As the current oil slump serves as a wake up call to diversify the economy from crude oil, many Nigerians are now turning to non-oil export to support the import substitution efforts of the Nigerian Export Promotion
Council (NEPC) .
It is an open secret that from farm produce to hides to natural resources, there abound endless opportunities for Nigerians to earn foreign exchange from the export of goods and services.
But how does a startup raise capital to finance that line of business? Experts opine that a logical first step if you’re seeking to finance short-term export sales is to approach the local commercial bank that your company already does business with. “If the bank previously has extended credit to your company, it will be familiar with your financial standing, credit need, repayment record, and ability to perform. The bank may be willing to raise the overall limit on an existing working capital line of credit, to expand its scope to cover export transactions, or to approve a separate line specifically adapted to export-related transactions that involve arrangements such as discounting,” say analysts with Export.Gov, an online medium.
To make the finance of short-term export easy for a beginner, some Nigerian banks came up with innovative ideas.
One of the lenders is Fidelity Bank, which presently collaborates with the Nigerian Export Promotion Council (NEPC) and Lagos Business School to provide training and financial support for the would-be exporters.
Speaking on the initiative, its Managing Director, Mr Nnamdi Okonkwo, said:
“How can we drive export business in this country? And how are we looking at doing this? We are looking at doing this through collaboration between Fidelity Bank, Nigerian Export Promotion Council (NEPC) and Lagos Business School. We don’t want to jump into financing export without creating capacity for the would-be borrowers. So the emphasis for us is to develop those exporters. We are going to do this under the platform of Export Leadership Institute and Export Management Programme anchored by the Lagos Business School.”
Objective
On what the programme is going achieve, Okonkwo explained: “We are going to teach those nitty gritty you need to know about export business; we are going to teach exporters how to prepare themselves and make themselves marketable; we are going to give exporters the necessary knowledge for access to finance. Then NEPC, on the other hand, will then provide them the opportunity, the window that exists out there. Now if all of these come together, you will find out that, if we have a lot more people exporting and we start to export a diversity of products, the next time oil industry sneezes, we will not be catching cold”.
Financial support
On how much the bank is devoting to this cause, the bank chief stated: “When you ask how much are we bringing? Honestly, we haven’t place end limit. But what we have done, how we approach programme like this is to create a product programme. And we are saying to ourselves that if we give about N30 billion of our loan portfolio towards export, then it would be something that would be quite impactful.
But then, the details of how to access this would be driven by a product paper that pre-qualify people to meet certain conditions. And the capacity-building programme would be one of them.
Now as a bank, our loan portfolio to SMEs is about N60 billion.That is the amount we have given out as loans to SMEs. In terms of the customers’ count, for three million customer count, we have SMEs probably account for about 40 per cent. So we are definitely SME-supporting bank.”
Opportunities
Giving insight into opportunities that await potential exporters, he said: “There are a lot of opportunities to export Nigerian made goods. Some countries have big Boeing jets flying out vegetables every morning to Europe. But we have fertile land here. Rice, cashew and all sorts of agricultural products are things we can do here. Why should we import tomato puree when we have the kind of climate that we have. Why should we not be exporting? So those are the questions everybody keep asking. But somebody has to do something. That is why we are saying let’s just stop talking and do something.
“What do we want to do? Lagos Business School is centre of excellence, they have enough research and enough expertise to teach our people what to do regarding export.
NEPC has the expertise, has the data, has the governance framework, has the institutional framework to help exporters. They have been doing this. Again, they cannot do it alone. So Fidelity Bank has the capacity to support exporters because one of the key problems they have is access to finance. So if they have the necessary academic and institutional information, or capacity development from Lagos Business School, and you have the NEPC providing the necessary data and government support, and then you have a financial institution. When these people have been prepared, the financial institution that is ready to collaborate with the academia, the government side to support the exporters, then something good must be happening.
“So the emphasis for us is to develop those exporters. And then definitely, we would support them, working in conjunction with the Central Bank of Nigeria (CBN). And that is why CBN has a programme on export finance. And CBN is not a retail bank. So they can’t sit in their offices and lend to these exporters. So they need banks like us to do that. You know that most developmental finance programmes of the CBN and BoI are usually single digit. So this one would also fall into that kind of category.”
Solid minerals sector
“We still need to do a lot about institutional framework for solid mineral sector because, for products or projects that are bankable, there must be some level of preparations that adequately help to mitigate the associated risks. If I don’t even know what the policy framework is, but the industry is not structured or develop enough to attract finance. Finance is not going to go there because there are other financing opportunities. Segun Awolowo, the CEO of NEPC, has given us enough information about what government is doing to make that sector bankable.”
Banks not lending to SMEs
“It may be true that some banks are not lending to SMEs, but you can’t be referring to Fidelity Bank, obviously, because we are known to support SMEs heavily.
The CBN created N120 billion SMEs funds, in conjunction with SMEDAN (Small and Medium Enterprises Development Agency of Nigeria). Today, Fidelity has disbursed N2 billion of that money to SMEs. Some months ago, we celebrated our first set of beneficiaries who repaid fully.
Today, 10 of them have already repaid and we have avail this fund to 120 of these customers.
Now as a bank, our loan portfolio to SMEs is about N60 billion that we have given as loans to SMEs. In terms of the customers’ count, for three million customer count, we have SMEs probably account for about 40 per cent. So we are definitely SME-supporting bank.
Bank value chain for customers in export
That is what actually Fidelity Bank is already known for. We use the cluster approach . I keep giving this example. We keep winning Best SMEs Bank of the Year Award. And one of the occasion to receive our plaque, my colleagues in other banks were saying to us that very soon, you will be the Best Bad Loan Bank in SMEs. Now this was three years ago. And I am happy to inform you that their dreams have not come to pass. And why? It is because we approach this from a structured perspective. That is why we have a General Manager heading the SMEs division. What we will do is clusters. Businesses that look alike. And their needs are similar. You pre-qualify them. Study what they do. And then you create financing products for them.
FG to appoint 2 managers, adviser for $1bn Eurobonds
The Federal Government is to hire two lead managers and a financial adviser to organise the issuance of its $1 billion Eurobonds this year.
According to the Debt Management Office(DMO) , the sale is the first tranche of a $4.5 billion Nigeria Global Medium-Term Notes Issuance Programme that runs through 2018. In a statement published in the U.K’s Financial Times newspaper yesterday, DMO explains that the government wants to appoint two international banks as joint lead managers and a local lender as financial adviser for the whole programme. Bids are to be submitted by noon on September 19 in Abuja
Quoting the DMO, a foreign new service said the movewould “enable Nigeria have the flexibility of quickly taking advantage of favorable market conditions in the international capital market to raise funds if and only when the need arises.”
The Eurobond sales this year would be the first since the Federal Government tapped the market in July 2013 and an inaugural issue in 2011.
Recall that President Muhammadu Buhari approved a N6.1 trillion ($19.3 billion) spending plan this year and the DMO intends to borrow to plug the budget’s N2.2 trillion deficit. The Federal Government is increasing spending to stimulate the economy after it contracted by 0.4 per cent in the first quarter as revenue dwindled amid lower oil prices and a decline in output.
The economy could shrink 1.8 percent in 2016, according to the International Monetary Fund(IMF).
Investor apathy worsens forex scarcity
Despite series of interventions by the Central Bank of Nigeria ( CBN ) to make foreign exchange (forex ) available for the end-users, acute scarcity has continued to rock the market as investors’ aparthy bites harder.
The situation was compounded further at the weekend as Fitch Ratings downgraded the country’s long-term local currency Issuer Default Rating (IDR) , just to dramatise the weakening ability of Nigeria to provide foreign currency support for the market.
Analysts have blamed this on the inability of the country toconvince both international and local investors that it has the reserves to meet all its obligations.
According to Mr. Johnson Chukwu, the Managing Director of Cowry Asset Management Limited, this shows that investors’ confidence in the country’s liquidity position has been punctured.
His words: “The key thing is that confidence has been punctured. Investors , both local and international, complain that we don’t have the reserves to meet all the maturing obligations or all our obligations. So they are not bringing in their money. As of today, the central bank can no longer convince both international and local investors that it has the muscle to ensure that we, as a country, can meet all foreign currency obligations as they are unfolding.”
Lamenting the situation, a forex market player, and the Group Managing Director of Vitafoam Nigeria Plc, Mr. Taiwo Adeniyi, said things are no longer at ease for the manufacturers to access forex to import their raw materials. He called on the Federal Government to bend over backwards to unravel the mystery that makes investors shun Nigeria.
His words: “We had never had it as bad as this before. As of (last)Tuesday, the best we could get of Dollar was N383/$. You need to see the way we rushed after it. The problem is that, as high as that, the Dollar is still not available. Where are the investors?” he queried.
Taiwo then x-rayed the various CBN interventions to boost liquidity at the market, but came to the conclusion that they have not achieved the desired objectives.
“When an economic situation is like this, you just have to come up with interventions; you can’t just keep quiet. MPC (Monetary Policy Committee) had decided that the interest rate on borrowing should increase so that more people will bring more money into the economy. The interest rate on investment has gone up to about 18 per cent. All in a bid to bring money to this economy. The more the policies are changed, believing that the investors would bring their money, that has not happened yet. That’s sad.
“For those of us in the manufacturing sector, these are trying times.With all the policies; after all said and done, nothing has changed. The situation has gone beyond oil slump. There is something fundamentally wrong. Oil might be the highest forex earner for us, but there are other things. I am sad because we are already concluding the third quarter of the year. Companies are shutting down; it’s getting to the point where you can’t pay salaries. So far, economists are saying that recovery may not happen until half part of 2017. That is sad”.
On how Vitafoam has been able to stave off the odds and keep its head above the waters, Adeniyi attributed it to diversification and foresight.
Hear him: “What we have done before now was to diversify into other areas of the same business, keeping our core business as mattress and allied products manufacturing. We have also gone into the likes of shoe soles, shoes. We produce bedsheets, duvets and all kinds of pillow to meet the demands of the general public. We also produce furniture of various types and classes for schools. We are Original Equipment Manufacturer (OEM).Because we manufacture, we can actually produce to your cost.As tough as the year is, we are sure that we will end the year in black and not red because we are a manufacturer and not a trader.We will be able to tell our stakeholders that we are convinced that we will end the year in profit.”
source: Sun News
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