How Sterling Bank is Supporting Trade, Transportation

Oluchi Chibuzo examines Sterling Bank’s business decision to provide financial products and services that would have significant positive social and environmental impacts on the communities where it operates

There are several financial institutions facilitating the exports and imports of goods and services in Nigeria, but one that unarguably stands out is Sterling Bank Plc. As part of its strategic vision to play a leading role in Nigeria’s economic growth and development, Sterling Bank took a major business decision in 2017 to provide financial products and services that would have significant positive social and environmental impacts on the communities where it operates by unveiling a programme known as the H.E.A.R.T. sectors. The programme had the overriding objective of concentrating investments in the Health, Education, Agriculture, Renewable Energy and Transportation sectors of the Nigerian economy.

Addressing participants at the Aviation and Cargo Conference held in Lagos recently, Mr. Olusoji Akintola, Sector Lead, Transport & Maritime with Sterling Bank, said the bank decided to support the transport sector because of its belief that an efficient transport system optimizes the value chain in any economy and has a significant impact on all other sectors.

“Besides, we have realized the urgent need for the private sector’s intervention in key areas of the economy for meaningful impact as government alone cannot shoulder the huge responsibility, especially due to the dwindling income from oil, the country’s major source of revenue,” Akintola said.

He said the transport sector has however not been able to contribute maximally to the country’s economic development due to factors beyond the control of players in the industry. For instance, the sector is not adequately structured and remains largely informal. Also, the sector is not supported with the right capital (funding) by the various levels of government and there are issues arising from the inability of operators to collect fares efficiently, which gives room for pilferage.

He noted that these factors discourage a lot of individuals from investing in the sector while financial institutions also shy away from financing the sector. He added that Sterling Bank, through its involvement in the industry, wants to finance efficient mass transportation systems that will link rural areas with cities to facilitate trade and investment. According to him, the bank has successfully achieved this in Lagos with the financing of Bus Rapid Transit (BRT) buses, a development which is being replicated in other states.

He said Sterling Bank’s interventions in the transportation sector also aims to establish effective fare collection systems across the sub-sectors as the current modality does not allow for accountability, thereby leading to loss of revenue. He, however, noted that the FAREPAY card, an electronic fare collection initiative introduced by the bank in Lagos, has taken care of this. The bank is also providing technology based bespoke solutions for top players in the logistics space and contributing to the Green Campaign by financing carbon free buses like electric and gas-powered vehicles to reduce carbon emissions as well as position the bank to be the go-to bank for transport finance.

The Transport and Maritime Sectors Lead said, “The intervention of the bank in Nigeria’s transport sector has helped in accelerating the desired transformation in the sector, starting with the bank’s investment in the BRT and LAGBUS initiatives of the Lagos State Government.”

He disclosed that the bank, in 2016, financed the acquisition of more than 400 BRT buses plying various routes on Lagos roads and is already expanding the experience beyond Lagos as discussions are on-going with various state governments on the deployment of mass transit systems.

He said with more than 500,000 commuters plying BRT routes in Lagos daily, it is now possible for Lagosians to get to their offices on time because of the dedicated lanes allocated to the BRT buses.
Akintola noted that in a bid to reduce pressure on road transportation, the bank is currently engaging operators and regulators in the water transportation sub-sector to see how it could finance more boats for their operations.

He observed that the aviation and cargo sub-sector has done well, especially in the transportation of goods by air and movement of express shipments consisting of air mail, air freight and air express in Nigeria and globally. He added that as a financial institution that is committed to the growth of the sub-sector, Sterling Bank will continue to support the industry along the value chain with special focus on suppliers, manufacturers, wet leasing airports, airline operators, maintenance, regulators and users and safety.

Akintola remarked that in order to ensure the steady growth in the sector so that it can compete globally, operators and regulators in the sector must address the challenges of poor storage system, improve on the turn-around time for shipment from sterile holding areas to some major destinations and develop capacity for local handling of maintenance of the cargo planes to check the drain on foreign exchange.

He said the sector must also work with state governments on how to build cargo airports to assist in the delivery of food items to warehouses, especially in states where there are no cargo airports. Efforts must also be made to impress on the federal government the need to reduce taxes and concession charges on ground handling companies, he said.

In his presentation, Head of Export Trade Finance with Sterling Bank, Mr. Chuks Aghaunor, said the need to diversify the revenue base of the economy and increase contribution from non-oil export has taken a frontal focus in the face of dwindling oil revenue, which explains why successive governments have embarked on some measures such as removal of export duty, establishment of Export Expansion Grant, Negotiable Duty Credit Certificate and creation of Export Free Zones to further drive export business in Nigeria.

He said the measures were taken in a bid to drive business initiative and to offer services to their existing customers who have businesses in some of the West African countries or wish to take advantage with the advent of the African Continental Free Trade Area (AfCFTA) initiative.

According to statistics from the World Bank, the non-oil sector contributed 91.84 percent to Nigeria’s real Gross Domestic Product (GDP) of N152.32 trillion compared to 91.22 percent achieved in 2019. Of this, transportation accounted for N209.788.41 billion while trade, which is the sum of exports and imports of goods and services, was reported at 25.4 percent.

Aghaunor listed the benefits of AfCFTA to include quick access to funds by the customer to meet working capital needs as part of the export value chain, quick access to financial services and other professional advice from the bank, protection of customers’ integrity in dealing with their suppliers and opportunity for growth by meeting customers’ demands.

He said Sterling Bank’s market and product focus are on ECOWAS and the rest of Africa for manufactured and semi-processed goods; EU and UK for agro commodities; Asia for solid minerals and USA for other petroleum oil products and services. He added that there is a need to understand the export life cycle which involves export readiness, inspection by buyer’s agent, Customs inspection agents, stuffing and sealing of containers and export account credited.

The Head of Export Trade said Sterling Bank will provide end to end solutions for all its customers export finance needs which will enable them to procure and aggregate all commodities for processing, manufacturing and export, provide a secure warehouse for goods and raw materials, process and package the goods, ship the goods to the buyers, provide all related logistics purposes, meet other operating costs of the business and working capital needs and execute more export contracts.

He listed trade finance that the customers can access from Sterling Bank as pre-shipment finance, post-shipment finance and CBN Intervention funds, which are non-oil stimulation facility and NEXIM Refinancing and Rediscounting facility.

Aghaunor said for prospective customers to benefit from the funds, such a customer must be a registered exporter with the Nigerian Export Promotion Commission (NEPC) for non-oil exports and with the Department of Petroleum Resources (DPR) for oil exports, provide security, repatriation and domiciliation of export proceeds, provide evidence of verifiable contract agreement or memorandum of understanding (MoU), acceptable risk rating and insurance policy.