World Bank Requests CBN Terminate RT200 FX Program
Due to its effects on the nation’s foreign exchange, the World Bank has encouraged the Central Bank of Nigeria (CBN) to evaluate the “Race to US$200 Billion In FX Repatriation (RT200 FX) Program.”
According to the World Bank, those who gain from the RT200 FX Program will profit from the incentive provided by the central bank through the rebate plan.
From the World Bank’s “Nigeria Development Update (December 2022): Nigeria’s Choice” report, Media outlets learned that traders could buy foreign exchange on the official market and exchange it for more money on the black market to profit from the premium rate difference between the two forex markets.
Notably, the CBN’s rebate program encourages non-oil exporters to repatriate foreign currency and sell export revenues on the official foreign exchange market.
The rebate program is meant to replace the foreign exchange that the banking system is losing to the illicit market as a result of the premium rate in the off-exchange market.
The World Bank’s assessment of the CBN’s RT200 FX Program
The RT200 FX Programme, however, is simply making Nigeria’s foreign exchange position worse as its foreign reserves have been depleted, according to the World Bank report.
The key element of this program is a rebate plan to promote the repatriation and sale of export revenues into the FX market, according to the World Bank research.
Despite the scheme’s best efforts, even when transactions are carried out through the I&E window, it has actually resulted in the creation of a second FX window with a different (subsidized) exchange rate.
Additionally, agents are encouraged to settle transactions outside of the I&E window at the parallel rate even after receiving the RT-200 rebate due to the rising parallel-to-official rate premium. This rule needs to be reviewed.
The “Race to $200bn in FX Repatriation (RT-200)” program, which aims to repatriate $200bn of non-oil export profits over the following five years, was launched by the CBN in February 2022, according to the report’s addition.
A rebate program to promote repatriation and the sale of export revenues into the FX market is the program’s major element.
Private sector stockpiling of currency
The private sector was also charged by the central bank for hoarding foreign exchange gained from the official market and retaining it overseas after the commercial transaction months earlier.
Egboagwu Ezulu, the CBN’s deputy director for banking services, had said: “We are taking foreign exchange out of this nation and dumping offshore, even though we were directed to bring them back. If Nigerians were bringing back foreign exchange, we wouldn’t be discussing about difficulties. It might be difficult for people and companies to act morally.
“We see billions of dollars that have been exported out of the country in the bank’s accounts, and the OPS isn’t bringing it back, so how can we finance FX demand? That’s why the CBN launched the RT200 to incentivize you to bring back the dollar you claim is scarce.”
