Global fac­tor­ing vol­ume hits €2.37 tril­lion

.Nige­ria, oth­ers record one per cent .Stake­hold­ers rec­om­mend trade in­stru­ments to im­prove sup­port for SMES

The Guardian (Nigeria) - - BUSINESS - By Femi Adekoya

WOR­RIED by the slow­paced growth of small and medium en­ter­prises in Nige­ria and other African coun­tries, stake­hold­ers have ar­gued in favour of adop­tion of new and struc­tured trade fi­nance in­stru­ments that will de-risk SME fi­nanc­ing and pro­mote lend­ing to the sec­tor.

In­deed, data from the global fac­tor­ing in­dus­try showed that Africa recorded only €20.39 bil­lion, rep­re­sent­ing one per cent of the €2.37tril­lion global vol­ume in 2016.

With fac­tor­ing yet to gain ground in Nige­ria, trade ex­perts have tasked gov­ern­ment on the need to pass the fac­tor­ing bill into law to deepen its pen­e­tra­tion in Nige­ria and im­prove the coun­try’s par­tic­i­pa­tion in in­tra-african trade.

Fac­tor­ing is a fi­nanc­ing method in which a busi­ness owner sells ac­counts re­ceiv­able at a dis­count to a third­party fund­ing source to raise cap­i­tal.

In a typ­i­cal fac­tor­ing ar­range­ment, the client (you) makes a sale, de­liv­ers the prod­uct or ser­vice and gen­er­ates an in­voice. The fac­tor (the fund­ing source) buys the right to col­lect on that in­voice by agree­ing to pay you the in­voice’s face value less a dis­count—typ­i­cally 2 to 6 per­cent. The fac­tor pays 75 per­cent to 80 per­cent of the face value im­me­di­ately and for­wards the re­main­der (less the dis­count) when your cus­tomer pays.

Sec­re­tary Gen­eral of FCI, Peter Mul­roy while speak­ing at the just con­cluded Ad­vanced Struc­tured Trade Fi­nance Sem­i­nar and Work­shops or­ga­nized by the African Ex­port-im­port Bank (Afrex­im­bank), in Cape Verde, said fac­tor­ing is emerg­ing as an im­por­tant mech­a­nism to bridge the gap in the fi­nanc­ing of SMES, adding that de­vel­op­ing this mech­a­nism would also con­trib­ute to en­hanc­ing trade well be­yond na­tional borders.

He ex­plained that there are ex­pec­ta­tions about the Nige­rian mar­ket, not­ing that the pas­sage of the fac­tor­ing bill into law will fur­ther aid the re­al­i­sa­tion of SMES’ po­ten­tial and open up the na­tion to prospects of fac­tor­ing to sup­port SMES as ac­tors in the sup­ply chains.

Man­ag­ing Di­rec­tor, In­traAfrican Trade Ini­tia­tive, Afrex­im­bank and Chair­per­son of the Africa Chap­ter of FCI, Kanayo Awani, em­pha­sised the need to re­de­fine the land­scape not­ing that fac­tor­ing as a per­cent­age of GDP is higher in coun­tries that have a wellde­fined body of fac­tor­ing statutes.

Awani said the Bank has also part­nered with Nige­rian Ex­port Im­port Bank (NEXIM) who are at the fore­front of push­ing for­eign ex­change regime in Nige­ria to ad­mit Fac­tors as deal­ers of for­eign ex­change in a bid to ex­pand the reg­u­la­tory regime from Let­ters of Credit to open ac­count modes of pay­ment.

“Re­gional in­te­gra­tion low­ers trans­ac­tion costs and smoothens the func­tion­ing of re­gional value chains pre­sent­ing op­por­tu­ni­ties for de­vel­op­ment. Africa there­fore must di­ver­sify, en­hance pro­duc­tion, and move to more com­plex prod­ucts, in terms of value ad­di­tion.

“The po­ten­tials for Africa’s value chain to in­te­grate are promis­ing, and so there­fore are the prospects of fac­tor­ing to sup­port SMES as ac­tors in the sup­ply chains. Con­sider that, leather pro­duc­tion in Botswana is feed­ing into the car in­dus­try in South Africa; dried man­goes from Gam­bia are be­ing ex­ported to Nige­ria to feed its food and bev­er­age in­dus­try; and even Cape Verde’s abun­dant stones and grav­els can feed con­struc­tion across the re­gion, not to talk of its pro­cessed fish ca­pa­bil­i­ties”, Awani added.

Ex­ec­u­tive Di­rec­tor, Oper­a­tions and Ser­vices, Ster­ling Bank Plc, Yemi Odu­biyi; Speaker, San­dra Mbanefo Obi­ago; Min­is­ter of In­dus­try, Trade and In­vest­ment, Dr. Okechukwu Enelamah; Pres­i­dent, In­te­rior De­sign As­so­ci­a­tion of Nige­ria, Titi Ogufere; and...

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