‘NEXIM is pushing new initiatives to bridge export gaps’
Abubakar Abba Bello is the Managing Director and Chief Executive Officer of the Nigerian Export-Import Bank (NEXIM). The consummate banker, with 26 years hands-on experience, has cut his teeth across directorates of the banking system, including corporate, regional and commercial and public sector banking. He also had a stint in auditing. An accountant, from Ahmadu Bello University, with post-graduate degree in Business Administration from University of Liverpool, United Kingdom, he is also a member of Chartered Institute of Bankers Nigeria, and a Fellow of Institute of Credit Administration. In this interview with Assistant Editor, Finance/Economy, CHIJIOKE NELSON, on the sidelines of the just concluded IMF/World Bank meetings in Nusa Dua, Indonesia, he outlines the institution’s efforts and new strategies to rise above challenges and increase the country’s export profile.
How would you describe the operational activities of NEXIM on assumption?
In the first instance, I did not find NEXIM in the state where I can meet the press and start making statements. I do not like to say how bad it was, but we found it challenging.
Our loan portfolio was in a state of mess, I mean, not performing. The first thing we did was to try and acculturate the bank.
We got people to know or see themselves as professional bankers than a public servant, because the establishment is bank indeed.
Aside from being a bank, it is an international organisation. We belong to so many international affiliations that professionalism becomes key. We can’t keep relying on government to fund us.
Most NEXIM banks have lines with us. We also have lines from other multinational institutions.
And one of the keys they want to know apart from financials is how professional the institution is.
So, we set out a strategy, went back to the drawing board and then, set out deliverables for ourselves on what needs to be done. It has been quite successful.
Another matter we found out was that the bank was almost insolvent, as we couldn’t even lend.
So, we evolved two approaches to get liquidity into the bank. One was to go on a massive recovery drive. Some of the loans that were given, though with good intention, went bad.
But a lot of them too, were given without proper procedure- proper collaterisation. It was like they were in a hurry to just give loans, maybe, pressure from government, but I don’t know what the issues were.
We tried a lot to recover the ones we know that are not performing, restructure the ones we think are noble enough and commercially viable.
But those that we thought had some fraudulent motives, we handed over to a presidential panel for recovery. We got the Central Bank of Nigeria to reintroduce the intervention for export, which is N500 billion.
Secondly, we got another N50 billion, which is what we call the Export Development Fund and since then, we are engaged because in all honesty, when we first came, we looked at the total customer, there was no significant exporter from Nigeria that was funded by NEXIM.
CBN, every quarter, publishes a list of the top 100 exporters of Nigeria. We looked at our books and found only two, and even the two was at the bottom of the top 100.
So, for us, while we want to support SMEs to grow into major exporters, we looked at the low hanging fruits. So, for us, the low hanging fruit is for us to now see how we can expand the business of exporters that are already in it.
Again, because we want to do processing and the hazards of processing, not as bad debts, but investing in long term projects, we have now opened discussions with other EXIM banks, especially the Afreximbank, which has already given us in principle $150 million.
Largely, $100 million for project finance and $50 million for trade. We are encouraging processing and not taking primary products into the global market.
That is why we are susceptible to international shock in prices, which by the way, as producers of those raw materials, we have no control over.
There is statistics that the President of Africa Development Bank likes to quote: “West Africa produces 75 per cent of global cocoa with Cote d’ivore, Ghana, Nigeria and Cameroon.” But we only control less than two per cent of global cocoa market, which is from beans and chocolate.
It is a 100 and current market size, global size is about $137 billion, so what it means is that Africa does less than three or four billion from that size.
How? It is because we do not, at primary production level, have control over price. You can have your cocoa and they will just tell you we are not buying and there is nothing you can do. It stays on the high sea for some times and starts becoming spoilt. So, we are at the mercy of global trading.
What was the challenge of NEXIM’s previous administration?
The previous administration of NEXIM was riding on processing than trade. By objective, as we were set up by the Act, we are just a trading bank.
So, what should happen is that producers of exportable goods of Nigeria, come to us through the Bank of Industry or commercial banks, then we finance the trading internationally.
They tried to do that, but maybe, it is lack of expertise or carelessness that made them put money where it was not viable.
Like I told you about maritime sector, export finance is also a special expertise that is different from normal lending.
If you don’t have it, what would sometimes normally happen is that you will do wrong costing and then, you start getting into trouble.
Both the promoter and the bank did not have that expertise and that meant that there was a lot of investment or lending into processing to the detriment of trade.
In fact, when we looked at the books, almost 90 per cent of the lending was project financing, which in banking, it is like suicide.
We met the bank insolvent, so if you put money in five-year loans, nothing is coming back.
If you put all your money in processing and project finance, you run into trouble with liquidity.
So, that was the situation. Again, we touched a lot of things in the strategy. One of the things is that we now have sectoral and loan type limits that would make us, at least, liquid at any given time.
We made it that at any given time, 10 per cent of our total liquidity or portfolio must be in liquid form.
We can just put it in treasury bills for instance. We are development bank, not commercial banks that must keep cash ratio of 22.5 per cent.
In terms of processing and exports, what is the country losing and what are the efforts to bridge the gap?
What we have put as one of our fundamental objectives is to encourage processing.
Another one I like giving example of is sheer nuts, where we are one of the world’s largest producers, but prior to last year, the first produced shear nuts was exported from Nigeria this year but prior to that industry, there was no processing plant in Nigeria.
The only processing that was done was micro enterprises that do it in the traditional way.
But guess what happens to Nigeria’s shear nut! People come in from Ghana and India, buy up the shear and take it to Ghana for processing because they have three processing plants.
So, now we have got one and that is the Ikene plant. Niger state is the largest producer of shear nuts and we are trying to set up one in Niger state. We are trying to resuscitate some of the cocoa plants.
Most of them have had their own issues, largely management related because I think a lot of them have learnt their lessons. We would get better value if we process cocoa, at least into butter in the first instance.
We have an acronym, PAVE- Produce, Add Value and Export and that is our focus now. Like cocoa, total processing capacity that is working in Nigeria now is like 165 tonnes.
But there is installed capacity well above 65,000 tonnes, only that it is not working. One by one, we are trying to bring them up.
We are aware that Nigeria is losing somewhere between a billion dollar of trade opportunity from Ghana for our coal, because Ghanaian power plants are powered by coal.
Our coal is one of the best in the world, but the problem is getting it to Ghana. And if we use trucking, by the time it gets to Ghana, it will become non-competitive.
Another example is Itakpe iron ore, which has close to a million tonnes of iron for China, but transporting it is a major problem.
Just to tell you how large that is, one million tonne is about 35,000 trailers.
Part of our mandate as a bank is also export or trade facilitation, not necessarily financing only.
So, one of the things we are doing is to create the logistics and infrastructure to get some of the solid minerals to the ports.
We are talking, first of all, about the inland water-ways. In fact, we have reached agreement with them to give us the inland ports, which incidentally are all near where the solid minerals for coal and iron ore are and also the railways.
So, from different angles, despite the limited resources we have, we are trying to make an impact on Nigerian trade of non-oil commodities and so far so good, I think we are making progress.
I think the economic recovery plan is key. It has identified eight strategic plans for diversification.
Between us and the export promotion council, we’ve taken the liberty to expand it to 12 because we brought in other commodities that we think have the capacity to contribute significantly. Like ginger, leather products and so on.
So, the council has, under the zero-oil plan, an initiative they call one-state-one-product. Fantastic initiative, but it has not come to fruition. What was missing was finance.
So, under our export development fund, we have dedicated N1 billion per state to drive one-state-one-product initiative. We are working closely with the council to actualise that initiative.
What we want the state governments to do is things like land, agriculture extension service and clustering farmers under a cooperative association. Typically, just to replicate anchor borrowers programme, but now specifically for export commodities.
And we are trying to also woo states that fall under the same climatic belt, to choose the same commodity because there is nothing like mass.
If we have seven north-west states for instance, all grow sesame, which grows around that area, we have N7 billion for sesame. With N7 billion, we can put processing centres around. As you produce, you process and we would have an aggregator that would now take the export.
Of course, the farmer will get better value for his products because there would be an agreed price that would be taken, not what speculators do that farmers will be hungry after harvest because they have to just sell to them. We will guarantee price and off take. Farmer goes happy.
Even for the states, the activities it will create helps both the economy, reduces unemployment.
We have seen the effect that Anchor Borrowers Programme has on Kebbi State for instance. There are more people going for Hajj, which tells you that they have money.
What is your business strategy for the maritime sector?
In Maritime sector, there is this Sealink project. Aside from that, there is a discussion we are having with NIMASA and some ship owners.
They actually went to CBN to get an intervention, specifically for maritime sector, but the apex bank directed them to NEXIM. So, we are already in discussions with them.
Vessel finance, for me, is not what I would ordinarily do. Honestly, because the expertise for vessel financing is not here. It is a totally new area for us.
Now, I won’t discount that the possibility, but if the prospect is big and commercially viable, from our own layman’s analysis, there is nothing that says we cannot get that expertise on today.
Because it is very key for us to have Nigerian flag flying vessels. When I gave you the example of cocoa, it involves even the price of freight, because we are out of it.
As soon as they deliver cocoa to the port here, we are out. Freight is done by foreign vessels, processing is done by foreign companies, marketing, trade and we are nowhere.
And I am happy some other initiative is happening on commodities exchange for Nigeria, which is also very key because that is where the trading of these commodities happens.
We need to put our acts together and tie up all loose ends to get more value for all we are doing.