Monday, 2nd October 2023

NEXIM and the non-oil exports

By John-Mark Ikyaave
30 March 2021   |   3:17 am
The business-driven leadership of the Abba Bello-led Management of the Nigeria Export-Import (NEXIM) Bank has led to a remarkable turnaround of the bank.

The business-driven leadership of the Abba Bello-led Management of the Nigeria Export-Import (NEXIM) Bank has led to a remarkable turnaround of the bank. Over the past three years, the NEXIM Management Team has implemented a suite of reform initiatives, which have helped to reposition NEXIM as a well-managed non-oil export development finance institution that is creating impact as a key driver of the Buhari Plan to boost Nigeria’s non-oil exports.

The Bank provided concessionary financing for the revamp of several moribund local manufacturing firms, supported a broad range of firms to expand their production capacities while also leading regional initiatives that would promote increased regional and global trade amongst several others. The result has been a decent uptick in non-oil export earnings for the country, the creation of thousands of skilled and unskilled jobs as factories expand operations and new openings for work hands emerge. Thanks to the renewed vigour at NEXIM, Nigeria is now experiencing a growing build-up of financially capable, competitive non-oil export firms that would help maximize Nigeria’s participation in the regional and global market.

The good news from NEXIM provides reasonable cause for optimism about the future of Nigeria’s foreign earnings. Set against the backdrop of declining global oil prices, which accounts for over 50% of foreign earnings, a reformed and stronger NEXIM Bank that is powering the emergence of financially capable non-oil export firms is so crucial signals the possibility that the non-oil sector might receive the necessary financial boost to help Nigeria hedge against the ominous effects of low global oil prices. Although, there has been a recent rally in oil prices to about $64 as economies have opened, movement and travel has increased after the dark days of the COVID-19 pandemic, it is a settled fact that the golden era of high oil prices over $100 is finally over. The shale boom in the United States and the Paris climate accords, have changed the outlook for the future of oil and gas. With the prospect that major economies like the US, China and Europe will ramp up implementation of green energy policies that would actively try to shift their economies away from oil at a time when the costs for producing oil from shale is declining through technological innovation, it is becoming clearer that oil under the ground, as is the case with Nigeria, might someday be less valuable than oil produced and sold in the coming years.

The stark reality calls for deep and sustained action. Nigeria now has a small window of time left to re-engineer the lopsided structure of its foreign earnings mix. The urgent need to move at blistering pace towards a rapid economic diversification by building local manufacturing capacity and bolstering non-oil exports is more reason why the positive developments at NEXIM, the leading non-oil development Bank, is so significant today.

Historic Increase in the Financing of Non-Oil Export Firms
Consider the Bank’s recent performance statistics. The NEXIM Management has used a targeted approach to significantly improve access to concessionary financing for non-oil export firms. In the past three years, NEXIM Bank processed a record total of 227 financing applications valued at N173billion for a range of non-oil export businesses. The amount includes a naira component totalling N159.27billion and a dollar financing portion in the sum of US$37.67million, equivalent of N14.3billion.

So far, the Bank has successfully disbursed over N68billion to 68 of the 227 beneficiary businesses, while over N30billion is currently under processing for another batch. The financing was structured under the bank’s Export Development Fund (EDF) window that is specifically designed to support export-oriented enterprises in the non-oil exports value-chain cutting across different segments from manufacturing, agriculture, solid minerals to services.

Impact: Revamp of Manufacturing Plans, Trade Facilitation, Job Creation Etc
The historic increase in NEXIM Bank’s financing interventions has handed many non-oil export businesses a much-needed financial lifeline to grow and thrive. Beneficiary operators are deploying the funds to resuscitate moribund manufacturing plants, while others are scaling up production levels to enable them produce more. These expansions have led to the creation of thousands of decent – skilled and unskilled – paying jobs for Nigeria’s teeming unemployed population.

Equally notable is the fact that a greater number of local businesses are engaging in high profile regional and global transactions on the back of the Bank’s financial boost. And, as a result recording higher foreign receipt that have positively impacted the volume of Nigeria’s export earnings in recent time.

Specifically, records show that over the past three years, Nigeria has received about $182.31million and €203,018.42, the equivalent of N70.40billion, as export proceeds from some of the NEXIM funded projects that have repatriated their income. More of such receipts are expected from other projects that are yet to complete their transaction circles.

The broad and longer-term implication of this trend is that NEXIM is, in effect, powering the emergence of a cross-sectoral and financially resilient network of non-oil export businesses that would collectively lead the charge towards the rapid growth of the country’s non-oil exports.

A Result-Oriented Strategy for Enhanced Value Exports.
A sense of focus and professionalism by the Management has been key to NEXIM Bank’s string of successes within the past three years. Immediately after the Abba Bello-led Management Team assumed office in May 2017, they set to work and crafted a Strategic Action Plan that laid out a clear but ambitious roadmap for the bank. The plan outlined the Bank’s corporate priorities, performance targets and operational course of action for the period 2018 to 2020. The Bank’s operations have been guided by a strict adherence to the Bank’s innovative philosophy of Produce, Add Value and Export (PAVE) that is designed to reverse the worrisome trend where primary products (such as cashew nuts, processed leather, cocoa, tobacco, cotton, etc.) dominated Nigeria’s export basket.

As a result, NEXIM has within the past three years expanded its operations beyond powering non-oil start-up business projects to cover the rehabilitation of important industrial manufacturing firms, whose operations were shut down due to inadequate working capital. This includes the provision of working capital and business advisory services. Companies that have benefitted from NEXIM Bank’s revitalization financing support cut across important sectors such as manufacturing, agriculture, and solid minerals.

NEXIM has also designed and implemented programs targeting key non-oil export commodities as part of an overarching strategy to maximize the scale and depth of Nigeria’s participation in the global non-oil exports market. A good example is the Shea Butter. Several operators that are into the production and export of Shea butter in Lagos, Ogun & Niger States have received varying levels of financial and advisory support that has led to a significant boost to their production and export levels.

Expanding Nigeria’s Export Basket to Maximize Global Trade Opportunities
In fact, as a direct result of NEXIM’s intervention and support for the acquisition of Shea Processing Plants, Nigeria recorded its first major export (state the yield. How about after that? Any additional shipments) of Shea butter in March 2018.  Prior to NEXIM’s intervention, Nigeria had no significant footprint in the export of shea products due to low processing capacity and high incidents of smuggling/informal trade.  This is despite Nigeria’s ranking as the world’s largest producer of shea, with annual production of 364,000 metric tons, accounting for 45% of global output.  NEXIM’s support strategy is helping this trend.

NEXIM has also recorded decent impact in its efforts to help players in the Hides & Skin industry to maximize the benefits of the global leather industry that projected to reach a market value of $306billion by 2027. The Bank formed a strong development partnership with the Kano leather cluster in Kano and deployed concessionary financing to enable them to scale their operations. Over the past three years, NEXIM funded three (3) companies and assisted them to acquire new machines and retool their operations towards becoming major players in the global value chain.

Other high impact non-oil commodities and services that NEXIM has supported include the cocoa industry, solid minerals, services sector, and the pharmaceutical industry.

Besides being a major advocate of value-added exports, the Bank also supported the export of raw materials, particularly where the local industries could not fully absorb production or where production capacity can be expanded.  Hence the Bank has also provided working capital to support many companies engaged in cleaning and export of various agricultural commodities and other products. Such commodities include hibiscus flower, dried ginger, sesame seeds, gum Arabic and charcoal, which were exported to various parts of the world.

Driving Intra-Africa Trade Initiatives
NEXIM also pioneered several initiatives that would help Nigeria to take full advantage of the opportunities offered by the African Continental Free Trade Area (AfCFTA) that is designed to move exporters up the value chain, promote intra-African trade, create jobs, and enhance export revenues.

Noteworthy is the Sealink Project that is designed to foster regional trade connectivity and facilitate inland waterways operations to support hinterland trade and bulk commodities exports, especially of solid minerals.

Last year, NEXIM facilitated the signing of a tripartite memorandum of Understanding (MOU) between NEXIM, Sealink and NIWA (Nigerian Inland Waterways Authority) towards the operation of the project. The Bank is working closely with the National Inland Waterways Authority (NIWA), Nigerian Navy and other private sector partners to ensure commencement of operations within Q2, 2021.

The second Intra-Africa Trade initiative is the Inter-State Road Transit Scheme.

This aims to facilitate the transportation of goods by roaacross Customs territories free of duties, taxes, and restrictions while in transit in line with ECOWAS protocol.  NEXIM has undertaken to act as the National Guarantor under the scheme through the issue of insurance bond to mitigate the risk of diversion.

NEXIM has also promoted factoring services to foster financial inclusion and provide alternative trade financing support for Micro, Small and Medium Enterprises (MSMEs).

Good Stakeholder Management
Besides the technocratic edge that the Abba Bello-led Management Team has brought to NEXIM, their ability to engage and build trust/confidence of critical stakeholders has been a key factor to the string of successes that they have recorded in the past three years. On the strength of the Strategic Action Plan that they laid out shortly after resumption of work, the Central Bank of Nigeria (CBN) in February 2018 released N50billion to NEXIM to enable it ramp up its non-export development intervention programmes. This amount was increased further to N100bn in December 2020 following effective utilization. The Bank is also collaborating with the CBN towards managing the N500bn Non-Oil Export Stimulation Facility, which also hinges on the provision of long-term funds to export oriented projects towards increasing value added exports.

Nigeria lost time and convenience during the golden era of high oil prices to grow the non-oil sector and diversify the economy. Today, the economy is in crisis mode with the reality of tepid oil prices and a bleak world outlook for the oil and gas industry. However, there is also so much that could be accomplished if catalytic institutions like the NEXIM Bank are supported to discharge their mandate to develop and unlock the potential of the non-oil sector to act as a hedge. In doing so, leadership matters. Refreshingly, the Abba Bello-led Executive Management of NEXIM has demonstrated a unique understanding of the Bank’s mandate, the urgency for swift action and the professional competence to deliver remarkable results within the past three years in line with the Buhari agenda to diversify the economy. They deserve some applause. Government and policy leaders must support the current NEXIM Team as they work hard to maintain the momentum of reform, consolidate the growth initiatives, strengthen institutional structures at the bank while midwifing a new era of sustained growth for non-oil exports.

Ikyaave is a public policy analyst based in Abuja.