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Role of NEXIM Bank in Jonathan’s Transformation Agenda

12 Feb 2013

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President Goodluck Jonathan

Ibrahim Yusuf
 
The Transformation Agenda of the President Goodluck Jonathan Administration, like other policies by successive Governments, seeks  to reposition the economy, through addressing, issues of poverty, unemployment, insecurity and most especially, diversifying the economy from total dependence on oil to a non-oil driven economy.

For this to happen, concrete commitment translated into strategic action must be shown by all Nigerians and the present Administration in a sustained manner even beyond 20:2020; that is, even after Nigeria becomes of the 20 economies by year 2020.
 
In his Christmas Day address to the nation, President Jonathan stated, “As we celebrate Christmas … I urge you all to continue to trust in our unwavering commitment to fully achieve the objectives of our Agenda for National Transformation for the benefit of all Nigerians. No one should doubt that we have the political will and determination to deliver on our promise of positive changes in the living conditions of our people in the shortest possible time….and that, despite the “distractions” posed by the security challenges in parts of the country, the Administration has remained committed to improving in priority areas such as roads, public infrastructure, power supply, agriculture, health, education and job creation.”
 
Agreeably, Nigeria is undergoing a fundamental transformation across sectors and the set developmental goals for 20:2020 will be realised through the implementation of the Transformation Agenda of President Jonathan. The successes being recorded in the power and energy sector, agriculture, youth empowerment programmes, increase in direct foreign investment, etc underscore this reality.
 
It is also imperative and trite to state that for Nigeria to achieve Vision 20:2020, Government, at all levels, must accord other sectors of the economy apart from the oil, the needed attention.
 
In various economies where the Government had pursued the kind of transformation being undertaken by Nigeria, the instrumentality of Development Financing has been used to the hilt. As stated in ‘The Growing Role of the Development Finance Institutions in International Development Policy’ by the Global Development Advisors - Dalberg , the role of DFIs are strategically “catalytic” and “additive”.
 
According to the argument, DFIs catalyse private capital and expertise; reduce risk of other parties, increase visibility of opportunities and offer tailored financing solutions; and create a multiplier effect in which their own investment are paired with additional private investment. On the other hand, they are “additive” to the extent that they invest in enterprises in developing countries which would otherwise not receive financing or use investment instruments that other private sector investors would not be willing to use.
 
Summarily, the argument is that DFIs add value in three main ways namely, Investing in underserved project types and settings – the way DFIs do business enables them to invest in higher risk segments; Investing in under-capitalized sectors; and mobilizing other investors after they have de-risked the sector and made it commercially viable. The rational for DFIs robust participation in national development efforts is simply for the reason that helping the private sector to grow is one of the keys to sustainable development. According to the World Bank, private firms are a powerful source of job creation in the developing world, which has shown to reduce poverty.
 
Perhaps, the Government of President Goodluck Jonathan has done more than previous Administrations to ensure that various DFIs are empowered to effectively contribute to the national transformation agenda. The injection of billions of Naira into Bank of Industry, Nigerian Export-Import Bank – NEXIM Bank, Bank of Agriculture, Federal Mortgage Bank and others are a pointer to this. An analysis of the Nigerian Export-Import Bank (NEXIM Bank), an Export Credit Agency (ECA) established by the Federal Government of Nigeria through Act No. 38 of 1991 will be apposite for this piece.
 
As a DFI, NEXIM takes developmental rather than a purely financial-return maximisation approach. It has consistently focused on the identification, development and financing of projects that leads to national objectives being met through encouraging private sector development. NEXIM has consistently provided financial products not readily provided by other financial institutions e.g. equity, longer-term finances, venture capital, etc. It has also undertaken and managed a higher risk profile while playing a catalytic role and providing additionality thereby encouraging export-oriented investments which move the economy in the desired direction.
 
The Bank is owned in equal proportions by the Central bank of Nigeria and Federal Ministry of Finance Incorporated, but had till the Jonathan Administration suffered from paucity of equity funds from its major Shareholders and unfocused leadership which had digressed from the mandate of the Bank.
 
All that came to a head in 2010 when the CBN Governor, Mallam Sanusi Lamido Sanusi and his Deputy Governor, Dr. Kingsley Moghalu decided to inject fresh capital into NEXIM to enable it pursue its mandate effectively and with renewed impetus.
 
The Bank, under the leadership of Mr Roberts Orya, a seasoned investment banker with close to three decades of experience in the industry, has re-defined its mission and vision statements and also developed new strategic objectives that would be achieved through focus on key areas of risk management and corporate governance, financial performance, review of operations and organizational processes and people. It also has defined its market focus on channelling resources into development of four sectors, namely Manufacturing, Agro - processing, Solid minerals and Services in what has been tagged the “MASS Agenda.” These sectors have high employment and foreign-exchange generation potentials in the non-oil sector of the Nigerian economy.
 
Less than three years since 2010 when the funds were injected and in justification of the trust by Mr President, CBN and Ministry of Finance, NEXIM Bank, through its various operational interventions, has generated or sustained direct jobs of over 14,358 as at August 31, 2012. In fact between August 2009 and August 2012, its facilities have enhanced the potentials of beneficiary projects to generate estimated foreign exchange in the sum of US$189.20 million annually.  Loan recovery and pragmatic remedial assets management continues to be a major focus of the Management, which had resulted in a cumulative loan recovery of N1.3 billion in the period under review.
 
NEXIM Bank is also pursuing other innovative initiatives such as trade facilitation. Mr. Orya consistently asserts that part of the Bank’s developmental role is to identify barriers to Nigerian export trade and come up with innovative mechanisms and instruments to make Nigeria’s exports more competitive by facilitating the reduction and / or elimination of the identified barriers.
 
Towards this, the Bank is trying to address two major limitations of formal trade between Nigeria and other ECOWAS countries, the rest of Africa and the world. One is absence of information and credible data on Nigeria’s informal sector to ensure that credible information and statistical data are made available for financial intermediation.
 
The second issue, which is inadequate key trade infrastructure results  in delays in clearing consignments at the ports of exit / entry, lack of integrated logistical and payment systems, absence of dedicated short Sea regional maritime liner, etc.
 
Partly to address the above, NEXIM is facilitating the Sealink Project, which will remove the barrier of high cost and unduly lengthy time taken to ship cargo within the ECOWAS region through trans-shipment arrangement.
 
NEXIM Bank also defines its business as complementing the role of the commercial banks and other Development Financial Institutions (DFI’s) and is currently focusing on the un-served markets, especially within ECOWAS and Central Africa and Asia. It has effectively created well-structured market-facing departments along the key target sectors of Manufacturing, Agro - Processing, Solid Minerals and Services.
 
Nonetheless, NEXIM can do more to support the realisation President Goodluck Jonathan’s laudable Transformation Agenda. With additional policy and financial support by the Government, the Bank can create more opportunities for SMEs thereby creating more jobs and generating more foreign exchange in Nigeria’s non-oil sectors. In fact, from its strategic transformation document presented to the CBN in last quarter 2010, NEXIM indicated that it can contribute to create/sustain approximately 70,479 and 60,587 jobs by 2015 in the Manufacturing and Agro-processing sectors through project finance.

Also in the Solid Minerals and Services sectors, the Bank projects to be in a position to enable the sectors account for 0.82 per cent and 0.61 per cent of the respective sectors GDP by 2015 as well as help create/ sustain approximately 2,885 and 26,236 new jobs within the solid minerals and Services sectors through project finance activities.

• Yusuf is a policy analyst

Tags: Business, Nigeria, Featured, NEXIM Bank, Jonathan’s Transformation Agenda

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