In this report, MARK ITSIBOR notes that as Nigeria grapples with severe economic crisis as a fallout of the coronavirus pandemic, NEXIM bank is providing lifeline for the economy with its pro-export interventions
The collapse in oil prices coupled with the COVID-19 pandemic have combined to plunge the Nigerian economy into a severe crisis, no denying the fact. True to projections by the World Bank, International Monetary Fund (IMF) and the federal government, the economy did contracted – by 6.10 per cent as critical sectors nose-dive in the second quarter of the year.
The economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points. World Bank projected that the macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus.
As it stands, oil represents more than 80 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue. With the drop in oil prices, government revenues have fallen drastically.
The Nigerian Export-Import Bank (NEXIM) seems to be mindful of the fact that fiscal resources are urgently needed to contain the fallout of the COVID-19 outbreak and stimulate the economy. In that regard, the bank is proactively making interventions by way of investment in the manufacturing or production of exportable products – where Nigeria has comparative advantage – with the aim of providing buffer for the economy.
Part of the initiatives of the Bank is to promote at least one exportable commodity in every state of the federation towards achieving the federal government’s zero oil plan and the initiatives of President Buhari administration to create one million jobs annually.
The move is to mitigate some of the security challenges in the country, especially north east and prepare the region towards effective participation in the continental market under the African Continental Free Trade Agreement (AfCFTA).
For the Bank’s managing director, Abba Bello, the ‘One State, One Product’ initiative of the bank is a pointer to the fact that Nigeria has enough potential to profitably compete in the global non-oil export market. If that belief is matched with action, Nigeria would soon reverse the narrative from being a consuming nation to becoming an exporter of several products including Sesame, cashew, cocoa, oil seeds, fertilisers, tobacco, manufactured substitutes, raw hides, skins, leather, aircraft, space crafts and boats in high volume.
Recently, NEXIM signed a Memorandum of Understanding (MoU) with the Yobe State government towards sustainable economic development in the state by facilitating export-related industrialisation and attracting investments that would utilise local resource endowments in the state.
NEXIM has an export credit guarantee facility that is designed to protect banks in Nigeria against the risks of non-payment for loans or advances granted to exporters to meet short-term export contracts.
Apart from that, NEXIM and the Katsina State government have a standing agreement to boost the export of Sesame seed and other agricultural products in the state. The bank is expected to sign a Memorandum of Understanding with the state government and set up an implementation committee to drive the project. The move is part of the bank’s nationwide export diversification campaign aimed at boosting the exports of non-oil products as a major revenue earner for the country.
That is not all, NEXIM Bank MD said in an interview that the bank was planning to increase its intervention in the solid minerals sector from five per cent to 25 per cent.
In addition to that, Bello said the development bank is looking forward to partnering with the Central Bank of Nigeria (CBN) to ensure mining becomes a priority sector to complement the efforts of the ministry of mines and steel development.
“Our focus at NEXIM is to ensure that there is enough funding to attract investment into this sector. And it is our strategic vision that we move from our current five per cent dedicated to solid minerals to a minimum to 25 per cent,” Bello said.
He midwifed the signing of a tripartite agreement between the ministry of mines and steel development, NEXIM Bank and SEALINK in Abuja to use the internal waterways in Nigeria to move goods from one place to the other. About 31 states in Nigeria have access to the internal waterways. The expectation is that the new move will serve to promote trade and commerce around the country at cheaper rates.
The regional SEALINK project was initiated in 2011 to remove the huge logistics challenges and non-tariff measures along the Economic Community of West African States (ECOWAS) trade corridor. It is a giant stride for the country in terms of commerce and logistics in Nigeria. When it eventually comes into functioning, the current damage caused to the Nigerian roads would be reduced.
Nigeria currently spends a lot on maintaining the damaged roads. The mode of transportation in Nigeria is essentially by road. Moving heavy duty trucks with loads on the roads have often times damaged the roads.
About a year ago, NEXIM signed an agreement with the Small and Medium Enterprises Development Agency (SMEDAN) to ensure trainings, capacity building and funding for exporters under the African Growth and opportunity Act (AGOA).
The determination to ensure the country becomes a major player in global trade balance, the NEXIM MD earlier in the year stressed the need to widen the nation’s export product basket from the present eight commodities to about 44.
He decried the instances where the country had lost so much revenue due to the nature and form of its exported commodities. Some Nigerian products have been facing rejection at international markets for failure to measure up to international standards.
Bello said the Bank has an initiative tagged: ‘Produce, Add Value and Export (PAVE)’ which is aimed at improving the nation’s share of export earnings by value addition could fetch Nigeria and the component states some revenues.
However, those who are players in the industry expect NEXIM to play in the present times especially with the recession in the global oil industry. It is expected to partner with both state and private business interests to create greater access to available funding and increase the participation of Nigerians in the export value chain