Promoting Non-oil Exports for Fiscal Sustainability, Growth
Trade
James Emejo writes that with proper funding support, the non-oil export segment could significantly enhance the federal government’s fiscal profile as well as facilitate the current drive towards economic diversification and sustainability
Amidst the present administration’s current efforts aimed at diversifying the base of the Nigerian economy from the perils of oil, the need to provide adequate funding and attention to the non-oil export sector cannot be over-emphasised.
Analysts have contended that most of the economic challenges bedeviling the country could simply be addressed by boosting local production and strengthening its non-oil export potential.
They argued that the current challenges regarding the depreciation of the local currency, the Naira, as well as the incessant foreign exchange crisis could be resolved with improvement in non-oil export activities which would, in turn, increase the inflow of dollars into the economy.
Besides, a vibrant non-export sector has the potential to solve much of the country’s unemployment challenges by providing millions of direct and indirect job opportunities.
Strengthening the appropriate non-oil export facilitation institutions to live up to their mandate of providing short-medium- and long-term financing to the private sector will not only boost the government’s revenue receipts thereby enhancing its fiscal profile amidst the current revenue challenges but also benefit the economy in several ways.
Contribution to Economy
According to the National Bureau of Statistics (NBS), the annual contribution of the non-oil sector increased to 92.76 per cent in 2021 from 91.84 per cent in 2020.
Nonetheless, the country’s export is still oil-dependent as crude oil exports amounted to N4.26 trillion and accounted for 74.04 per cent of total exports, according to Q4 2021 trade statistics.
The non-crude oil contributed N1.49 trillion or 25.96 per cent to total exports of which non-oil products amounted to N810.88 billion representing 14.06 per cent of total exports during the quarter.
Challenges of Non-oil Export Segment
Stakeholders under the aegis of the Network of Practicing Non-Oil Exporters of Nigeria (NPNEN) recently urged the federal government to embark on an aggressive drive to strengthen intra-regional trade in Africa to effectively diversify the economy.
The exporters further maintained that to enhance trade and boost Gross Domestic Product (GDP), investment in non-oil export activities must be taken seriously.
Also, the sector had suffered from the devastating impact of the COVID-19 pandemic which further affected its viability and resulted in increased funding constraints.
Credit Facilitation to Sector
It was part of the government’s commitment to addressing the funding inadequacies in the non-oil export space that the Nigerian Export-Import Bank (NEXIM) was established by Act 38 of 1991 as an Export Credit Agency (ECA) with a share capital of N50 billion held equally by the Federal Ministry of Finance Incorporated and the Central Bank of Nigeria (CBN).
The bank is saddled with the responsibility of providing export credit guarantee and export credit insurance facilities to its clients; provision of credit in local currency to its clients in support of exports; establishing and managing funds connected with exports; maintaining a foreign exchange revolving fund for lending to exporters who need to import foreign inputs to facilitate export production; and provision of domestic credit insurance where such a facility is likely to assist exports.
The bank also provides short and medium-term loans to Nigerian exporters including short-term guarantees for loans granted by Nigerian banks to exporters as well as credit insurance against political and commercial risks in the event of non-payment by foreign buyers among others.
Mandate Actualisation
Since the assumption of office of the Managing Director/Chief of NEXIM Bank, Mr. Abba Bello, on May 2, 2017, the new management had developed a new Strategic Plan (2018 – 2022) that was articulated toward improving operational performance, achieving the bank’s mandate and contributing to meeting the objectives of the federal government under the Economic Recovery and Growth Plan.
Currently, in its fifth year of operations, the plan has contributed to the significant turnaround of the operational performance of the bank while efforts to clean up the balance sheet as well as improvement in risk management practices had ensured that new loans granted from 2018 are performing 100 per cent, which is a major departure from the huge non-performing loans in the past.
Loan Recovery Drive
Bello has said the introduction of aggressive debt recovery and proactive loan measures had increased recoveries from N200 million in December 2016 to N10.2 billion and $3.25 million between January 2017 and February 2022, adding that the loan recovery drive had led to the seizure of assets worth about N7 billion which are currently on the sale block.
He told THISDAY, “Unlike the trend in the past, the bank has also engaged significantly with stakeholders, with improved relationship, manifesting in collaborative efforts towards policy intervention and increased focus on the non-oil export sector.
“Enhanced operating model through restructuring of regional offices for the bank to maintain a presence in each geo-political zone of the country for better market penetration and nationwide coverage.”
Intervention Projects
The bank’s Export Development Fund (EDF) had led to the processing of 442 Applications worth N461 billion and $43.69 million, out of which N214.65 billion had been approved while N153.03 billion had been disbursed to 101 beneficiaries, as well as approvals totaling N55.85 billion which were undergoing the pre-disbursement process.
Bello said so far, $492.97 million and €1.17 million, translating into N196.32 billion, have been received as export proceeds from projects that have repatriated their income, while others are yet to complete the transaction circle, adding that many of the institutions supported by the bank now feature on the list of top 100 exporters published annually by the Central Bank of Nigeria (CBN).
According to him, over the last three years, the bank had operated under the philosophy of Produce, Add Value, and Export (PAVE) to change the current narrative of the dominance of primary products in its export basket.
Moreover, in supporting start-up projects, a lot of emphases had further been placed on providing working capital to resuscitate many industrial projects, which have hitherto become moribund or operated below capacity towards boosting value-added exports and enhancing jobs creations.
Operational Performance
Nonetheless, he said the bank grew its balance sheet from N67.73 billion in April 2017 to N202.03 billion as of February 2022, adding that with continued positive performance, increased strategic partnerships for lines of credit and the push for recapitalisation of the bank, the target is to achieve a significant increase in balance sheet size in line with growing export opportunities, particularly given the African Continental Free Trade Agreement (AfCFTA).
The bank further recorded a profit of N1.09 billion in 2018, N2.13 billion in 2019, N1.28 billion in 2020, and N4.10 billion in 2021, after a loss of N567million in 2017 and a bigger loss of N8.03 billion in 2016.
This also suggests that if properly funded, the development finance institution could boost revenues for the government with its attendant impact on the economy.
The MD explained that the profit decline in 2020 was due to the impact of the COVID-19 pandemic on businesses, which necessitated the interest rebate and moratorium extension granted by the bank to its customers.
•Non-oil export stimulation post-COVID-19
According to the MD, the bank is also collaborating with the CBN to manage the N500 billion Non-Oil Export Stimulation Facility, which has been introduced to provide long-term funds to export-oriented projects toward increasing value-added exports.
In this regard, under the Pandemic Trade Impact Mitigation Facility (PATIMFA) program, NEXIM Bank secured $25 million from the AFRIEXIM Bank to alleviate the economic and business impact of the COVID-19 pandemic on Nigerian businesses.
He said, “The facility is available for continuous funding of exporters, particularly SMEs, many of whom were adversely impacted by the disruptions of the global value chain and other fallouts of the COVID-19 pandemic.
According to him, “The bank’s objective is to enhance its intervention in the different geo-political zones of the country. As part of its strategy to increase intervention in Small and Medium Enterprises (SMEs), the Bank is also working with various State Governments and has signed Memoranda of Understanding (MOU) with about 10 States under the State Export Development Programme.
“This scheme is expected to facilitate industrialisation and economic development at regional level under the One State One Product programme, whereby each state of the Federation is expected to identify and develop at least one commodity for export as part of the Federal government’s Zero Oil Plan.”
• Response to global supply disruption
NEXIM Bank is further taking steps to position Nigerian exporters to benefit from the unfolding opportunities offered by AfCFTA, following the recent exit of Britain from the European Union and the prospects in other regions.
The bank is therefore taking measures to increase its funding capacity towards boosting lending support thereby increasing foreign exchange earnings for the country and facilitating employment generation.
