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Enhancing the purchasing power of exporters
This is the sixth in the series of articles to advise the President of the Federal Republic of Nigeria on what should be done to grow Nigerian non-export volume to match and surpass that of crude oil and gas exports. This edition will focus on the policies relating to boosting the purchasing power of exporters in Nigeria. The guidelines aim to grow the non-oil export volume by increasing the quantity of goods purchased and processed by the exporters for shipment to the export markets. This will involve deploying various trade finance instruments to boost the capital available to businesses shipping different products out of the country to other export markets worldwide.
The component of the recommended policy to boost the capital available to businesses that want to export out of the country should include the establishment of a dedicated export financing programme to provide affordable loans and credit facilities to exporters, offering of export credit insurance to protect exporters against non-payment risks and encourage them to explore new markets, creation of revolving export fund to support small and medium-sized enterprises (SMEs) in accessing capital for export activities, provision of grants or subsidies to offset export-related costs such as market research, trade show participation, and certification expenses, implementation of tax incentives or exemptions for companies engaged in export activities to boost their competitiveness in global markets.
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In addition to this, the policy should also establish a venture capital fund to invest in high-potential export-oriented businesses and help them scale their operations, encourage foreign direct investment (FDI) in export industries through favourable policies and incentives to enhance capital availability, support the development of export clusters or zones with access to shared infrastructure and resources to reduce capital requirements for individual exporters, collaborate with international financial institutions and trade partners to access global capital markets and diversify sources of export financing for Nigerian businesses and facilitate partnerships with financial institutions to develop specialised export financing products tailored to the needs of exporters.
The policy on enhancing the purchasing power of exporters should establish a dedicated export financing programme to provide affordable loans and accessible credit facilities to exporters. This is currently being done by the Nigeria Export-Import (NEXIM) Bank at a single digit. However, the loan requirements are as stringent as those of commercial banks, making it inaccessible to many exporters. The policy should de-emphasise tangible collateral and focus more on trade finance instruments like demand guarantees and standby letters of credit to secure the export financing facilities.
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The country is in dire need of foreign exchange and therefore needs to de-risk export business to encourage new entrepreneurs and banks to provide more funding. This can be achieved by ensuring that the policy on boosting the capital of export businesses offers export credit insurance to protect exporters against non-payment risks and encourage them to explore new markets. This will enable enterprises to take calculated risks and attract the bank to make more capital available to export businesses. All these will consequently grow the country’s non-oil export volume.
It is a common saying that small and medium-sized enterprises (SMES) are the engine room for economic growth in different countries worldwide. Based on this premise, creating a revolving export fund is essential to support SMES in accessing capital for export activities. This revolving facility should also be a single-digit loan, and it should be focused on funding the machinery, certification, and feedstock required to manufacture the finished goods that are being exported.
The cost of doing business in Nigeria, particularly in the manufacturing sector, is huge due to the high level of infrastructural deficit, the cost of lending, and the high cost of power. This has necessitated the need for a policy that provides grants or subsidies to offset export-related costs such as market research, trade show participation, and certification expenses. This should be coupled with tax incentives or exemptions for companies engaged in export activities to boost their competitiveness in global markets.
Another good source of funding, which has not been well exploited in the export sector, is venture capital funding. It is important to establish a venture capital fund to invest in high-potential export-oriented businesses and help them scale their operations. This type of funding should also be channelled towards supporting the development of export clusters or zones with access to shared infrastructure and resources to reduce capital requirements for individual exporters.
READ ALSO: What President Tinubu must do to grow Nigerias non-oil export (5)
In conclusion, if the policies outlined in this document are carefully considered and modified as necessary before implementation, they will assist the government in achieving the goal of increasing the volume of non-oil exports in the country. With the right strategies in place, we can elevate this sector to a level where it becomes a significant source of foreign exchange for the nation.
Bamidele Ayemibo is the chief executive officer at 3TImpex Trade Consulting
READ THE OTHER ARTICLES IN THE SERIES BELOW.
What President Tinubu must do to grow non-oil export in Nigeria (5)
What President Tinubu must do to grow non-oil export in Nigeria (4)
What President Tinubu must do to grow Nigeria’s non-oil export (3)
What President Tinubu must do to grow non-oil export in Nigeria (2)
What President Tinubu must do to grow non-oil export in Nigeria (1)
