Wednesday, March 16, 2011


Nigeria is an emerging economy with high growth potential. Unfortunately, most of it remains untapped due to many exportable commodities being neglected, as the federal government’s main focus is the exploration and exportation of crude oil. In addition, the government and financial institutions have so far given little or no attention to developing commodity export in terms of policy implementation and export financing, respectively.

There is no doubt that Nigeria is capable of increasing her current levels of commodity production. The  country is among the  top ten in  the export  of commodities  worldwide, despite the fact  that nearly all Nigerian  commodity  exports are  mostly  cultivated by small  scale farmers. For example, Chemonics International Inc.’s 2002 report on the overview of the Nigerian Sesame Industry, Nigeria is listed as the seventh largest exporter of sesame seeds in the world.  Thus, it is proposed that exporters should be financed in order to increase the demand for several Nigerian commodities, which will in turn raise the return on   investment (ROI) of farmers. The bigger the ROI of the farmers, the more they will be encouraged to cultivate on a larger scale.  New entrants will also be enticed to join, and Nigeria’s annual production will ultimately grow as a result.

Most small scale Nigerian exporter uses open account or documentary collection and unconfirmed letter of credit as mode of payment and has to wait for at least 14-30 days from the date of shipment to the date of receipt of the export proceeds from the buyer.  Post-shipment financing, which finances exported goods from the date of shipment to the date of receipt of the export proceeds, aims to provide small scale exporters with the working capital needed to minimize the cash constraints resulting from the extended waiting period. Since the waiting time depends on several factors, the need for post-shipment finance to reinforce the exporter’s financial position also varies accordingly. Post-shipment finance can take various forms but we will only be focusing on factoring or discounting of receivables.

Export credit insurance The purpose of export credit insurance is to provide offshore protection to exporters of goods and services who sell their products on credit terms. Exporters are insured against losses arising from various risks, either commercial or political. Export credit insurance gives exporters a significant degree of financial security, enabling companies to take on bolder export policies by accepting new purchasers and venturing into new overseas markets with fewer risks. Export Credit Insurance in Nigeria is available through the Nigerian Export Import Bank through their Export Credit Insurance Facility (ECIF).

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