Mr. Abba Bello, Managing Director of Nigeria Export and Import Bank (NEXIM), sees Nigeria’s dwindling oil fortune as an opportunity to develop other revenue resources and grow the economy. He says his agency has done well but can do better if the challenge of poor balance sheet among others is addressed, even as it witnesses critical structural changes. He spoke with the duo of Business Hallmark’s Editor, OKEY ONYENWEAKU and Senior Correspondent, EMEKA EJERE.
The mandate of your agency is to promote non-oil export. To what extent would you say you’ve lived up to this mandate?
Well, the bank like you mentioned has a mandate: To promote non-oil export. That is the primary mandate of the bank, but it also has other subsidiary mandates like import substitution and, like a development bank, creation of jobs and so on. We have in the past, from when the bank was incorporated or when it came into being, supported export primarily in primary products. But along the existence, one of the mandates too, of course, is to also aid processing and value addition to the primary products rather than just financing the sales of the primary products.
So eventually the bank also went into light manufacturing, processing of those products before export. The bank has done quite well. But of course you know there’s always room for improvement. One of the limiting factors for the bank has always been the size of the balance sheet- the available resources that it has. And it was to that extent that the bank made a presentation to government through the CBN and an Export Stimulation Fund was availed by the bank having issued a debenture which the Central Bank invested into to the tune of N500 billion. And in addition to that one of the oldest products of the bank which is the RRF, that is, Rediscounting Refinancing Facility was also enhanced from the original sum of N2 billion in 1991 to N50 billion.
So available to us now is N550 billion in different products that can be used to support non-oil export from Nigeria. I’m sure your next question is going to be how much has been utililised or that exporters are complaining that they have not seen it. Unfortunately after the fund was availed the fund, the bank lost its management and board, so its utilization was suspended. But in the process we have close to N111 billion in applications under different stages of processing out of which about N34 billion is already with the central bank. The status now is that they’re waiting for us to have a full management and board before the utilization begins. So that is the status of that fund.
You have mentioned one of your challenges which is funding. Are there strategies to strengthen that by the government?
You see, the primary product of any export credit agency really is not funding, but we have instruments that are supposed to aid financing and they are export credit guarantees and export credit insurance. So where it becomes useful for us now is that we’re trying to get light manufacturing, and for value addition, we need equipment. So we work with other export credit agencies across the world for supply of manufacturing equipment. These export credit agencies lend out to their own manufacturers in their own economies for supply into our country.
Now they will need somebody who will guarantee it locally. So the relationship between export credit agencies is to guarantee each other to facilitate the export of their own. One of our major constraints is that any export credit agency that will lend to its own manufacturer but guaranteed by us must ensure that we’re strong enough to guarantee that person. So with the size of our balance sheet and the resources we have, that has not been really successful. First of all today NEXIM has no international rating. The balance sheet is quite small by international standard.
So we’re talking with our owners which are the Central Bank and also the Federal Ministry of Finance to find a way of enhancing the balance sheet’s size and quality to ensure that we are able to perform that role. This is especially given now that the focus of the Federal Government is in diversifying the economy’s sources of revenue into agriculture, solid minerals and other services that are away from oil. So we’re working with the Central Bank and Federal Ministry of Finance with a view to further enhancing most especially the quality of our balance sheet.
How has the economy as weak as it is affected this programme?
I wouldn’t want to say as weak as the economy is but what is happening to global commodities is actually an opportunity for us to develop other potential earners for the country. So we’re taking our eyes off oil now given that apart from the drop in oil prices globally, there is also the projection that by 2020, 2030, 2040 the demand for oil will keep dropping because there are alternative sources of energy that are coming up.
So it is an opportunity for us now to diversify our focus to other sectors. And there is always a learning that will happen. During the time that oil is less important in the world, we should be raising up other sectors. So I look at it now more as an opportunity being presented to us to develop other sectors of the economy, rather than looking at it from a negative point of view that the economy is weak.
The former MD, Robert Orya, revealed the other time that FG was targeting to generate an additional $2 billion from non-oil export in2016. To what extent will you say that target has been met?
Generally that has not happened, not because the volume of export has not increased, but it is generally because global prices also dropped. At the peak of Nigeria’s non-oil export, we did $7.2 billion. But as at last year it dropped, not because of volume but because of commodity prices across the globe. So while efforts have been put to grow volumes, unfortunately prices are beyond our control. I will rather take those targets to be based on the volumes we’re doing into the global value chain rather than in terms of dollar because prices now affect that in our country.
Would you score the agency high on the number of non-oil exporters who have benefitted from what it is doing?
I can go back to history. In the current dispensation, honestly because of the size of our balance sheet a lot of bigger exporters have looked for alternative funding. But for us NEXIM from history has been one of the creators of export credit. But we can do better, in contributing to Nigeria’s earning capacity from non-oil products. We’ve done quite well, you won’t believe, in solid minerals. The biggest local producer of granite was funded from inception by NEXIM. There’s a company in Kaduna called Chilly Marbles, it was funded by NEXIM. We’ve also funded a lot of exporters of cocoa. And today most of the applications we have are from biggest exporters of cocoa.
So for me we’ve supported exporters, we’ve done hide and skin; we’ve done cocoa; we’ve done other commodities such as sesame seed; we’ve done cashew nuts and so on. So we’re building up right now to go into the top 100 exporters of Nigeria. And our fund that we have now given that it is single digit interest and so on attracts the bigger exporters to us once again. So our constraint has always been capacity which the Export Stimulation Fund has provided.
Is leather export part of your plan because our leather export dropped from about N100 million in 2014 to less than N50 million last year? What are you doing in that regard?
I’m happy about what we’re doing here today. One of the areas that we’re focusing on is leather, which is abundant but unfortunately most of our tanneries have gone under. We’re helping in the plan to revitalize some of those tanneries. Now it is not about turning leather into white, blue or yellow because that is what we have done in the past. Now that we’re having the Aba shoe community, we want a situation where rather than the leather being exported let us develop that value addition into leather.
Now the Aba shoe makers actually import Chinese leather. We want to turn that around. So we have at the moment four of the biggest exporters of leather bringing their own applications. So their applications are in various stages of processing too, and we’re going to go back to that. When we speak of a commodity let’s speak about it in the value chain now. We should be able to key into the global value chain by supplying processed leather. Let’s supply the world shoes or bags rather than just doing the leather.
So when we look at a sector we’re looking at it from the primary raw materials into various stages in the global value chain. I will give you an example which I’m sure you know about. Between Cote devoir, Ghana, Nigeria and Cameroun, we supply 75 percent of the world’s cocoa. But out of about $100 billion cocoa and its products businesses, only about two percent comes to Africa. That is simply because we supply the world cocoa in its ‘rawest’ form, or just with a bit of processing. So we’re out of the shipping of cocoa; we’re out of the storage of cocoa; we’re out of the manufactured goods of cocoa; we’re out of the logistics and trade of cocoa.
Now we can start going up the global value chain and get more of that share of global cocoa market into Africa. So let’s move our thinking away from supplying the world raw materials. We also have to say okay, like the shoe manufacturers, where will NEXIM be able to come in to support those shoe manufacturers? In cocoa, where will we go in to move from maybe just cocoa beans or cocoa butter into the next level?
Have you created a dedicated fund to support this leather business?
Since we came into NEXIM what we have done is to re-strategize. So we engage KPMG, we sat down and said what do we do so that the impact you’re asking about will be felt in the economy, in the job market and so on. So we have finished the strategies, the strategy document is ready and so on. But the most important thing, I think, we are changing right now is the structure of the bank. Today as it is we have 11 branches. But they’re 11 branches that are not active, because everything is processed, and done from head office, because the whole essence of those branches was to be in strategic places where Nigeria’s exportable products originate from.
We’re changing that to ensure that those branches become active and productive. It starts from marketing, to processing, to what have you. The most important thing I think we’re changing is the structure of the bank. Today as it is we have 11 branches. But they are 11 branches that are not active, because everything is done and processed from the head office. The whole essence was to locate those branches at strategic areas where Nigeria’s exportable originate from. We are changing that to ensure that those branches become very active and productive. It starts from marketing, to processing and to what have you.
For instance, Akure office is going to be the best for cocoa; the Calabar office is going to deal with palm oil; the office in Kano is going to deal with melon. So we’re not going to keep those experts at the head office. They are going to be where the source is. So those 11 offices we’ve decided that we’re going to shut down some of them. We’re going to have one office in each of the six geo-political zones and one in Abuja, that’s seven plus the head office. By geo-political zone I don’t mean that if you have a business in Benin, which is south south, I won’t expect Calabar to do it when Akure is one hour from Benin.
So while the office is in Akure it’s going to also serve those businesses around it but are outside the geo-political zone. So the logistics are being done in such a way that no exporter is going to have difficulty in reaching any of our offices. Secondly, some of the offices are in places where we think are not convenient to the exporters.
For instance, in the Northeast, I have an office in Gusau. Gusau is far off from everybody, so we’re going to shut down that office and move it to a more commercially oriented city in the Northeast and in my opinion that should be Gombe. Why, because Maiduguri is also very far away. Gombe is more central and more commercial at the same time. We have an office in Kano that is going to serve the Northwest; we have one in Maiduguri that will serve the North Central and so on.