Presentation Title Trebuchet MS 36pt over 2 lines

Report
The Role of NEXIM Bank in Diversifying
The Non-Oil Export Sector
Presentation by Mr. Awami Mohammed
Nigerian-Export Import Bank
At the ISPON 2013 Annual Conference on “Software
Strategies For Retooling The Workforce” held at Tinapa,
Calabar, Cross River State
October 22-23, 2013
Outline of Presentation
1.0
Introduction
2.0
Types/ Instruments of Export Finance
3.0
Sources of Export Finance
4.0
NEXIM’s Products & Services
5.0
Constraints to NEXIM’s Intervention
6.0
Concluding Remarks
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1.0 Introduction
 Nigeria is predominantly an agrarian economy, with the
Agriculture sector contributing about 40% of GDP and
employing over 60% of the labour force.
 In spite of this, the Oil and Gas sector continues to dominate
government and export revenues, accounting for about 70%
and 95% of revenues, respectively.
 Given the challenges of oil dominance, particularly in view of
decreasing demand by the United States, and discovery of oil by
competing nations, the Federal Government, under the current
Transformation Agenda seeks to diversify the economy through
increased production and exports of non-oil products.
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Introduction Cont’d
 Currently, Nigeria’s non-oil export revenue is insignificant.
 Of the total export revenue of N15.28trillion (US$97.03bn)
in 2012, the oil sector accounted for about 97%, while the
non-oil sector contributed a paltry 3%.
 The above trend, which has persisted since the post-SAP
period in 1986, can be attributed to a myriad of factors,
principal among which include:
 low investment and poor farm yield
 Dominance of raw agricultural commodities and
insignificant amount of value-added non-oil exports
 Poor access to long term concessionary funds by exporters
has also contributed to the observed trend
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2.0 Types/Instruments of Export Finance
 Export finance
has some peculiarities given that
international trade is sensitive to
 Quality of product
 Price
 Delivery schedules, and
 Payment terms (must be flexible)
 While export finance takes various forms and types, its
categorization may be done according to the purpose of
finance, stage of export operations or tenor of loan
 In general, the following financing instruments are used for
export transactions.
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THE TRADE FINANCE TRANSACTION CHAIN
Sub-title Trebuchet MS 20pt Flow of Goods
Trader
Producer
Consumer
Bridge Financing
Pre-shipment Financing
Post-shipment Financing
Import Financing
BANK
TYPES/INSTRUMENTS FOR EXPORT FINANCE
PostShipment
Financing
PreShipment
Financing/Pa
cking Credit
Documentary
Credit
Supplier’s
Credit
Buyer’s
Credit
Structured
Finance
Factoring
Forfaiting
Counter
Trade
Type / Instruments of Export Finance

Pre-Shipment Financing/ Packaging Credit

This is a financing arrangement preparatory to shipment, which
is usually short term in nature
 Post-Shipment Financing
 This is essentially financing for the period after shipment
 Supplier’s Credit
 Here an exporter extends credit to the buyer in the importing
country to finance the buyer’s purchases.
 Documentary Credit
 Here a bank, (Usually in the importer’s country) undertakes to
pay for shipment, provided the exporter submits the required
documents (such as clean bill of lading, certificate of insurance,
certificate of origin) within a specified period
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Types / Instruments of Export Finance
 Buyer’s Credit
 This is a financial variant whereby a financial institution
in the exporting country extends a loan directly or
indirectly to a foreign buyer to finance the purchase of
goods and services from the exporting country
 Forfaiting
 The exporter surrenders, without recourse to him, his
rights to claim payments for goods delivered to an
importer, in return for an immediate cash payment from a
forfeiter, thus converting a credit sale to cash sale
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Type / Instruments of Export Finance
 Structured Finance
 This technique essentially transfers risks in trade financing from
parties less able to bear those risks to those more equipped to
bear them in a manner that ensures automatic reimbursement of
advances from underlying assets. Such assets include inventory
and export receivables
 Factoring
 It is a process used by some exporting companies whereby a
factor (usually an international bank) purchases the debt owed to
the exporting company by a foreign client (at a discount). When
the client has received the goods, they then pay the money owed
to the factor, rather than the original exporter
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3.0 Sources of Export Finance
 Export Finance could be obtained from several sources which
includes:
 Deposit Money Banks
 Capital Market: Offer for Subscription, Bonds, Debentures, etc
 Development Finance Institutions (DFIs), NEXIM, BOI, NERFUND
etc
 Other Export Credit Agencies, for Buyers’/ Suppliers’ Credit
Arrangements: Afrexim, US Exim, Export Import Bank of China, etc
 Equity / Angel Capital (Loans from friends, family, etc.)
 In Nigeria, the Banking sector, being the biggest segment of the
financial system is the most significant source of funds
 Unfortunately however, support to the export sector by
commercial banks has been limited by tenor and cost of funds
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Sources of Export Finance
 The following schematics gleaned from the CBN Annual
Report shows that about 97% of deposits in the Banking
System are short term funds maturing in one year or less
Source: CBN Annual Report
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MATURITY STRUCTURE OF COMMERCIAL BANKS’ DEPOSITS
 Also, over the past 5 years, the proportion of loans to
the export sector by commercial banks have been less
than 2%
 Besides the short tenor and high cost of funds, the
categorisation of export projects/ transactions as
high risk could also be adduced to the above trend.
 Development Banks like NEXIM Bank have therefore
been created to fill this gap through the provision of
long term funds at concessionary rates
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Credit to the Core Private Sector, 2006- 2011
Share inOutstanding (per cent)
2008
2009
2010
26.2
25.2
30.4
2006
30.3
2007
25.9
Agriculture
2.2
3.2
1.4
1.4
1.7
3.5
Solid Minerals
10.1
10.7
11.3
12.7
15.3
17.7
Exports
1.2
1.4
1
0.5
0.6
0.5
Manufacturing
2. Less Preferred
Sectors
16.9
46
10.4
41.2
12.5
42
10.6
46.9
12.8
47.8
14.4
45.8
Real Estate
5.9
6.2
6.2
8.3
8.7
6.2
Public Utilities
0.9
0.6
0.6
0.8
0.7
0.9
Transp. &
Comm.
7.6
6.8
7.2
8.3
10.7
17.3
Finance &
Insurance
4.6
9.4
9.5
13.1
11.3
4.1
Government
Imports & Dom.
Trade
4.5
22.5
3.7
14.5
1.9
16.4
3.7
12.8
4.9
11.7
6.8
10.3
3. Unclassified
Total (1+2+3)
23.7
100
32.9
100
31.8
100
27.9
100
21.8
100
18.1
100
1. Priority Sectors
Source: CBN Annual Report
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2011
36.1
4.0 NEXIM’s Products and Services in support of Exports
 The Nigerian Export – Import Bank was established by Act
38 of 1991 as Nigeria’s Export Credit Agency (ECA). The
Bank is equally owned by the Central Bank of Nigeria (CBN)
and the Federal Ministry of Finance Incorporated (MOFI).
 The Bank’s broad mandate is essentially to promote the
diversification of the Nigerian economy and develop the
external sector through the provision of the following
services in support of the non-oil export sector:
 Credit Facilities in both local and foreign currencies,
 Risk-bearing facilities - Export Credit Guarantee &
Export Credit Insurance
 Business Development and Financial Advisory Services
 Trade & Market Information
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Role of NEXIM in Promoting Trade & Investment cont’d
 The Bank also complements in attracting foreign
investment capital towards the development and growth
of targeted industries and strategic sectors of the
economy through availment of concessional lines of
credit, co-financing arrangements and facilitation of
buyers’ / suppliers’ credit towards the adoption and
acquisition of new and clean technologies, assess to
patents/intellectual properties, etc.
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NEXIM’s Products & Services
 Rediscounting & Refinancing Facility (RRF) – This is an
interbank product designed to liquefy the export credit
transactions of banks through the provision of a window to
rediscount export bills finance and/or refinance their export
credit portfolio
 Foreign Input Facility (FIF) – This facility is designed to
support banks / exporters with foreign currency loans to
import foreign inputs e.g. plant & equipment, raw/packaging
materials, spares, etc needed for production for exports.
 Local Input Facility (LIF) – This is the local variant of FIF
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NEXIM’s Products & Services
 Stocking Facility (SF) – This is an interbank or direct lending
facility designed to enable processors stock adequate raw
materials that are seasonal in nature to keep their production at
optimal levels during off-season of inputs.
 Direct Lending Facility (DLF) – this is a funding window
purveyed directly to exporters who meet meets the Bank’s
minimum eligibility criteria
 ECOWAS Trade Support Facility (ETSF) – This facility is
developed to support intra-regional exporters as well as
promote formal trade and deepen payment system within
ECOWAS, thereby facilitating economic integration
and
cooperation under ECOWAS Trade Liberalization Scheme
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NEXIM’s Products & Services

Export Credit Guarantees


This facility is designed to protect banks in Nigeria and
foreign lending institutions against the risk of non-payment
for loans or advances granted to exporters to meet short term
export contracts
Export Credit Insurance

This is designed to protect exporters in Nigeria against the
risk of non-payment for goods and services exported on credit
terms.
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NEXIM’s Products & Services
 The Creative/ Entertainment Industry Loan Scheme
 The was designed to provide lending intervention to
the creative industry in response to the ranking of
Nigerian Nollywood as 2nd most prolific industry
globally and 3rd in terms of revenue generation.
 The scheme is designed to extend loans to eligible
companies in the value chain, including support for
improvement of distribution infrastructure/platforms
and establishment of new digital production studios.
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NEXIM’S INTERVENTION – (1991-2013)
NEXIM’S FUNDING INTERVENTION(1999-2013)
SN
NON – OIL
EXPORTS
NON – OIL EXPORTS FINANCED
FINANCED (N’000) (USD'000)
YEAR
ESTIMATED
JOBS
FOREX EARNINGS
CREATED/SUSTAINED (US$’000)
1
1991-1993
-
273,240.00
2,106
34,155
2
1991-July 2009
(excluding ADB
ESL)
56,791,786.71
-
33,312
943,385
3
AUG - DEC 2009
1,001,400.00
-
1,362
8,408
4
2010
5,655,324.20
21,000.00
5,298
73,406
5
2011
8,000,124.00
6,300.00
5,113
71,335
7,308,870.83
3,337,199.26
86,216,672.00
357,240.00
4,191
2,002
51,278
58,655
26,783
1,216,127
6
7
2012
YTD2013
SUB TOTAL
GRAND TOTAL (N'000) = 89,722,379.73 (After conversion of the foreign currency component)
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5.0 Constraints to increased intervention by NEXIM
 Government ownership implies that the Bank’s Capital can only be
enhanced through budgetary allocations:
 However, the Bank has been leveraging its balance sheet to access
lines of credits
 The main challenge is dearth of bankable projects, particularly by SMEs
who are the main focus of the Bank, being a DFI. Some of the
Challenges in handling SMEs include:
 Higher risk associated with small scale businesses, which
operate in a more competitive environment and have lower
capacity to withstand adverse developments in the economy
 Higher transactions costs in handling SME financing
 Inadequate/Lack of collateral to support loan request
 Lack of proper business plans/Poorly conceived projects
 Poor managerial skills/improper record keeping
 In spite of the above, NEXIM has continued to build capacity through
Seminars/workshop in addition to establishing an Advisory Desk to
assist SMEs and improve their access to finance.
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6.0 Concluding Remarks

The Bank’s objective is to increase intervention in the underserved, but
key sectors of the economy in line with the Federal Government’s
Transformation Agenda.

NEXIM is particularly interested in working with SMEs and since
inception has supported over 900 SMEs, many of which currently rank
among the top 100 exporters in Nigeria.

We, therefore, welcome applications from bankable projects and
exporters in our target sectors as identified above, including of course,
members of ISPON.

The Bank also invites the informal / small traders as well as large
export merchants to avail themselves of the newly introduced ECOWAS
Trade Support Facilitate (ETSF), which is designed to deepen and
expand Nigeria’s trade in the ECOWAS sub- region, in addition to
helping small exporters to expand their businesses and bring them into
the formal sector.
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OUR CONTACTS
Sub-title Trebuchet MS 20pt
Head Office:
Plot 975, Cadastral Zone A0,
Central Business District,
Abuja
Website: www.neximbank.com.ng
E-mail:
[email protected]
Branches:
Lagos Area Office,
Calabar Area Office
31D, Thompson Avenue,
Calabar Free Trade Zone
Fatima House,
Off Glover Road,
Cross River State
Murtala Ikoyi,
Lagos State
[email protected]
Kano Area Office
Kano State
[email protected] [email protected]
Thank You For Your Kind Attention!
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