBN offered N65 for every dollar repatriated while those who sell for their own get N35 for every dollar sold. This is to encourage the participation of companies who repatriate their forex for third-party usage.
Yet, sources with material information have stated that some of the companies participating in the program have found a way to manipulate the policy by selling at the black market rate and receiving the CBN incentive.
These sources have discovered that after receiving a due incentive for supplying forex into the Investor and Exporter window, some companies still collect the black market exchange rate premium (the differential between the official and black market rates) outside of the window.
How they outsmart the RT 200 Policy
It begins with a third-party (individuals or companies) that bid for forex at the official market rate through their banks.
-
A third-party company in need of forex will bid for it via the bank on the official Investors and exporters Window.
Once the bid is initiated, a seller who is the market taker willing to match the market made by the buyer is contacted by their bank.
The official I&E window exchange rate will be adopted for pricing the currencies in the transaction.
The difference between this price and the black-market exchange rate is used to sell off the market by the representative banks of both the buyer and seller respectively.
Siting an instance, a company that supplies $5 million will sell at the official rate of between N415-N438/$1, collect their N65 per dollar incentive and then get the buyer of the forex to settle the difference between the official rate and the black-market rate of over N700/$1.
Before this kind of transaction can fly, the buyer of the forex will have to first settle the official/black market exchange rate differential outside the market into a designated account, before the buyer can get on the list of those that will be matched with sellers on the official market. This is usually done days before the bid is tabled in the market.
According to a source who preferred to comment anonymously, while interacting with our research analysts expounded that settlement, which perhaps settles the official and black market differential has to go ahead of the fulfillment of the transaction. He said “before my bid for $4 thousand was successful, I had to settle the system with some hundreds of thousand Naira. It was after the settlement that I was included on the list and afterward received the dollar I sought.”
This practice has gained momentum as traders do not see it as a bridge of CBN’s guidelines, rather, they view it as a palatable way to comply with CBN’s directives whilst still selling at the parallel market rates.
Nigeria’s Exchange Rate Reality
The CBN’s RT 200 program which is a novel forex repatriation strategy may have been bastardized, as the naira has remained prostrate with no value accruing to it. When the apex bank introduced the RT 200 policy in February this year, the exchange rate was about N580/$1 in the parallel market. After nine months, the exchange rate has depreciated 22 percent to N710/$1.