ANALYSIS: NEXIM turns the positive curve, poised for more

“NEXIM bank was set up to support import and export trade within the country. We are happy to say that NEXIM has proven its worth. It has been performing its functions. That makes the bank a very important part of our finance complex. But, there are a lot of expectations. The government of President Goodluck Ebele Jonathan has embarked on a path of transforming the economy; trying to work with our private sector to expand trade, particularly regional trade, incorporating the West African zone and even beyond. With Nigeria’s economy accounting for 55 per cent of the regional economy, that means our weight means a great deal in the sub-region. Therefore, what we do in terms of supporting our private sector to trade within the region and beyond is very important. As such, NEXIM is key and critical if Nigeria is going to play its role of being the powerhouse within the West Africa sub-region, and beyond that, within Africa.”

These were the elated words of the Minister of Finance and Coordinating Minister for the Economy, Ngozi Okonjo-Iweala, at the inauguration of the reconstituted Board of the Nigeria Export-Import Bank (NEXIM) on Friday in Abuja.

The Minister said she was impressed that NEXIM, which was a near-moribund government financial institution a few years ago, has been able to, within about four years under a new management, turn the performance curve and begin to declare profits and pay dividend to its shareholders.

When the Federal Government established NEXIM through the instrument of Act 38 of 1991,its objectives and mandate as an export credit agency were clear – to provide export credit guarantees and export credit insurance facilities to support and promote export of Nigerian commodities and services within and outside the West African sub-region and beyond.

However, within a few years of its establishment, it appeared the bank lost its focus, after its management began paying scant attention to set internal business monitoring guidelines. Apart from operational leakages, the poor corporate governance structure of the bank culminated in a high portfolio of non-performing loans.

With a declining capital base and the absence of a recapitalization scheme to boost the capacity of the bank to deliver on its core mandate and services, poor performance records resulted in a loss of confidence by partners and international credit agencies that were willing to lend their support.

By December 2009, the new management of the bank under the leadership of its Managing Director, Roberts Orya, inherited huge bad debts totaling about N14.6billion, about 72 per cent of which was categorized as non-performing, while over N10.03billion, or 69.05 per cent, was classified lost or irrecoverable in line with prudential guidelines.

However, within a brief period of the new focused and purposeful management, inspired by a vision to transform, the red in the balance sheet gradually began to give way, with the numbers assuming a spiraling ascendancy, and the productivity graph pointing to an upward scale.

With an enhanced vision “to be the leading African export development bank”, and a rededicated mission “to become a first class institution promoting a diversified export base through the provision of finance, risk bearing and advisory services in line with government trade policy,” the new management, through the provision of innovative services, turned the bank’s fortunes around.

The new management not only established a risk management strategy and a good corporate governance framework, it also set up asset creation processes and a business advisory unit to assist prospective customers in preparing their documents properly.

Pursuing an agenda to support Nigerian exporters, particularly small and medium enterprises (SMEs) involved in Greenfield projects under the manufacturing, agro processing, solid minerals and services (MASS agenda), the bank was able to disburse about N23.33billion as loans, while also issuing guarantees of about N27.3million between 2009 and August 2012 to facilitate the provision of hospitality financing for the creative, entertainment and tourism industry in line with government policy.

Within a year of the new management, audited profit of the bank at the end of December 2010 recovered from a deficit position of about N5.46billion loss in the previous year to about N189million profit, in addition to the dividend paid to its shareholders, the first in several years.

Leveraging on its improved balance sheet, the bank not only used that to open lines of credit and sovereign guarantees with international credit institutions as EXIM Bank of India, AFRIEXIM, Economic Community of West African States (ECOWAS) Bank of Investment and Development as well as the United States EXIM Bank, it also initiated innovative projects to boost regional trade and economic integration.

The $61.5million Sealink project initiated to promote maritime trade among member states of ECOWAS, involves the establishment of a new shipping company that would connect the West African seaports and increase trade relations among member states of the region.

Despite the bank’s positive strides, Mrs. Okonjo-Iweala told members of the Board that a lot more are still expected from them, to ensure that NEXIM plays its role effectively.

“We look towards the Board members of the NEXIM Bank to really perform a very important function of ensuring that NEXIM plays the role it should within this country and beyond. Our private sector, where so many talented men and women entrepreneurs are, would need to be empowered by the activities of NEXIM to show what Nigeria can indeed do

“I am proud of the bank, because it’s going into some very innovative areas, like shipping along the coast of West Africa, entering into partnerships with many institutions, like the African Development Bank (ADB), Islamic Development Bank (IDB), etc. This is the kind of outreach that we would like it to have,” she said.

For the Minister of State for Finance, Yerima Ngama, despite these successes, there is yet more work to do with the inauguration of the new Board. The Minister, who hailed NEXIM’s management for turning around the fortunes of the bank in the last three years from counting losses to making profits, said having worked so hard to reverse the “very bad credit culture” and cleaning the books of bad and irrecoverable debts, the new Board would have to face the challenge of creating a credit culture through the training of relevant credit personnel who would enforce strict credit evaluation processes at the bank.
“The bank has a very good staff. They have done well. This is something that is a credit to the present management, because before it came, the bank was just recording losses. But, two, three years after it came, for the first time it started posting profits.

“Last year was the third year in a row that the bank was posting profits. Not only did it post profit, it declared dividend, the first time in the history of the bank. This is a good report card for the present management, and also good news for the incoming Board to know that they have people who can really deliver,” the minister said.

“We inherited a lot of legacy issues. The bank had a very bad history of granting credits, because the credit culture was not good. The total figures for non-performing debts in the balance sheet were scary. We had to sit down and look through all those facilities, remove those we know we can never recover. On these ones, a memo was done and was approved. Today, the balance sheet has been cleaned, and a special task force set up to excavate anything,” he added.

With the cleaning of the books of bad debts, the minister challenged the new Board to resolve never to allow the credit quality of the bank to deteriorate again, by not only maintaining the standard, but also working to secure a credit rating that would help in its effort to raise funds to strengthen its capital base.

He said with an improved balance sheet, it was time for NEXIM to subject its books, management and practices to ratings by a reputable rating agency to put the bank in a position to qualify to negotiate facilities to enhance its capacity to deliver on its mandate.

On the need for a standard credit culture, Mr. Ngama emphasized the importance of hiring and training of the relevant personnel, stressing the need for a new credit department manned by qualified personnel who would help in handling all credit issues.

To bring the services of the bank closer to the grassroots, the minister said steps have been taken to expand its presence from Abuja, Lagos and Kano by establishing seven new agencies in Yenogoa, Akure, Ishiagu, Damaturu, Yola, Gusau and Makurdi to ensure that customers that need the services of the bank can do business with it.

“We have so many people producing commodities for exports, whether it is cocoa, palm kernel, hide and skin, or sesame seeds. These people have never gotten any facility from the bank. The decision to open new agencies attached to the branches of the bank was to make the services of the bank available to such people across the country,” he said.

To broaden the scope of the credit offering by the bank to guarantee credits for both export and import as well as credit insurance, he said NEXIM entered into agreement with some international credit institutions like the Islamic Development Bank.

On the ECOWAS trade support facility, the Minister said discussions are ongoing between the bank and two firms towards the establishment of a shipping line that would convey goods and services from city to city along the West African coast, while there are provisions to give facilities to transporters to move goods across Nigeria’s borders to Chad, Cameroun and Benin Republic.

He underlined the need to de-emphasis dependence on the shareholders equity to survive, pointing out that there was need to address the fundamental issue of capitalization by reviewing the bank’s funding structure.

“The bank would have to go out and raise money or float a bond. AFRIEXIM is raising money from the international market. Our own bank should not look on to the shareholders for the capital to survive. That is why the rating is important. It is good that we have a good balance sheet, posting profits and declaring dividend. Why can’t we go and raise money from the international market? This is the challenge to the new Board,” the minister said.

The Board, which has the Deputy Governor of the Central Bank of Nigeria (CBN) in charge of Economic Policy, Sarah Alade, as Chairman, also has the Director of Trade and Exchange, CBN, Musa Batari; Director, Home Finance, Federal Ministry of Finance, Kalli Zaji; Director of Trade, Federal Ministry of Industry, Trade and Investment, David Adejuwon; representative of the private export interest, Mohammed Babangida, and NEXIM Managing Director, Robert Orya, as members.

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