NEXIM Bank CEO, Roberts Orya
The federal government’s plan to empower the non-oil sector of the economy is being threatened by the problem of undercapitalisation of NEXIM Bank, saddled with the responsibility of funding export trade, reports James Emejo
Only recently at the just-concluded annual meeting of the Export-Import Bank of the United States, former President Bill Clinton had made a strong case to the Barack Obama administration for the recapitalisation of the bank in order to enhance market access to American entrepreneurs and create more jobs in the economy. Within three weeks when the proposal was made, the US EXIM Bank was recapitalised with its portfolio cap increased to $140 billion.
In his response to the development, President, Export-Import Bank of the United States, Mr. Fred P. Hochberg, described the Senate Passage of HR 2072, the Export-Import Bank Reauthorisation Act of 2012, as “a victory for American companies, workers and taxpayers.”
Analysts believed the US experience goes a long way to underscore the indispensable role which EXIM banks globally have assumed in recent times as critical instrument for the empowerment of the non-oil sector of the economy, particularly amid the present global financial turmoil which has brought hitherto strong economies to their knees. It equally re-emphasised the inherent potentials in small businesses to grow any economy when adequately supported.
Although one of Nigeria’s foreign policy trusts has been to expand trade and investment, there has been little commitment to reposition its trade policy and finance institution-Nigeria Export-Import Bank (NEXIM)- to fully carry out its primary role of galvanising the non-oil segment especially the informal sector to meet the diversification objectives of President Goodluck Jonathan’s administration.
Managing Director/Chief Executive, NEXIM Bank, Mr. Roberts Orya, had earlier in the bank’s 2012 budget proposal noted that investment in the targeted sectors was expected to create over 23,923 jobs and generate about $229.6 million in foreign exchange earnings for the 2012 fiscal year through active support to the Manufacturing, Agriculture, Solid Minerals and Services (MASS) sectors of the economy.
But it is doubtful if the institution would be able to achieve these targets going by its current pattern of funding. The increasing uncertainties in the global oil prospects has called for the need for the country to refocus attention on non-oil revenue-generating sector to mitigate the impact of a possible fiscal crisis due to cut in oil demand or drop in its price. This has given impetus to the current diversification objectives.
However, in a sharp contrast with the financial profile of the US Exim bank, currently, the paid -up share capital of NEXIM Bank, THISDAY learnt, is only about N36 billion-a flash in the pan for an economy as large as Nigeria. Moreover, for close to 19 years, the cumulative paid-up share capital of the bank was a meagre N17.2 billion. Only the Central Bank of Nigeria (CBN) which is one of its two shareholders had fully paid up N18.2 billion as its own share of the equity.
The Federal Ministry of Finance is also a shareholder.
But in an exclusive chat with THISDAY, Orya said: “The level of activities that NEXIM is supposed to undertake, what we have (resources) now is inadequate to do them.
So you need to find a way of augmenting what you have from your shareholders. I want to be able to use my own balance sheet and avail some concessional lines of credit from other funding partners like we have about $20 million from the NEXIM Bank of India. I want to be able to get to that situation where NEXIM Bank should be able to give credit facilities to other countries so that Nigerian exporters should be able to have a competitive edge over other people that are selling to the same buyer.”
He said: “I want to be able to make Nigerian Exports more competitive even if I commence to give $5 million or even $2 million to a country like Ghana-the only country within Africa that I know are consuming so much from Nigeria. It makes sense. All NEXIM banks are born to create market access to their exporters and I think we should be able to do that. But I need a lot of funds to be able to galvanise these opportunities because the pipeline projects that we have for Nigerian exporters, looking at the available resources, we won’t be able to meet them.”
The NEXIM boss also said although the non-oil sector had been the major driver of the economy, the sector could be empowered to do better amid the current global financial crisis.
According to the National Bureau of Statistics (NBS), the country’s total value of exports in Q1 2012 was valued at about â‚¦4.9 trillion. But that indicated a decrease of about â‚¦2.1 trillion or 30.3 per cent over the value in the previous quarter.
The decline was partly attributed to the decrease in the value of Non-crude oil exports (especially products of the chemical and allied industries; plastic, rubber and articles thereof; wood and articles of wood; and textiles and textile articles, amongst others) which dropped by â‚¦2,368.6 billion or 65.4 per cent over the period.
“Nigeria in particular is at a stage where our non-oil sectors should do better and that is why you can see everybody running up and down to see how we can diversify the economy because the key growth driver are in the non-oil sector,” Orya said.
Perhaps, yet another major impediment to the growth of the non-oil sector is the absence of a credit insurance policy to mitigate risk in volatile segments of trade.
Orya said: “We don’t yet have a seed fund for credit insurance. The way we are now, we need a credit insurance arm: it is a risk mitigating instrument to expand the market for our exporters.”
Undoubtedly, the current administration’s efforts to boost exports and create job opportunities is bound to have set-backs unless its key trade institutions such as NEXIM Bank is recapitalised to achieve its important target of creating market access to Nigerian exporters; giving them the competitive edge and thereby generating jobs in the economy.