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"We don’t just give loans to exporters; we also address barriers to trade"

Interview - February 3, 2012
The head of Nexim discusses how the bank has been actively promoting the diversification of Nigeria’s economy for more than two decades by not just providing loans to local industries wanting to export their products, but also opening up new sectors and adding value to overlooked industries
Starting with the economic situation in Nigeria we know that for the past 6 years GDP has not dropped below 6% and this year is looking toward a positive 7%. I want to understand from your perspective how do you see the current economic situation in the country?

Thank you very much and welcome to the Nigerian Export-Import Bank (NEXIM). I would like to start by saying that Nigeria is now at the dawn of a real economic transformation. Before the last election, there had been a lot of apprehension from the international investors with regards to all manner of uncertainty in the country. However, with the outcome of a very successful election, there are indications of increase in potential foreign direct investments flow to the country, which would further sustain and enhance job creation and the national economic growth rate.

At the macro economy level, a lot of work has gone into charting an investor friendly policy framework for the mining sector in order to ensure full realization of the huge potentials in the sector, which economic impact would no doubt surpass that of the oil and gas sector. The agricultural sector is doing quite well due to large expanse of arable land, albeit with low level of mechanization and utilization of essential inputs and implements. Agriculture at the moment is the highest employer of labour in the country and contributing well over 40% to the GDP. So against this background and the new agricultural policy initiatives aimed at facilitating mechanization and irrigation as well as the Central Bank of Nigeria’s (CBN) complimentary role of de-risking the sector to enhance access to credit and commercialization of agricultural activities, it would be safe to assume that the GDP future outlook is very good and we should be able to do better next year.

Also, with the ongoing reforms in the power sector, which is one of the major infrastructural challenges affecting economic activities and Mr. President’s appointment of key professionals in his cabinet and the National Economic Management Team to drive the transformation agenda, the prospects for high growth for the Nigerian economy are in my opinion, very, very bright. 

I want us to now take a closer look at the role of NEXIM Bank and the impact you create in the different sectors you operate. NEXIM established in 1991 is an institution that is 50/50 owned by the CBN and the Ministry of Finance and its primary objective is to deepen the non-oil sector of the economy with export potentials. Please in your words tell us more about this institution?

As you rightly said, NEXIM Bank was established in 1991 to facilitate the diversification of the Nigerian economy from over dependence on crude oil and to deepen the non-oil sector. What we have done over the years toward the realization of the Bank’s mandate was to enhance the contribution of the non-oil sector to the GDP and the external sector of the economy through funding interventions to various non-oil sectors with high exports potentials and comparative advantage. For instance, in the agricultural sector, NEXIM has funded a lot of Greenfield and start-up projects that have become successful and are published on the CBN’s Top 100 Exporters List. Also, when delineated into sub-sectors, you will see that NEXIM has supported projects in the cocoa and rubber processing as well as industrial fishing/trawling businesses. Some of these are among the largest processing plants in Africa with annual export turnover of about US$50 million annually. So evidently NEXIM has been able to do much in value-added processing and exports in the area of agriculture.

So much is also happening in the mining sector. The industry is getting well structured, even though the risks are enormous, but as a development financial institution, we design products to stimulate and attract investment to the sector to make it more viable and attractive for both the commercial banks and every other private entity that is interested to operate there. As part of our mandate, we are also looking at the services sector, especially financing the development of rated hotels in line with the Nigerian Tourism Development Master Plan as well as other services with high export potentials. In this regard, we are looking at the creative arts and entertainment industry because we believe that it’s an industry that has a high growth, employment and foreign exchange earning potentials. It is essentially an area where you can generate a lot of employments for the youths.

You are definitely making impact in some key sectors. For example, mining which you mentioned, we know there are 34 identified minerals in this country with commercial value; in agriculture there are endless possibilities given the amount of arable land and labour pool which could help Nigeria not only service itself but the whole of West Africa. One project in fact I wanted to specifically ask you about is the Sealink project that is being finalized to help increase trade with the rest of the region, can you please tell us more about this?

We looked at the status of Nigeria within ECOWAS (Economic Community of the West African States) sub-region, and realized that the population of ECOWAS is over 300million people and Nigeria constitute about 165million of that. In Africa, this is the largest market and about the most dominant economy where investors have shown interest to invest. However, on the issue of intra-regional trade and integration, we have identified some barriers to our effective funding intervention, which we are trying to address. Look at the sub-region for instance, there are lots of potentials within the ECOWAS region and not just within West Africa alone, but even the Central Africa region, but currently there is no efficient transportation system that can directly connect the regions. If you have to move your goods from Lagos to Tema port in Ghana by truck, with all the non-tariff barriers, etc, it might take you two - six days, but if you have to move your goods from Apapa Port in Nigeria to Tema port in Ghana by sea, it may take you about 60 days. Under this kind of scenario there is no way you can deepen trade, because we don't have efficient sea-going cargo vessels. So if a country like Nigeria does not take step to see how we can address this trade barrier there is no way trade would improve within the region. What we are trying to reverse in Nigeria is the penchant of our exporters to look at the markets of America and Europe rather than the regional hub. This makes less economic sense when you consider that we don't have the new technology to be able to produce goods competitively for these markets, besides the traditional products that are basically raw and/or semi-processed commodities. But we do have a lot of potential in this region, and so we have to concentrate on intra-regional markets where our products are competitive and also in high demand. So the question is why do our exporters want to go and compete in a market where they don't have competitive advantage? There are other examples of trade barriers arising from transportation/logistical deficiencies that usually come at stakeholders’ conferences and seminars such as the issues of prohibitive cost and delays in movement of goods by sea, etc. This prompted NEXIM Bank to come up with an initiative to facilitate a dedicated regional Sealink company which will be private sector driven for the benefit of West and Central African countries.

So what we have done is come up with a promotional company as a Special Purpose Vehicle that would set up the regional Sealink company and raise the initial funding requirement of about US$61.5 million US dollars in both debt and equity capital. As soon as we raise that money and we incorporate that company, the SPV (Special Purpose Vehicle) would cease to exist.

Are there any limitations to investing in this special proposed vehicle?

No, we are just using the SPV to midwife the establishment of a shipping company. All willing investors are welcomed to join the initial project sponsors comprising members of the Federation of West Africa Chamber of Commerce, the members of individual ECOWAS member countries Chambers of Commerce and Industry, a big logistics company based in Douala, called Transimex S.A. Cameroun, among others. The goal is to have a regional maritime shipping company that would essentially serve and transport persons and goods between these two neighboring regions. It is important to point that this is line with the provisions of the ECOWAS protocol on Free Movement of Persons, Goods and Services.

What is your position towards the American market? We know that you have worked closely before with the US EXIM Bank so please tell us a bit more about the importance of this market for Nigeria and your specific relationship.

Well, the Nigerian/US trade relationship is not quite balanced, we have a lot of exports for the American market but it is mainly crude oil exports and if you look at the non oil exports, it’s almost insignificant. Now the question is how do we reverse and correct this imbalance? How do we improve general trade with the US, especially non-oil exports of apparels and textiles, processed agricultural produce like cashew nuts, sesame, rubber, gum Arabic and cocoa, etc under the scheme of frameworks such as AGOA?

The US market is a very, very important market and a key trading partner not only for our non-oil exports consideration but for the importation of industrial plants and machineries, foreign raw material inputs, new and clean technologies required for export production purposes, etc. For example, NEXIM had over the years funded the acquisitions of over 40 trawlers for industrial fishing/trawling activities and all these vessels were imported from the USA, which facilitated the increase in Nigeria’s exports of frozen seafood to an average of US$50 m yearly.

With regards to our relationship with the US EXIM, it is quite cordial and we have had some useful meetings towards establishing strategic partnerships in areas of capacity building, information sharing and project co-financing, among others. We hope to build upon this relationship in the coming years.

I know NEXIM is aspiring to be the largest Export-Import Bank in Africa by 2015, and since 2009 when you became MD & CEO you have worked tirelessly to restructure and redefine the Banks strategy, which had previously lost a lot of its direction and profitability. So I want to know, what is your personal ambition and strategy for NEXIM Bank and are you on target so far?

Our strategy is on course, and like you rightly said, our vision is to become the largest and leading EXIM bank in Africa by 2015. When we came in, in 2009, we met a lot of operational and policy challenges arising from the world economic meltdown and financial crises, so what we focused on addressing the quality of the Bank’s risk assets and prioritised on the sectors that the Bank would strategically intervene. Most importantly, with the help of shareholders, we were able to put in place a robust risk management framework and corporate governance policy.

To carry out this strategy, we first identified the sectors with high growth and export potential where we believed have a lot of employment and job creation opportunities. This is pivotal, as we need the support of our shareholders in order to become the biggest EXIM bank in Africa. So far the journey has been very good and we have submitted our strategic blueprint to our stakeholders which was favorably received. So far we have turned around the fortunes of the bank in 16 months and the financial outlook is quite good. In the past two and a half years we have been able to support exporters with over N26 billion in funding interventions and also provided some risk bearing facilities of US$32 million. This expected to facilitate the creation of an estimated minimum of 14,000 direct jobs and enhance the contribution of the non-oil sector in foreign exchange earnings. So our transformation can be said to be completely on track, primarily, I must add due to the professional staff we have, who are highly motivated and well trained. In closing therefore, we are very excitedly hopeful and optimistic of becoming the leading EXIM Bank in Africa by 2015.