How NEXIM is growing Nigeria’s non-oil exports

The size of a country’s exports determines in large part its economy’s resilience and capacity to create jobs and stimulate inclusive growth. Exports create new markets, expand existing ones, and underpin the trading/purchasing power of a country’s currency in the global marketplace. They also serve as an important source of foreign exchange earnings for powering national development.

This explains why the world’s most economically advanced countries such as the United States, China, Germany, Japan, Hong Kong, South Korea, etc. are export leaders. Statistics show that in 2020, China topped the list with a total export value of $2.5trillion, followed by the United States and Germany with $1.4trn and $1.3trillion respectively.

In Nigeria, growing exports, especially non-oil products such as cocoa beans, cashew nuts, rough wood, nitrogenous fertilizers, rubber, and cotton, has been a central part of government policy for decades, albeit with little impact. Oil and gas account for about 90% of exports while the non-oil exports contribute a marginal 10%. World Bank statistics show that the total value of Nigeria’s export earnings was $49million in 2017, $61.5million in 2018, $63.7m in 2019, and 38.1million in 2020.

For Nigeria, balancing the parity between oil and non-oil exports and reducing Nigeria’s reliance on oil and gas is now a time-bound matter of national survival. Reasons include a new normal of lukewarm global oil prices, the threat of climate change, and the resulting global clamor for sustainable economic development.

NEXIM – Charting a promising path to non-oil exports

The good news is that the Buhari administration is on track to making a significant difference in the Nigerian export market space. The administration has undertaken an aggressive non-oil export growth strategy that is delivering practical results with the Nigerian Export-Import Bank (NEXIM) at the forefront of its implementation. Established in 1991, NEXIM functions as an export credit agency that provides finance and risk-bearing services to exporters.

In 2017, President MuhammaduBuhari appointed a Management Team comprising technocrats with wide-ranging competencies and expertise to reposition NEXIM for a five-year term. The team comprised Mr. Abba Bello as the Managing Director and Chief Executive. He is a seasoned banker with over 30 years of experience. Others include Dr. Bala Bello, Executive Director (Corporate Services), and Stella ErhuvwuOkotete, Executive Director (Business Development).

The Management Team inherited a Bank, with suboptimal operational and financial performance, and dwindling confidence in the bank by partners – regional and international

To fix this, they developed a Strategic Plan (2018 – 2022) to improve operational performance and enhance the Bank’s contributions to achieving the objectives of the government’s Economic Recovery & Growth Plan.

Five years later, the Abba Bello-led Management Team has succeeded in turning around NEXIM. Through deft management, they steered NEXIM from the brink of insolvency to profitability, rebuilt stakeholder, and investor confidence in the bank, and aligned its operational focus in line with its mandate.

To enable them to consolidate their successes, President Muhammadu on the 30th of March 2022, re-appointed the entire Management Team for another five-year term effective 10th April 2022.

Industry analysts and stakeholders agree that the tenure renewal is a fitting recognition of their outstanding efforts and ability to reposition the bank as a catalyst for growing the country’s non-oil export market. Indeed, the team maintained a high level of professionalism. They ensured compliance with corporate governance standards and financial risk management procedures in the conduct of the Bank’s operations.

Expectedly, the efficiency-induced operational improvements at NEXIM have turbocharged the Bank’s institutional capacity to support Nigerian non-oil export businesses to thrive through its financing windows

A Better NEXIM

The result is a better and improved NEXIM. Consider the historic boost to NEXIM’s operational performance across key financial indices. With a focus on profitability and strict adherence to prudential guidelines and global best practices, the Abba-Bello Management Team grew the Bank’s balance sheet from N67.73m in April 2017 to N202.03bn as of February 2022. This represents a remarkable increase within five years. The Team hopes that continual improvements in its balance sheet along with the push for the re-capitalization of the Bank would place it in pole position to maximize the export opportunities under the African Continental Free Trade Agreement (AfCFTA).

Read also; African governments making AfCFTA survival difficult

Second, the Management Team has recorded a consistent trajectory of profitability. After posting a loss of N8.03billion in 2016, another loss of N569m in 2017, the bank reversed the trend to record consecutive profits of N1.09billion in 2018, N2.03bn in 2019, N1.28bn in 2020, and N4.10bn in 2021. The impact of Covid-19 on the Bank’s operations and resulting interest rate rebates and moratorium caused a decline in profits in 2020.

Third, the Bank implemented an aggressive debt recovery drive to recover its funds from defaulters. The efforts have led to a significant increase in recoveries from only N200m in December 2016 to N10.2bn and US$3.25mn between January 2017 and February 2022. This is in addition to debtor assets totaling N7billion that are up for sale.

Fourth is the elimination of non-performing loans on the Bank’s balance sheet. Operation-wide improvements in risk management practices have ensured that all NEXIM loans to export-oriented businesses from 2018 to date are 100% performing. This is a huge departure from the prevalence of non-performing loans in the Bank’s Balance Sheet pre-2017.

Robust Financing for Non-Oil Export Businesses

Expectedly, the efficiency-induced operational improvements at NEXIM have turbocharged the Bank’s institutional capacity to support Nigerian non-oil export businesses to thrive through its financing windows.

Starting with the Export Development Fund (EDF), which the Bank operates to stimulate and increase funding, especially to Small and Medium Enterprises (SMEs), towards facilitating regional industrialization for value added exports and broadening Nigeria’s export basket and market destinations.

The Abba Bello-led Management Team pursued an effective stakeholder engagement program that improved confidence levels. As a result, the Central Bank of Nigeria (CBN) in February 2018 released N50bn to NEXIM to implement the Export Development Programme. The Fund was further enhanced to N100bn in December 2020 after it was clear NEXIM had effectively utilized the initial N50billion and created a commensurate impact.

Specifically, official statistics from NEXIM show that from 2017 to date, the Bank has leveraged the Export Development Fund to ramp up its financing interventions. This includes processing of 442 applications, across various sectors, including Manufacturing, Agro-processing, Solid Minerals and Services Sectors worth N461billion and US$43.69mn. Out of this N214.65bn is approved and N153.03bn disbursed to 101 beneficiaries. Also, approvals totaling N55.85bn are undergoing pre-disbursement processes.

The positive impact on Nigeria’s foreign exchange earnings is already evident. Statistics indicate that $492.97m and €1.17m, translating into N196.32bn, have been received as export proceeds from NEXIM funded projects that have repatriated their income, while several others are still in the process of completing their transaction circle.

NEXIM has also secured a vantage position in the implementation of the N500bn Non-Oil Export Stimulation Facility in collaboration with the Central Bank of Nigeria. The facility is designed to provide long-term funds for export-oriented projects.

Additionally, the Bank has re-established value-adding relationships with strategic partners, having recently received $25m from Afreximbank under the Pandemic Trade Impact Mitigation Facility (PATIMFA), launched to alleviate the economic and business impact of the Covid-19 Pandemic on Nigerian businesses.

The facility is available for continuous funding of exporters, particularly SMEs, adversely impacted by the disruptions of the global value chain and other fallouts of the Covid 19 Pandemic. Also, NEXIM and Afrexim have jointly established a Project Preparation Fund, under which both institutions have earmarked $50m, as takeoff fund, to support the pre-operational phase of a project preparation circle. The objective is to address the dearth of bankable projects and increase the flow of funds to the SME sector.

Revamping moribund businesses nationwide

The broad impact of NEXIM’s activities is the growing league of vibrant, well-funded, and competently managed non-oil businesses.

These businesses are adding value to local commodities and leveraging the global marketplace to grow their businesses, create good-paying jobs, and improve Nigeria’s foreign exchange earnings. As a result, many now feature on the Central Bank of Nigeria (CBN)’s list of top 100 exporters published annually. Five years ago, the picture was quite different.

A good example is Ladgroup Limited with operations in Ogun State. NEXIM funded the acquisition of the Shea Processing Plant, which led to the first major export of Shea butter from Nigeria in March 2018. Before NEXIM’s intervention, Nigeria had an insignificant 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 an annual production of 364,000 metric tons, accounting for 45% of global output.

Another equally salient instance is Vertex Agro Limited. NEXIM supported Vertex with working capital to commission its Sesame seed and Cashew processing factories with annual installed capacities of 6,000 tons and 75,000 tons respectively per annum. This has facilitated the employment of over 250 staff of which 80% are women.

In Kano, NEXIM supported GB Tannery to increase its production capacity and boost the export of finished/crust leather by the company to about US$9million annually. The company has installed a new processing line, which is expected to increase direct jobs offered by the company from 250 in 2019 to 400 in 2020/21.

Like Ladgroup, Vertex, and GB Tannery, NEXIM’s financing interventions are breathing life into moribund industrial projects and revamping the fortunes of many vital non-oil export businesses across the country under the philosophy of Produce, Add Value, and Export (PAVE).

Positioning Nigeria in pole position for AfCFTA

Furthermore, NEXIM under the Abba Bello – led Management Team has prioritized deepening Nigeria’s participation in Intra-Africa Trade.A key focus of this push is ensuring that Nigeria maximizes the benefits of being a major player in the March 2018 African Continental Free Trade Agreement (AfCFTA). AfCFTA aims to forge the largest free trade area in the world by the number of countries participating.

The pact connects 1.3 billion people across 55 African countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. Key objectives include reducing tariffs among member countries, enhancing trade facilitation and services, and addressing technical trade barriers.

The World Bank estimates that AfCFTA would boost Africa’s income by $450 billion by 2035 (a gain of 7 percent), increase Africa’s exports by $560 billion, mostly in manufacturing, and boost wages for both skilled and unskilled workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.

In this regard, NEXIM has been nimble and proactive. The Bank initiated and developed strategic programs and systems to enhance Nigeria’s readiness to take optimal advantage of the opportunities in AfCFTA.

A notable one is the Sealink Project. Sealink aims to foster regional trade connectivity and facilitate inland waterways operations to support hinterland trade and bulk commodities exports, especially solid minerals. Though an on-going project, it was taken to the next level in 2020 after NEXIM facilitated a tripartite pact between Sealink Consortium and other agencies of the federal government. Since then, the project has recorded significant progress with the Nigerian Navy and the National Inland Waterways Authority (NIWA) completing the first segment of the joint survey and navigational charting activities covering Benue-Onitsha. The duo is also on track to complete the 2nd segment of the exercise, which covers Onitsha-Burutu by May 2022, following which the pilot scheme of the Sealink project will commence by end of Q2 2022.

Another related NEXIM initiative is the Inter-State Road Transit Scheme. The scheme is designed to facilitate the transportation of goods by road across Customs territories free of duties, taxes, and restrictions while in transit in line with ECOWAS protocol. NEXIM, functioning as the National Guarantor, issues insurance bonds to mitigate the risk of diversion. The Bank is also implementing factoring Services to engender financial inclusion and provide alternative trade financing support for MSMEs.

To cap, the Abba Bello-led Management Team has demonstrated an outstanding capacity to reposition NEXIM to deliver on its institutional role as a growth catalyst for non-oil exports. President Muhammadu Buhari exercised commendable judgment in recognizing the value that the team has brought to NEXIM’s operations and the historic impact that the revamp of its interventions is having on the export market. The country needs a vibrant NEXIM as a matter of national economic survival. With the proven and competent Abba Bello-led Management Team in place for another five-year term, there is a strong basis for optimism for Nigeria’s non-oil exports ambitions.