The Federal Government has been making efforts to diversify the country's economy away from oil and gas as the sole foreign exchange earner. Government's attention has since shifted to agriculture and solid minerals as the alternatives.
In this interview, the Managing Director/CEO, NEXIM Bank, Abba Bello, said apart from its primary mandate as a development finance institution, the bank has extended its support to the two sectors to help them realise their potentials.
PT: With the current crisis in the oil sector, attention has shifted naturally to agriculture and solid minerals sectors to guarantee the country's economic survival. What is NEXIM doing in these sectors to help realize their potentials to contribute to the continued growth of the economy?
BELLO: NEXIM Bank's core focus is to help our investors address the critical challenge of raising capital for the agricultural and solid mineral sectors. Yes, these two sectors have been identified as key growth drivers in the economy. But, they have continued to be constrained by a myriad of problems.
For instance, crop production in the country has remained largely rain-fed and mostly at subsistence level. Dearth of investments has seen most of our plantations ageing without being replaced with new and higher-yielding crops.
The solid minerals sector is also dominated by artisanal miners. Low level of mechanisation, coupled with the challenge of poor transport and logistics infrastructure have been the main setbacks.
In spite of the availability of over 34 solid minerals in commercial quantities in different locations in the country, the sector currently contributes less than one percent of the gross domestic product, GDP.
A common problem to both sectors has been poor access to credit by operators, given that the sectors require long term funds at concessionary interest rates to thrive.
The banking system has largely crowded out these sectors, owing to increased risk aversion, high risk perception and dearth of long terms funds.
Our role as the country's premier development finance institution is to provide quality support to mitigate some of these problems.
PT: How is the support being provided?
BELLO: In many ways, really. Even before the inception of the present administration, NEXIM Bank has been at the forefront of efforts to boost export-oriented investments in the manufacturing, agro-processing, solid minerals and services. This is what is captured under our MASS agenda.
Presently, we have redoubled our steps. In the solid minerals sector, apart from our funding interventions, we have been working in collaboration with the miners' association of Nigeria and other interest groups on how to mitigate the infrastructure gap, to commence high volume exports of solid minerals on a sustainable and competitive basis.
We are working towards achieving an annual export of about one million tons of coal, iron ore and lead/zinc, using self-propelled and/or dry bulk cargo barges in the dredged inland waterways channels from Lokoja/Ajaokuta to Burutu Port, through the support of Nigeria Shippers' Council and Nigerian Inland Waterways Authority, NIWA.
In the agricultural sector, we are increasing funding support for primary/processed commodities, such as cocoa, cashew, shea, rubber, sesame, ginger and cotton, etc. Significant intervention can boost contribution to export revenues and job creation.
Our intervention will also encourage and support production of hydrocarbon-free jute bags to address the challenges of packaging primary agricultural commodities, to reduce incidence of rejection.
We are also supporting the leather value chain, to reopen and upgrade shutdown factories as well as attract investments in light manufacturing and branding/franchising to boost exports.
PT: What are those impediments to realizing the MASS agenda?
BELLO: The MASS agenda was designed to boost interventions in the high growth sectors of the economy, namely manufacturing, agriculture, solid minerals and services.
The impediments to the realisation of our objectives are two-folds. The first has to do with the external factors, which have continued to negatively impact the non-oil export sector.
Some of these factors include low capacity to meet export contracts arising from ageing cash crops with low yields; poor infrastructure and general low level of investments in the agricultural and solid minerals sectors over the years.
Again, the problems of rejection of our agricultural exports, owing to poor quality/packaging standards as well as high level of informal trade, makes it difficult for the small-scale exporters to access funds under an institutional arrangement.
But these are all external factors which we have been addressing with other government agencies.
The key challenge has been dearth of funds to boost interventions in the key sectors of the economy. Having retooled our operations over the years, we have become more visible, with applications under processing currently exceeding the loanable funds several times over.
Given the expected role of the Bank, the authorized capital of N50 billion has become too small, relative to the size of the economy and the opportunities available in the non-oil export sector.
PT: How's the bank resolving these challenges, to enable it help realize its mandate?
BELLO: What we are doing is to explore avenues to work in synergy with other agencies of government to redress the external factors.
We have continued to have regular engagements with agencies like the Nigerian Export Promotion Council, NEPC, Standards Organisations of Nigeria, SON, the National Agency for Foods and Drugs Administration and Control, NAFDAC, as part of efforts to increase awareness and address the problem of quality standards and rejection.
The Bank is also making necessary consultations and advocacy to boost funding support to the non-oil export sector.
PT: What is the update on the Export Stimulation Facility, ESF, and Export Rediscounting and Refinancing facility; two intervention funds established to help diversify the economy away from oil?
BELLO: The N500 billion Export Stimulation Facility, ESF, and N50bn Export Rediscounting and Refinancing Facility, RRF, were approved by the Central Bank of Nigeria, CBN, to boost investments in the non-oil export sector. NEXIM was appointed as the managing agent.
Since the release of the guidelines in June, 2016, we have embarked on various sensitisation sessions in Lagos and Kano as well as capacity building programmes with banks and key stakeholders.
Following the sensitisation sessions, we have received applications worth N111.02 billion under ESF, and N3.59 billion under RRF.
Of these, we have concluded appraisals and forwarded for CBN consideration, approval and disbursement applications worthN33 billion, under ESF and N3.59 billion under RRF.
PT: The N500 billion debenture was to redress the declining export credit facility to some key sectors of the economy. What's the assessment of the impact so far?
BELLO: Well, the funds are yet to be disbursed. But, the applications are already being considered by the CBN. We are quite optimistic that the intervention will positively impact the non-oil export sector when it finally starts.
PT: But, we learnt low patronage is said to be one of the major problems the facility is facing, as prospective beneficiaries say conditions for accessing the fund are too stringent. What is the bank doing about this?
BELLO: (That)might not be correct. I am not sure we have any problem of low patronage. As I observed, in less than six months of its introduction, we already received applications worth over N110 billion. This is in spite of the lead time required for the applicants to package their documentations and for the participating financial institutions, PFIs to put structure in place.
Nonetheless, I do acknowledge that few issues have been raised by exporters/banks, particularly with regards to the issue of refinancing existing projects. We are engaging with the CBN on this.
PT: The regional Sealink project was initiated by your predecessor in office to facilitate and promote regional trade. Where are we now on that project?
BELLO: As you are probably aware, the Bank initiated, funded the study and is currently facilitating the setting up of a regional shipping company, Sealink, in collaboration with the Federation of West African Chamber of Commerce and Industry, FEWACCI, the Nigerian Shippers Council and Transimex, a Central African logistics company based in Cameroon.
The aim is to establish a dedicated regional shipping company, which will be owned and operated by the private sector, to provide shipping services for the movement of goods and passengers within the West and Central Africa sub-regions.
This is intended to boost trade, by helping to mitigate the issues of high transportation cost and excessive transit time, which makes intra-regional trade non-competitive and the West and Central African transport and logistics cost one of the highest in the world.
Efforts towards actualising this initiative have continued and the Board of the Sealink has concluded arrangement with a major operator to commence a pilot scheme, by deploying ships along the routes that have been designated.
Marketing activities have also continued and enquires have been made towards confirmation of cargo volumes/frequency of cargoes with some identified potential service off-takers with large intra-regional trade volumes.
Late last year, the Ministers of Transport of the member countries met in Lome, Togo where far-reaching decisions were taken towards a smooth and efficient operation of the shipping company. During the meeting, the Sealink Company was granted a Community Enterprise Status.
PT: Thank you for your time
BELLO: Thank you.