Monday, June 23, 2014

OPINION: Non-Oil Export and Creative Trade Financing, a Panacea for Unemployment-By Dele Ayemibo

It is no more news that the unemployment rate in Nigeria is becoming very alarming. According to the article published by premium times in October 2013, the Performance Monitoring Report on Government’s Ministries, Departments and Agencies, indicated that the unemployment rate in Nigeria in 2010 was 21.1 per cent, a figure that increased to 23.9 per cent in 2011. “In 2011, Nigeria’s unemployment rose to 23.9 per cent compared with 21.1 per cent in 2010,” the News Agency of Nigeria quotes the report as stating. The report referenced its facts from the National Bureau of Statistics (NBS).

But the good news also is that God has endowed our nation with all that it takes to tackle this problem. In this article, I will be looking at how to solve the problem of unemployment from the perspective stimulating growth in the non-oil export trade in Nigeria. The reason for this is very simple. Nigeria is endowed with great potential to produce and export both Solid Minerals and Agricultural commodities. These two categories of commodities can be exported as primary product, semi-processed or finished goods.

God has so made Nigeria in such a way that no state of this country lacks an exportable Solid Minerals and Agricultural commodities even though some have more than the others. Exportation of these commodities passes through a chain that has great potential of creating different jobs all the way from the farm gate or mining site to the point of exporting them.

A significant growth in the exportation of these commodities will mean growth for the Farmers/Miner, the local buying agents, the commodity merchants, the processing factory, the exporting company.  

It is sad to say that while we have tens of thousands of companies importing different items into Nigeria, less than 600 companies are involved in non-oil export. A number of company that are in the business could not grow at a faster rate because of inadequate funding in that sector. Experts have attributed this to a number of factors but the major one is said to be the lack of financial institutions that are creative enough to come up with trade finance products that are targeted are funding SME Exporters.

In my opinion, there is need for a deliberate policy towards the growth of the non-oil export finance in Nigeria and I think this should be championed by the CBN.

Please find below my suggested sustainable solutions to funding of the SME non-oil exporters in Nigeria

Government/CBN should make laws/regulations to encourage the establishment of specialized banks that will only finance export transactions. These laws/regulations should allow private individuals to establish export focused banks and Government/CBN should own and contribute 50% of these banks capitalization so as to have a good control over its operations and thus enable the government to achieve her dreams of growing the SME exporters in Nigeria. The law/regulations should stipulate the following among other things as might be deemed necessary by the Government/CBN:

a.     The export banks are to finance only export transactions and any financing done outside this should be penalized.
b.    The export banks should offer trade finance products like Export Credit guarantee, Export Credit Insurance, Factoring, Forfaiting, Invoice discounting etc.
c.     The interest rate on the export financing facilities from this bank should be set by the Central Bank and should be lower than the prevailing rate in the market at any point in time.
d.    The export banks should be given tax holiday as an incentive to attract a lot of investor to the scheme.
e.     Government should reward any of the export banks that have the highest export finance facility portfolio at the end of each financial year.
f.     The export banks should offer both pre and post export financing to exporters.
g.    The banks should only finance SME exporting companies or cooperatives with at least 6 month experience in the business and with Bill of lading records of export and evidence of receipt of export proceeds from the buyers abroad.
h.     The banks should only finance SME exporting companies that are owned 100% by Nigerians
i.      The export bank should have a warehouse where all the products that they are financing are inspected to ascertain the quality before they are exported.
j.      The export bank should grant export facility that is as low as 1 Million Naira and as high as 50 Million Naira to the SME exporters
k.     The goods should be used as collateral for post shipment financing while equity contribution of 30-50% must be a pre-requisite for pre-shipment financing.
l.      The export financing facilities from the export bank should cover the export of solid minerals and agricultural commodities, semi-processed products and finished goods.
m.   The export bank financing facility should only be granted to export transactions with Letter of Credit, Sight Bill for Collection and tenored Bill with Avalised Bill of Exchange.

I expect that some people will say that we already have a NEXIM Bank doing this, but we all know that NEXIM is a government institution, it is not a profit driven organization and they are also under so much political influence. All these have gone a long way to hinder their performance over the years and  since inception.

In conclusion, if the Government/CBN can adopt what have been suggested in this article, modify it as might be required, implement it to the letter and give the adequate publicity in order to make it known to the general public, we will be on our way to the commencement of a systematic and sustainable approach to drastically reducing the very high unemployment rate in our dear Nation Nigeria.

Long Live Federal Republic of Nigeria!!!

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