In this interview, the acting Managing Director, NEXIM Bank, Mr. Bashir Wali provides insight on the newly launched N500billion Export Stimulation Facility for Nigerian exporters and the rediscounting/re-financing facility. Excerpts:
Tell us what NEXIM Bank is all about
The Nigerian Export Import Bank, with the acronym NEXIM is a government development finance institution. It is an export credit agency established and wholly owned by the government and its mandate is to diversify the external sector of the Nigerian economy by opening of the non-oil export sector. The bank, in doing this, provides market information and export advisory services as well as lending facilities for entrepreneurs in the export sector of the economy. In doing this, we encourage diversification and foreign exchange earnings from the non-oil export sector.
Can you give us a sense of the current and potential non-oil export market in Nigeria?
Nigeria is a blessed country, in so many respects. We have resources both in the agricultural and solid mineral sectors. From the National Bureau of Statistics, the total non-oil exports earnings of Nigeria in 2015 amounts to $5.9 Billion with an average of $6.18 Billion over the past 5 years. The fact is that these are the official figures. In terms of informal trade, what we have is much higher. The annual information estimates in terms of informal trades from the Nigerian Export Promotions Council ranges between $12 billion to $14 billion annually. You can well imagine the potential in the non-oil export sector if properly harnessed.
How do we increase these numbers in the non-oil export market? What are those key factors that the non-oil exporter should consider before taking their decisions about financing?
For any entrepreneur, the first and basic requirement is that you should know what you are getting yourself into and what area you are investing in. Once you have done your study and have considered the pros and cons, the opportunities and the challenges, then you need to have a platform. That platform could be in the form of an incorporated company where shareholders will jointly participate by having investments or you can have a cooperative; especially for SMEs based on their size. The cooperative will provide for a proper synergy as well as the platform where you can have collateral security which is one of the major challenges entrepreneurs in the SME sector face. Then of course you need to have a proper business plan, a feasibility survey and a report. The next step is to link up with an export owner or a have a firm contract with an off-taker for the goods or products you are intending to export. Furthermore, ensure that you conform and keep to the standards, both in terms of quality, in terms of packaging and keep to time in terms of delivery. The most important aspect in a business relationship is integrity and credibility.
What has been the major challenge with exporters who visit NEXIM Bank for this facility?
The major challenge for Nigerian entrepreneurs is the issue of process. Entrepreneurs in Nigerian and in other parts of the world are impatient to get going and only a few have the resilience to go through due process. Documentation for exports take time and is pains-taking. The processes in terms of meeting up to quality standards and control, in terms of packaging, in terms of having collateral backing for the funding support required all take time. Due diligence and KYC requirements, both locally and externally, take time. I think patience is one of the key issues that we have to bear with.
What are the main objectives behind the Export Stimulation Facility of N500 billion?
The Export Stimulation Facility of N500 billion (ESF) was launched by the Central Bank of Nigeria. It is an initiative that is aimed at incentivizing and encouraging entrepreneurs in the export sector to boost the foreign exchange earnings of the country from the non-oil export sector. The access to funding of the export sector of the community has been placed to about 0.4% of the total domestic private sector loans. This has underscored the need and urgency to come out with an incentive scheme that will give encouragement and access to funding and funding opportunities to entrepreneurs in the export sector; hence the N500 billion lifeline.
What are the documentation requirements for the ESF?
The CBN in collaboration with NEXIM has tried to simplify the processes and shorten the waiting time. One of the attributes of the ESF is the direct link with the commercial bank, because the whole process is initiated by an entrepreneur with his own commercial bank. It is the commercial Banks that appraises and analyses the request. Once they find that it meets the requirement and that it is an exportable commodity with market good market up-take, they will process and recommend the facility for approval by the CBN through NEXIM Bank. NEXIM Bank will evaluate and make an input and pass a recommendation to the CBN for approval. From the time NEXIM receives this recommendation from the commercial bank to the time of final approval by the CBN is a period of 20 days. This underscores the importance which the CBN and the Federal Government places to the regeneration of the export sector. We believe that within this short span of time, any committed entrepreneur will be able to meet the documentation requirement and will be able to draw down and start business.
Is there a maximum limit for this facility?
For an individual entrepreneur, or incorporated company, or a registered business name or even an individual person, the maximum limit is N5 billion. I have used this in the generic sense of the word. Of course if you are looking for N5 billion as an individual, you have to be able to go through the rigors of evaluation.
How does the Rediscounting/Re-financing Facility of N50 billion (RRF) work?
The Rediscounting/Re-financing Facility is a window given to commercial banks to refinance or rediscount existing risk obligations they have already granted to their customers. It is a window that is meant to provide liquid funds for risk assets that have been created and to give opportunity for creation of other risk assets by these commercial banks; thus broadening the scope and application of these funds. It provides concessionary interest rates. Incidentally, both the ESF and the RRF are at discounted interest rates to give encouragement to the non-oil export sector.
What does the NEXIM look into before recommending an individual for a loan?
For any given credit request, the first and cardinal thing is to look at the individual or the company applying. Credibility and integrity are the primary considerations. One has to have credibility before you can be fit for consideration for any facility. Secondly, you have to consider the objective of the loan. Is it a profitable venture? If funding support is given to a given customer, will he profit by it? In the process of profiting by it, will the lender also profit by it? For the lender to profit it could be in a variety of ways. For a development finance institution or for a government that is intervening in a given sector, satisfaction and benefit will be by way of developing that sector. For a commercial banking enterprise or for a business man who is investing for profit, it is the return he will get on the money that he has invested. For the given customer who is undertaking a particular venture, it is the return that he will get on his investment in terms of time, in terms of money and in terms of commitment that matters. At the end of the day, if all of these indices meet, of course you take collateral as a fallback position. It is a fallback position but it is a regulatory requirement for lending in Nigeria. Any financial institution that is lending money must lend, but with security. You have to consider the adequacy of the backup collateral that is provided.