Home Analysis How NEXIM is helping to diversify economy away from oil

How NEXIM is helping to diversify economy away from oil

by Business News Report

The free fall in crude oil prices and exposure of the Nigerian economy to financial crisis has pushed stakeholders and policy makers’ attention to non-oil revenue generation. One sustainable source of foreign exchange generation is export of manufactures, solid minerals, and agricultural output with value addition.
The Nigerian Export Import Bank NEXIM, is fast becoming the centre of attraction to government and exporters to push the non-oil foreign exchange earnings drive through trade financing and productive efforts of exportable products from Nigeria
According to government official documents in no other sector is the role of NEXIM in driving the foreign exchange revenue drive of the present administration more pronounced than in encouraging the manufacturing, mining and the agric sectors in producing non-oil goods for export.
This way, government reasons that the volume of external trade is being gradually shifted away from crude oil on which the nation largely depends, to non-oil items that are abundant and widespread in the country, but which have largely suffered neglect due to a multiplicity of factors, chief of which is funding.
The new focus is intended to permeate a wide spectrum of the nation’s everyday life, ranging from housing, industry, energy, entertainment and the whole gamut of every facet of our social life with the simple message: export and earn foreign exchange for Nigeria.

Managing Director/CEO, Nigerian Export-Import Bank, Robert Orya, explaining the success so far recorded in the new agenda government export drive of which NEXIM Bank has played a pivotal role, “It is evident that the important story of Nigeria’s advancement from where we are would not be told by earnings from our hydrocarbon reserves (although we have one of the world’s largest). Our success would be driven by a robust manufacturing industry; self-sufficiency in agriculture for food and processing so that excess yields could tap export markets; world-class service sector to serve domestic industries, global outsourcing and export markets, and commercial access to wider range of mineral deposits that dot every nook and cranny of our country.”
Since the introduction of the Structural Adjustment Programme SAP in 1986, Nigeria has been trying to diversify the economy away from oil with little success. So it is not for lack of ideas that the export of non-oil goods has remained at infancy, the problem, amongst others, has to do largely with the will and commitment to focus and redirect resources to the non-oil sectors and take appropriate action to actualize what is largely recognized as a cash cow.
Although NEXIM was established to play this role, the current administration’s determination to focus on these sectors in the bid to improve on the nation’s revenue profile outside crude oil sales and create employment, played a key role. “What the administration of President Goodluck Jonathan has done, perhaps more than any previous regime, is combine commitment with practical actions in diversifying the Nigerian economy away from sole reliance on crude oil for external revenue,” Orya said.
The inhibition standing in the way of operators in the identified sectors from accessing finance has to be addressed. NEXIM Bank, having identified the drawbacks, intervened to set the ball rolling in a manner that ensured the delivery of the intended benefits.
As the NEXIM Bank boss puts it: “Development Finance Institutions are bearers of risks which commercial lenders would term excessive, and therefore avoid.
“ New industries, new initiatives, people without financial collaterals, projects which cannot pay commercial cost of finance, etc have been beneficiaries of funding by DFIs. This way, business formation can continue, people can continue to innovate, bias against social and reputational collaterals are reduced, and projects can be incubated and nurtured to when they can attract lending from commercial banks,” he said, adding that NEXIM Bank has assumed this critical role in Nigeria where banking penetration is less than 15 per cent of the population, commercial lending rates are prohibitive, land titles are not even available to owner occupiers, but where innovators are born daily, and where we have to eradicate poverty.
He said as a DFI, NEXIM Bank has to assume its natural function in driving the Transformation Agenda of the government, by supporting the export-prone sectors, increase foreign exchange earnings and create employment, so as to free government to focus on the provision and delivery of necessary infrastructural projects to aid implementation of programmes under the plan of structural transformation of the Nigerian economy that cannot be delivered by commercial lending.
Orya, explained that NEXIM Bank is the official and sole Trade Policy Bank of the Federal Government. In this regard, providing financing, risk-bearing facilities, market information and value-added advisory services to businesses towards deepening export-oriented investments in the country’s non-oil sectors of manufacturing, agro-processing, solid minerals and services, for job creation and economic growth.
He said the bank has provided N12 billion in lending to Nigerian export manufacturers over the four-year period from August 2009 to April 2013, adding that it has funded agro-processing export businesses, to the tune of N6.6 billion over the same period.
Onya speaking to journalist said ” From the institutional viewpoint of Nexim Bank, I am excited at the prospects of playing a role in diversifying the Nigerian economy and harnessing the immense potentials of the sectors which had, hitherto, been neglected. Indeed, the role Nexim Bank is playing is unique as a development finance institution (DFI)“.
Accordingly, in the solid mineral sector, NEXIM Bank is working in partnership with industry stakeholders to take formal mining off the ground again, Orya said, adding that Nexim Bank has so far provided over N2 billion in early funding to help some commercial miners to develop their site in order to start operation and invite further funding from other sources apart from the long-term commitment of Nexim Bank to the nascent industry.
In pursuit of its drive to impact on other segments of the economy as part of the Transformation Agenda, the bank has taken on the management of the Nigerian Creative and Entertainment Industry Stimulation Loan Scheme (NCEILS). The fund which is lent at below commercial rate is meant to fund businesses across the entertainment value-chain, including filming production, cinema operation, music recording, and intellectual property development and recording studios, as a revolving fund with repayment terms.
He said to date; Nexim Bank has disbursed over N1.4 billion for the Fund, adding that Entertainment industry project proposals under review exceed N5 billion in value. Overall, disbursements to the creative and entertainment industry, including the services sector is about N8.5 billion, covering support to transportation and hospitality industries.

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