CBN Governor, Sanusi Lamido Sanusi
| credits: File copy
The primary objectives of any export activity are to increase the level of economic development, reduce unemployment and create wealth.
But in Nigeria, the activities of the non-oil sector within the last few years have been erratic. Prior to the transformation agenda of the current administration, the non-oil sector had not contributed significantly to the Gross Domestic Product of the economy.
For instance, the National Bureau of Statistics said the country’s GDP dipped to 6.48 per cent in the third quarter of 2012 as against the 7.37 per cent recorded in the corresponding period of 2011.
It said the economy, comprising the oil and non-oil sectors, witnessed slow output growth in the third quarter of 2012 as a result of decline in the activities of the non-oil sector.
The NBS in its latest report said while the oil sector witnessed positive growth for the first time in four quarters, the slow growth of the non-oil sector was driven by the activities in the building and construction, cement, hotel and restaurant, and electricity sub-sectors.
The non-oil sector, it stated, grew by 7.55 per cent in real terms in the third quarter of 2012 compared with 8.76 per cent in the corresponding period of 2011.
It attributed the drop in non-oil GDP to the decline in agriculture, telecommunications, wholesale, retail trade and real estate sector output.
But the Managing Director, Nigerian Export-Import Bank, Mr. Robert Ory, said the bank’s strategies, which it recently unveiled, would help to boost the contribution of the non-oil sector to GDP.
Established by Act of Parliament 38 of 1991 as an export credit agency, the bank is saddled with the responsibility of providing export credit guarantee, local currency, management of funds and export credit insurance facilities to exporters.
He said with the transformation of the bank, the country would begin to see more funding of non-oil export sector.
Before the current management team was constituted in 2009, the bank had witnessed a decline in both its financial and operational performance.
Some of the bank’s problems are huge decline in the quality of risk assets as the bank’s total loan portfolio as at August 20, 2009 was N14.6bn, out of which 72 per cent was non-performing and within that category, N10.03bn or 69.05 per cent was classified as completely lost, resulting in decline in the bank’s income.
Others are paucity of funds with outstanding call, unpaid capital standing at N32.74bn leading to decline in creation of risk assets; depletion of the bank’s shareholders funds as a result of accumulated losses; significant decrease in income and tolerance of excess and escalating overheads; worsening assets quality and poor record keeping.
The bank also lacked strategic focus and distraction from core mandate; ineffective risk management framework; non-adherence to corporate governance tenets; over bloated staff strength with significant skill gaps; and lack of visibility of the bank.
It was learnt that as soon as the new management team led by Orya was reconstituted, a corporate transformation programme was implemented to reverse these problems and also ensure its ability to contribute significantly to the economic development of Nigeria.
The corporate transformation project led to the re-definition of the bank’s mission, vision and strategic objectives, with the intention of channelling its resources into the development of four sectors-manufacturing, agro-processing, solid minerals and services.
The need to focus on these areas of the non-oil sector of the economy, according to Orya, is due to their high employment and foreign exchange earning potential.
He said, “The agreed strategic objectives were to have a clear market focus and become a major contributor to non-oil exports to be a relevant player in the export market and significantly influence government trade policies.
“The bank also defined its business posture going forward as that of complementing the role of the commercial banks and other Development Financial Institutions by focusing on the un-served markets.
“In order to ensure that the strategic objectives are achieved and consequently impact the economy, we revised and adopted an optimal operating model with a robust organisation structure, with clearly defined roles and responsibilities, structured market-facing departments along the key target sectors of manufacturing, agro – processing, solid minerals and services.”
The outcome of the review of operational model, he noted, led to the financing of non-oil exporters majorly the Small and Medium Enterprises to the tune of N23.33bn and issued Guarantees valued at $27.3m between 2009 and August 2012.
A breakdown of the N23.33bn intervention shows that the manufacturing sector with a funding of N11.34bn or 48.6 per cent benefitted the most while agro processing, services and solid minerals followed with N5.03bn (21.6 per cent), N4.88bn (20.9 per cent) and N2.07bn (8.9 per cent) respectively.
These interventions, he noted, had enabled the bank to generate about 14, 358 direct jobs.
Despite the enormous risks, the bank according to him, is stepping up its role as a development financial institution to provide the relevant products to stimulate and attract investment to the sector to make it more viable and attractive for both the commercial banks and every other private entity.
Orya also hinted that NEXIM was also looking at the services sector, especially in the area of financing the development of entertainment sector.
However, the intervention programme of the bank in boosting non-oil sector is currently being slowed down by inadequate capital.
Confirming the development, the NEXIM boss said the bank would need about N250bn in terms of capitalisation to adequately perform its operations
He said, “We have a balance sheet of N50bn. We are doing a lot currently but I think we will make a lot of impact with a capital of N200bn to N250bn considering the size of the economy.”
He pointed out that there were still some sectors that had not been properly reached out to.
“If we have enough, we have some sectors we still need to reach out to. For instance, we need to look at the non-oil sector which we have not even looked at,” Orya added.
The NEXIM boss noted that his dreams for the bank was to make the Nigerian economy to be the most competitive in the entire African region, saying when all these were achieved, the bank would be in the position of giving money to potential buyers of Nigerian products without fear of possible absconding.
He explained that a lot of work had gone in charting an investor friendly policy framework for the mining sector in order to ensure full realisation of the huge potential therein.
The economic impact of this, he noted, would surpass that of the oil and gas sector.
He said, “We are looking at the creative arts and entertainment industry because we believe that it’s an industry that has a high growth, employment and foreign exchange earning potential. It is essentially an area where you can generate a lot of employment for the youths.”
On how the challenges of trade barriers could be overcome, he said, “We looked at the status of Nigeria within the Economic Community of West African States sub-region, and realised that the population of ECOWAS is over 300 million people with Nigeria constituting about 165 million of that. It became obvious to us that this is the largest market and about the most dominant economy where every serious investor should show interest to invest.
“If you have to move your goods from Lagos to Tema Port in Ghana by truck, with all the non-tariff barriers, it might take you two to six days. But if you have to move your goods from Apapa Port in Nigeria to Tema port in Ghana by sea, it may take you about 60 days.
“This is because the vessels would first sail directly to their home ports in Europe or South Africa and from there make a trans-shipment of the goods back to Tema Port.”
Under this kind of scenario, he noted that there was no way the bank could deepen trade as there were no indigenous sea-going cargo vessels.
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NEXIM’s non-oil intervention set to boost economy