Promoting Non-oil Exports for Fiscal Sustainability, Growth
James Emejo writes that with proper funding support, the non-oil export segment could VLJQLÀFDQWO\ HQKDQFH WKH IHGHUDO JRYHUQPHQW·V ÀVFDO SURÀOH DV ZHOO DV IDFLOLWDWH WKH FXUUHQW GULYH WRZDUGV HFRQRPLF GLYHUVLÀFDWLRQ DQG VXVWDLQDELOLW\
AmidstthepresentadministraWLRQ·V FXUUHQW HͿRUWV DLPHG at diversifying the base of theNigerianeconomyfrom the perils of oil, the need to provide adequate funding and attention to the non-oil export sector cannot be over-emphasised.
Analysts have contended that most of the economic challenges bedeviling the country could simply be addressed by boosting local production and strengthening its non-oil export potential.
Theyarguedthatthecurrentchallengesregarding the depreciation of the local currency, the Naira, as well as the incessant foreign exchange crisis could be resolved with improvement in non-oil export activities which would, in turn, LQFUHDVH WKH LQÁRZ RI GROODUV LQWR WKH HFRQRP\
Besides, a vibrant non-export sector has the potential to solve much of the country’s unemployment challenges by providing millions of direct and indirect job opportunities.
Strengthening the appropriate non-oil export facilitation institutions to live up to their mandate of providing short-medium- and ORQJ WHUP ÀQDQFLQJ WR WKH SULYDWH VHFWRU ZLOO not only boost the government’s revenue receipts WKHUHE\ HQKDQFLQJ LWV ÀVFDO SURÀOH DPLGVW WKH FXUUHQW UHYHQXH FKDOOHQJHV EXW DOVR EHQHÀW WKH economy in several ways.
Contribution to Economy
According to the National Bureau of Statistics (NBS), the annual contribution of the non-oil sector increased to 92.76 per cent in 2021 from 91.84 per cent in 2020.
Nonetheless, the country’s export is still oil-dependent as crude oil exports amounted to N4.26 trillion and accounted for 74.04 per cent of total exports, according to Q4 2021 trade statistics.
The non-crude oil contributed N1.49 trillion or 25.96 per cent to total exports of which non-oil products amounted to N810.88 billion representing 14.06 per cent of total exports during the quarter.
Challenges of Non-oil Export Segment
Stakeholders under the aegis of the Network of Practicing Non-Oil Exporters of Nigeria (NPNEN)recentlyurgedthefederalgovernment to embark on an aggressive drive to strengthen LQWUD UHJLRQDO WUDGH LQ $IULFD WR HͿHFWLYHO\ diversify the economy.
The exporters further maintained that to enhance trade and boost Gross Domestic Product (GDP), investment in non-oil export activities must be taken seriously.
$OVR WKHVHFWRUKDGVXͿHUHGIURPWKHGHYDVWDWing impact of the COVID-19 pandemic which IXUWKHU DͿHFWHG LWV YLDELOLW\ DQG UHVXOWHG LQ increased funding constraints.
Credit Facilitation to Sector
It was part of the government’s commitment to addressing the funding inadequacies in the non-oil export space that the Nigerian ExportImport Bank (NEXIM) was established by Act 38 of 1991 as an Export Credit Agency (ECA) with a share capital of N50 billion held equally by the Federal Ministry of Finance Incorporated and the Central Bank of Nigeria (CBN).
The bank is saddled with the responsibility of providing export credit guarantee and export credit insurance facilities to its clients; provision of credit in local currency to its clients in support of exports; establishing and managing funds connected with exports; maintaining a foreign exchangerevolvingfundforlendingtoexporters who need to import foreign inputs to facilitate export production; and provision of domestic credit insurance where such a facility is likely to assist exports.
The bank also provides short and mediumterm loans to Nigerian exporters including
short-term guarantees for loans granted by Nigerian banks to exporters as well as credit insurance against political and commercial risks in the event of non-payment by foreign buyers among others.
Mandate Actualisation
6LQFHWKHDVVXPSWLRQRIRFHRIWKH0DQDJ- ingDirector/ChiefofNEXIMBank,Mr.Abba Bello, on May 2, 2017, the new management had developed a new Strategic Plan (2018 – 2022) that was articulated toward improving operationalperformance,achievingthebank’s mandate and contributing to meeting the objectives of the federal government under the Economic Recovery and Growth Plan.
&XUUHQWO\ LQ LWV ÀIWK \HDU RI RSHUDWLRQV WKH SODQ KDV FRQWULEXWHG WR WKH VLJQLÀFDQW turnaround of the operational performance RI WKH EDQN ZKLOH HͿRUWV WR FOHDQ XS WKH EDO- ance sheet as well as improvement in risk management practices had ensured that new loans granted from 2018 are performing 100 per cent, which is a major departure from the huge non-performing loans in the past.
Loan Recovery Drive
Bellohassaidtheintroductionofaggressive debt recovery and proactive loan measures had increased recoveries from N200 million in December 2016 to N10.2 billion and $3.25 million between January 2017 and February 2022, adding that the loan recovery drive had led to the seizure of assets worth about N7 billion which are currently on the sale block.
He told THISDAY, “Unlike the trend in the SDVW WKH EDQN KDV DOVR HQJDJHG VLJQLÀFDQWO\ with stakeholders, with improved relation- VKLS PDQLIHVWLQJ LQ FROODERUDWLYH HͿRUWV towards policy intervention and increased focus on the non-oil export sector.
“Enhanced operating model through re- VWUXFWXULQJ RI UHJLRQDO RFHV IRU WKH EDQN WR maintain a presence in each geo-political zone of the country for better market penetration and nationwide coverage.”
Intervention Projects
The bank’s Export Development Fund (EDF) had led to the processing of 442 Applications
worth N461 billion and $43.69 million, out of which N214.65 billion had been approved while N153.03 billion had EHHQGLVEXUVHGWR EHQHÀFLDULHV DVZHOODV approvals totaling N55.85 billion which were undergoing the pre-disbursement process.
Bello said so far, $492.97 million and €1.17 million, translating into N196.32 billion, have beenreceivedasexportproceedsfromprojects that have repatriated their income, while others are yet to complete the transaction circle, adding that many of the institutions supported by the bank now feature on the list of top 100 exporters published annually by the Central Bank of Nigeria (CBN).
According to him, over the last three years, the bank had operated under the philosophy of Produce,Add Value, and Export (PAVE) to changethecurrentnarrativeofthedominance of primary products in its export basket.
Moreover, in supporting start-up projects, a lot of emphases had further been placed on providing working capital to resuscitate many industrial projects, which have hitherto becomemoribundoroperatedbelowcapacity towards boosting value-added exports and enhancing jobs creations.
Operational Performance
Nonetheless, he said the bank grew its balancesheetfromN67.73billioninApril2017 to N202.03 billion as of February 2022, adding that with continued positive performance, increased strategic partnerships for lines of credit and the push for recapitalisation of the EDQN WKH WDUJHW LV WR DFKLHYH D VLJQLÀFDQW increase in balance sheet size in line with growing export opportunities, particularly given the African Continental Free Trade Agreement (AfCFTA).
7KH EDQN IXUWKHU UHFRUGHG D SURÀW RI 1 billion in 2018, N2.13 billion in 2019, N1.28 billion in 2020, and N4.10 billion in 2021, after a loss of N567million in 2017 and a bigger loss of N8.03 billion in 2016.
This also suggests that if properly funded, WKH GHYHORSPHQW ÀQDQFH LQVWLWXWLRQ FRXOG boost revenues for the government with its attendant impact on the economy.
7KH 0' H[SODLQHG WKDW WKH SURÀW GHFOLQH in 2020 was due to the impact of the COVID-19 pandemic on businesses, which necessitated the interestrebateandmoratoriumextensiongranted by the bank to its customers.
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According to the MD, the bank is also collaborating with the CBN to manage the N500 billion Non-Oil Export Stimulation Facility, which has been introduced to provide long-term funds to export-oriented projects toward increasing value-added exports.
Inthisregard,underthePandemicTradeImpact Mitigation Facility (PATIMFA) program, NEXIM Bank secured $25 million from the AFRIEXIM Bank to alleviate the economic and business impact of the COVID-19 pandemic on Nigerian businesses.
He said, “The facility is available for continuous funding of exporters, particularly SMEs, many of whom were adversely impacted by the disruptions of the global value chain and other fallouts of the COVID-19 pandemic.
According to him, “The bank’s objective LV WR HQKDQFH LWV LQWHUYHQWLRQ LQ WKH GLͿHUHQW geo-political zones of the country. As part of its strategy to increase intervention in Small and Medium Enterprises (SMEs), the Bank is also working with various State Governments and has signed Memoranda of Understanding (MOU)withabout10StatesundertheStateExport Development Programme.
“Thisschemeisexpectedtofacilitateindustrialisationandeconomicdevelopmentatregionallevel under the One State One Product programme, whereby each state of the Federation is expected to identify and develop at least one commodity for export as part of the Federal government’s Zero Oil Plan.”
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NEXIM Bank is further taking steps to position 1LJHULDQ H[SRUWHUV WR EHQHÀW IURP WKH XQIROGLQJ RSSRUWXQLWLHVRͿHUHGE\$I&)7$ IROORZLQJWKH recent exit of Britain from the European Union and the prospects in other regions.
The bank is therefore taking measures to increase its funding capacity towards boosting lending support thereby increasing foreign exchange earnings for the country and facilitating employment generation.