How Nexim Bank is strengthening Nigerian export financing
The beneficiaries of NEXIM Bank’s interventions are businesses of various sizes operating in the value chains of manufacturing, agro-processing, solid minerals, and services sectors.
Three major opportunities are shaping the Nigerian non-oil export sectors. First is the acute economic disruption caused by the COVID-19 pandemic, which requires virtually all the world’s economies to “build back better.” This entails building economic resilience to future crises.
Second, the operational take-off of the African Continental Free Trade Area (AfCFTA) will, generally, improve intra-Africa trade from 15 per cent at the end of 2019. Nigeria serves as an attractive consumer market for other African countries, based on the country’s 200 million population and being the region’s largest economy with $443 billion GDP in 2020. However, AfCFTA will also provide access for Nigeria to the rest of the African consumer market of over 1 billion population and $1.887 trillion GDP (i.e. Africa’s GDP minus Nigeria’s).
Third, the Federal Government (FG) is ramping up financial and non-financial interventions to boost the country’s non-oil export sectors. The Central Bank of Nigeria (CBN) is supporting the efforts with export intervention financing. Both the FG and the CBN have also been strengthening the institutional capacities for growth in the export sectors.
Centre of Gravity
At the heart of the efforts to harness Nigeria’s non-oil export potentials is Nigerian Export-Import Bank (NEXIM Bank). NEXIM Bank is the country’s export development bank. In May, 2017, the current management of the bank, led by the MD/CEO, Abba Bello, came into office and developed a new strategic plan (2018 – 2022) to improve the performance of the bank across various indicators and contribute towards the achievement of the goals of the then-subsisting Economic Recovery and Growth Plan (ERGP) of the FG.
During a media parley the management of the bank held on Thursday, February 18, 2021, the strategic frameworks of the export credit agency of the FG were highlighted to include more focus on the non-oil sectors, building partnerships, and stakeholder engagement. In this regard, NEXIM Bank became a member of the National Committee on Export Promotion, established by the National Economic Council, the policy forum including the governors of the 36 states of the federation. Chaired by the Governor of Jigawa State, the council is responsible for promoting the Zero Oil Plan of the government.
NEXIM Bank also partnered with the Office of the Vice President to organise nationwide MSME clinics and establish one-stop shops as well as shared facility centres for use by small and medium scale enterprises (SMEs). The bank is also now a member-institution of the Export Facilitation Sub-Committee of the Bankers’ Committee – the club of the CEOs of Nigerian banks, chaired by the CBN Governor – to increase funding for intervention for selected exportable commodities. To enhance capacity development in the non-oil sector, NEXIM Bank is also fostering collaborative relationships with key government institutions, including Nigerian Export Promotion Council (NEPC), the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), and Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), amongst others.
National Development Finance Institutions (DFIs), unlike conventional, private sector banks, are not primarily profit-oriented. Rather, they are established to de-risk and carry out other important interventions in sectors that may be underfunded by the commercial banks. Such interventions may target export growth, job creation, and implementation of government’s industrial policy. This is the same with NEXIM Bank.
Nevertheless, maintaining operational continuity, strengthening financial interventions, and ensuring continued political support mean DFIs have to be profitable, apart from delivering their more important economic mandates. NEXIM Bank said it fully embraces these imperatives.
With regard to its profitability, the current management reversed the losses of N8.03 billion and N567 million in 2016 and 2017, respectively, under the previous management, and achieved a profit of N1.09 billion in 2018, N2.13 billion in 2019, and N1.28 billion in 2020. The decline in profit last year was attributed to the negative impact of the COVID-19 pandemic on businesses; it was also caused by the interest rebate and moratorium extension granted by the bank to its customers.
Improvement in risk management practices with new loans granted from 2018 has ensured that the bank’s current credit asset is performing at 100 per cent. The loan impairments under the previous management are also been addressed.
Undoubtedly, under the current management, NEXIM Bank is enjoying unprecedented financial support. Its balance sheet grew from N67.73 billion in April 2017, to N158.84 billion as of January 2021. NEXIM Bank said it aims to raise its balance sheet to N1.2 trillion by 2022.
The dramatic asset growth is being underpinned by prudential measures and asset protection strategies. This includes aggressive debt recovery and proactive loan workout measures, which have already increased overall recoveries from N200 million in 2016, to N4.76 billion and $750,000 between 2017 and January 2021. The bank has also put assets worth about N7 billion up for sale.
Management of Intervention Funds
The CBN released N50 billion to NEXIM Bank in February 2018 to implement the Export Development Programme (EDP). Following effective utilisation, the fund was enhanced to N100 billion in December 2020. NEXIM Bank is also collaborating with the CBN to manage the N500 billion Non-Oil Export Stimulation Facility, which has been introduced to provide long-term financing to export-oriented projects and increase value-added exports.
The Bello-led management is demonstrating that it takes its stewardship of the intervention funds with professional rectitude. It has processed 227 applications valued at N159.27 billion and $37.67 million, out of which N98.87 billion has been approved. N68.01 billion has been disbursed to 68 beneficiaries, while approvals totalling N30.86 billion are currently in the process of meeting pre-disbursement conditions.
One other objective of the intervention of the FG and CBN in the non-oil sector is to broaden the sources of foreign exchange inflow to the economy beyond the proceeds from crude oil exports. According to the information provided by NEXIM Bank, this objective is being met under the EDP. So far under the programme, $182.31 million and €203,018.42, which translate to N70.40 billion, have been received as export proceeds from projects that have repatriated their income. Others are yet to complete the transaction cycle. Many of the institutions supported now feature on the list of top 100 exporters published annually by the CBN.
Generally, the beneficiaries of NEXIM Bank’s interventions are businesses of various sizes operating in the value chains of the non-oil sectors, specifically manufacturing, agro-processing, solid minerals, and services. But as DFIs often take particular view of sub-sectors and industries needing interventions to meet specific policy objectives, NEXIM Bank has developed such special interventions. The bank has created the SME Desk and Small & Medium Enterprises Export Facility (SMEEF) to support such exporters under more favourable terms and conditions.
NEXIM Bank has also established the Women and Youth Export Fund to provide credit assistance to industries dominated by the women and youth demographics, including women-led businesses. This is in support of the national efforts towards achieving the sustainable development goals (SDGs).
Similarly, the bank’s Anchor Export Programme was designed to provide market access to small business owners and increase intervention in all aspects of the export value chain.
Relationship with Multilateral Institutions
NEXIM Bank has improved its relationship with multilateral institutions and funding partners, including by paying its due obligations. It, therefore, has been able to attract new lines of credit. The bank is collaborating with African Export-Import Bank (Afreximbank) to implement the Nigerian-African Trade and Investment Promotion Programme (NATIPP), under which $1 billion has been earmarked to support Nigeria’s trade and investment activities under the African Continental Free Trade Area.
NEXIM is also finalizing plans to on-lend at least $25 million from Afreximbank under the Pandemic Trade Mitigation Facility to assist Nigerian exporters following the COVID-19 disruptions.
NEXIM Bank serves to develop key exportable commodities, unlock opportunities and de-risk key non-oil export sectors to facilitate investments and increase the flow of credits, all geared towards achieving the economic diversification objectives of the FG. Over the last three years, the bank has operated under the philosophy of Produce, Add Value and Export (PAVE) to change the current narrative of the dominance of primary products in the country’s export basket.
In addition to supporting start-up projects, a lot of emphasis was also placed on providing working capital to resuscitate many industrial projects, which had been operating below capacity or become moribund. Improving the performance of such businesses is critical in enhancing job creation in the country. The project interventions cut across the aforementioned key sectors: manufacturing, agriculture, solid minerals, and services. The services sector includes the creative & entertainment industry, professional services, ICT, medical tourism, etc.
It may suffice to mention some of the interventions that have been creating the targeted impacts. NEXIM Bank is working with the leather cluster in Kano, having funded three companies and assisted them to acquire new machines to retool their operations. This was with the view of enabling the companies to become major players in the global value chain. In the shea industry, the bank is currently supporting various projects in Lagos, Ogun, and Niger States. The bank’s intervention and support for the acquisition of shea processing plants led to the first major export of shea butter from Nigeria in March 2018. Prior to this, Nigeria had no significant footprint in the export of shea products due to low processing capacity and high incidents of smuggling and informal trade. This is in spite of the country’s ranking as the world’s largest producer of shea, with annual production of 364,000 metric tons, accounting for 45 per cent of global output.
In the cocoa industry, the bank is revitalizing existing processing plants with the aim of increasing value addition and ensuring that Nigeria benefits from the global cocoa value chain estimated at about $130 billion. NEXIM Bank is also providing financial intervention towards the acquisition of machinery, equipment and working capital for the processing of solid minerals for export. Nigeria has over 34 solid minerals in commercial quantities, which remain largely unexploited.
NEXIM Bank is also intervening in the services sector to improve intra-Africa trade in the wake of AfCFTA. The pharmaceutical industry is another target of the bank’s interventions to meet the standards of the World Health Organisation (WHO) and against the backdrop of the COVID-19 pandemic. NEXIM Bank is providing trade support for such export produce as hibiscus flower, dried ginger, sesame seeds, gum Arabic, and charcoal.
The acute fiscal shock brought about by COVID-19 shows the sustainable Nigerian economy cannot remain reliant on crude oil revenue. The economy has to broaden non-oil export production. NEXIM Bank’s balance sheet needs to grow more dramatically to strengthen its intervention to scale up its impacts. The recent support it has received shows the relevant policymakers, in particular the CBN, are taking the necessary steps in the right direction.
Jide Akintunde is the Managing Editor, Financial Nigeria. He is also the director of Nigeria Development and Finance Forum.
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