NEXIM Bank is moving Nigeria up the non-oil export value chains
Amongst others, we're supporting the tanning industry to move up the value chain, from production and exports of leather to production and export of leather products.
In this exclusive interview, the Managing Director/CEO of Nigerian Export-Import Bank, Mr. Abba Bello, speaks on initiatives to move Nigeria up the value chains of non-oil exports. He spoke to Financial Nigeria editors.
Financial Nigeria (FN): In your recent public lecture, you said that the non-oil export sector is key to spurring the delivery of Nigeria's economic potential. What is the statutory role of NEXIM Bank in facilitating Nigeria's non-oil sector growth?
Abba Bello (AB): As an Export Credit Agency, NEXIM's mandate is essentially to promote the diversification of the Nigerian economy and contribute to the growth and development of the non-oil export sector by providing credit in local and foreign currency, export credit guarantee and export credit insurance, as well as trade information and export advisory services. The Bank also complements in attracting development capital and concessionary credits to the export sector from other EXIM Banks as well as Bilateral and Multilateral financial institutions. Through these, the Bank contributes to jobs creation and foreign exchange earnings for the country.
The Bank also plays a trade facilitation role through various strategic initiatives. Some of these initiatives include the Sea-Link Project, aimed at addressing the transport and logistics problem inhibiting regional trade, through the establishment of a regional shipping company that will operate within the West and Central African Region. NEXIM is also collaborating with the Borderless Alliance, which is a regional advocacy platform that seeks to remove non-tariff barriers and other impediments to intra-regional trade. We are also the national guarantor under the Interstate Road Transit Scheme (ISRT), which is a programme designed to facilitate the smooth operation of the ECOWAS Trade Liberalisation Scheme (ETLS).
FN: The current management of NEXIM Bank, which you lead as Managing Director and Chief Executive, came into office about a year ago. What have been the key steps it has taken to revalitalise the Bank for it to be able to make the all-important contributions to Nigeria's economic transformation through non-oil exports?
AB: The current Executive Management resumed duty on 2nd May, 2017 to meet an organisation challenged by a myriad of problems, the main ones being absence of a subsisting strategic plan, inadequate capitalisation and paucity of operational funds required for the creation of new risk assets. This led to the inability of the Bank to effectively deliver on its mandate. The focus of the new Executive Team, therefore, has been to reverse these problems and also strive to ensure that NEXIM Bank is able to contribute significantly to the economic development of Nigeria.
Several measures were therefore taken, with the key ones including comprehensive diagnostic of the Bank, leading to the development of a new Strategic Plan (2018 – 2022) with implementation already on course. We also took steps to enhance the operating model through restructuring of Regional Offices for the Bank to maintain presence in each geo-political zone of the country for better market penetration.
There was also a lot of engagement with our key stakeholders, the Ministry of Finance and the Central Bank of Nigeria (CBN). Through these efforts, we were able to activate two intervention Funds provided by the CBN, including the Non-Oil Export Stimulation Facility (NESF) and Export Development Fund (EDF) to address the financing gaps. The Bank is now better positioned, with more motivated staff to deliver on its mandate.
FN: What should prospective borrowers know about the two new non-oil export development funds, which NEXIM Bank manages?
AB: As you may be aware, the N500 billion Non-oil Export Stimulation Facility (NESF), which was first established by the CBN in June, 2016, was relaunched in December, 2017 with some modifications, which now admits NEXIM as a Participating Financial Institution. This implies that exporters can now submit applications to NEXIM directly and not necessarily through other Banks as was previously the case. The facility is available for export-oriented projects, either as term loan for acquisition of machinery and equipment or for working capital, and could be availed for tenors up to ten years for project finance, inclusive of a moratorium of up to two years. The loan amount shall not be more than 70% of the total project cost, subject to a maximum of N5 billion per project and is available at an interest rate of 9% per annum.
Another N50 billion Export Development Fund (EDF) was also made available by the CBN, which is to be deployed towards funding the Regional and State Export Development Initiative being implemented by NEXIM. Under the EDF, at least N1 billion has been earmarked for each state of the federation to promote economic diversification and regional development, based on the economic endowments in each state.
The Bank has also earmarked about N3 billion from the Export Development Fund to support industries that are major employers of women and youth under a special economic empowerment scheme for the vulnerable groups, as part of NEXIM's contribution towards meeting the targets of the Sustainable Development Goals. This fund will be provided at highly concessionary rate with the key objective of promoting women and youth empowerment.
I wish to confirm that these funding schemes have become operational and NEXIM is already processing applications under the schemes.
FN: Nigeria is Africa's largest economy, and the economy is now known to be quite diversified. Therefore, one imagines a wide range of industries that constitute the non-oil sector. Does NEXIM Bank have priority industries that it is especially focused on?
AB: Yes, the Nigerian economy is now well-diversified. Indeed, data released by the National Bureau of Statistics (NBS) indicates that the Oil & Gas sector accounts for only 8.68% of the Gross Domestic Product (GDP) by end December, 2017, implying that the non-oil sector accounts for over 90%. It may also interest you to know that the Services sector now accounts for over 55% of national output, implying that Nigeria is beginning to exhibit some of the features of developed economies, where the Manufacturing and Services sectors account for a larger share of economic activities over and above the primary sectors.
Unfortunately, however, this changing structure of our production base has not reflected in our export sector, which is still dominated by oil and gas, accounting for over 95%, while primary agricultural exports make up over 60% of the 5% contributed by non-oil exports. In spite of the rapid growth in the Services sector, Nigeria does not have a footprint in services exports.
NEXIM is, however, working to correct this, which is why in our current Strategic Plan (2018-2022), while we are still focusing on the MASS Sectors (i.e., Manufacturing, Agro-Processing, Solid Minerals and Services), we are placing a lot of emphasis on value addition, particularly in the Agriculture sector, and also placing a lot of attention on services exports. Our emphasis on value addition comes naturally, not only because this is a prerequisite for growing our export revenues and creating jobs, it is also consistent with the objective of government under the Nigerian Industrial Revolution Master Plan (NIRP), which seeks to make Nigeria the manufacturing hub for West Africa and the entire region.
We are also deliberately promoting export of services, which cuts across many areas including professional services, especially engineering & construction services, the creative economy, business process outsourcing & ICT (information and communication technology) as well as medical tourism/healthcare services.
In many of the areas mentioned above, we are already building capacity and developing necessary collaborations and alliances to ensure that we make the desired impact.
FN: Apart from wanting to help the Nigerian economy generate more foreign exchange revenue, what are the other economic principles that guide NEXIM Bank's financing operations?
AB: As a government agency, our role is developmental. Besides our primary mandate, which is to diversify the export base and facilitate foreign exchange earnings, we are also guided by government's objectives and the need to create jobs, alleviate poverty and provide social safety nets. This is why we have launched the Regional/State Export Development Programme, which is targeted at providing strategic intervention in restive areas, such as the North East & the Niger Delta area.
Currently, we are working with the Niger Delta Commission to identify projects for business development, capacity building and funding under a counterpart funding arrangement. We have also visited the North-East region to see how we can help to rebuild the economy, following the recent insurgent activities. As I earlier mentioned, we have earmarked N3 billion out of the Export Development Fund to support the vulnerable groups, mainly women and youth.
FN: What are the key relationships and stakeholders that NEXIM Bank works with in delivering its mandate?
AB: Given the nature of our mandate, we maintain relationships with various government agencies, other EXIM Banks as well as bi-lateral and multilateral institutions for various purposes, which could be for information exchange, capacity building or to increase access to funds. In some instances, we enter into collaboration or partnerships to deliver better services to Nigerians. For example, we share similar mandate with the Nigerian Export Promotion Council (NEPC), so we work together to promote export. Currently, we are working together with NEPC and NEPZA (Nigerian Export Processing Zone Authority) on the National Committee on Export Promotion established by the Federal Government earlier in the year, through which we seek to implement the One State One Export Product (OSOP) programme, under the Zero Oil Plan of NEPC. The project recognizes that each state of the Federation has at least one product that can be exported. Hence, under the programme, NEPC addresses the issue of market development, while NEXIM will provide the funds and, of course, NEPZA will provide some tariff benefits and other incentives available under the Free Trade Zone.
We also have strategic alliances with foreign institutions, such as the African Development Bank (AfDB), the African Export-Import Bank (Afreximbank) and Export-Import Bank of India to mention a few. Afreximbank, for example, is the pan-African export development institution, which besides lines of credit and transactional relationships, we also jointly promote capacity building and trade facilitation. We are currently working with Afreximbank to develop “factoring” as an alternative financial instrument to promote trade and enhance access of the Small and Medium Enterprises to funds.
Factoring is a financial transaction involving purchase of receivables from a seller (the exporter in our case) with the factor assuming full credit and collection responsibility. Global factoring transaction in 2017 was €2.6 trillion with Africa contributing less than 1%. The major players in Africa are South Africa, Tunisia, Morocco, Egypt and Mauritius, while Nigeria did not even feature in the African statistics. So, through technical assistance from Afreximbank and the Factor Chain International (FCI), we are working with other stakeholders under the auspices of Financial System Strategy 2020 of the CBN to develop this product in Nigeria. We have developed the draft Factoring Bill, which is currently being considered by the National Assembly and we expect that it will be passed into law very soon.
Let me also quickly mention our partnership with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the Bank of Industry (BOI) to establish the Small and Medium Enterprises Rating Agency of Nigeria (SMERAN). SMERAN was conceived as a specialized institution to develop and implement a rating mechanism for SMEs in Nigeria as a way of generating requisite information towards improving the operations of the sector and boosting access to funds. We are leveraging the technical assistance of Dun & Bradstreet and it is expected that SMERAN will assist towards enhancing the contribution of SMEs to national development and jobs creation.
FN: What is your outlook of NEXIM Bank and Nigeria's non-oil export sector by year 2020, which is less than two years away?
AB: The outlook is quite bright. Let me start with NEXIM. I see a NEXIM that is well transformed with well-motivated staff and strong balance sheet to effectively deliver on its mandate. In our current strategic plan, we are seeking to grow our balance sheet from about N70 billion in 2017 to at least N1.2 trillion in 2022, through a combination of measures, including raising money in the international market and I think we are moving quite well in this direction. Currently, we have moved the balance sheet to N120 billion and by the end of the year, we hope to increase it further.
Now, regarding Nigeria's non-oil export sector, I believe that in the next two year, the relative contribution of the non-oil export sector should begin to increase, given the significant efforts that are ongoing in NEXIM and at the national level. In this regard, I wish to observe that the first major formal export of Shea Butter from Nigeria was made by one of our customers, Ladgroup, in February, this year. This is quite significant given that hitherto, Shea butter did not feature in the official record of exports from Nigeria even though the country is the highest producer of shea in the world, accounting for over 50% of total production.
Also worthy of note is our efforts to support the tanning industry to move up the value chain from production and exports of leather to production and export of leather products. We are also working towards commencement of operations of the regional shipping company, the Sea-Link Project, which will not only boost trade within the West and Central African Region, but also assist in transporting our solid minerals via barges, thus unlocking the huge opportunities in our solid minerals sector.
We are working towards revitalizing Nexportrade Houses Limited, which is an incorporated company promoted jointly by NEXIM, the Export Group of the Manufacturers' Association of Nigeria and NEPC to operate as export trading company towards boosting trade in the West African region.
We are working on a number of initiatives, which are expected to impact positively on the non-oil export sector very soon.