This is the sixth in the series of articles being written to advise the President of the federal republic of Nigeria on what must be done in order to grow the non-export volume to match and even surpass that of crude oil and gas exports. In this edition, the focus will be on the policies relating to boosting the purchasing power of the exporters in Nigeria. This policy is therefore aimed at growing the non-oil export volume by increasing the quantity of goods being purchased and processed by the exporters for shipment to the export markets. This will involve the deployment of various trade finance instruments to boost the amount of capital available to businesses that are involved in the shipment of different types of products out of the country to different export markets around the world.
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 program 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, implement tax incentives or exemptions for companies engaged in export activities to boost their competitiveness in global markets
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 favorable 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 specialized export financing products tailored to the needs of exporters.
The policy on enhancing the purchasing power of exporters should stablish a dedicated export financing program 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 that of the commercial banks thereby making it to be inaccessible to many exporters. The policy should de-emphasize tangible collateral and focus more on trade finance instruments like demand guarantees and standby letter of credit to secure the export financing facilities.
The country is in dire need of foreign exchange and therefore needs to de-risk export business in order to encourage new entrepreneurs to come in 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 encourage businesses to take calculated risk and also attract the bank to make more capital available to export businesses. All these will consequently grow the non-oil export volume of the country.
It is a common saying the small and medium-sized enterprises (SMEs) are the engine room for economy growth in different countries around the world. Based on this premise, it is therefore very important to create a revolving export fund 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 machinery, certification and feedstock required to manufacture the finished goods that are being exported.
The cost of doing business in Nigeria, particularly in manufacturing sector is huge due to high level of infrastructural deficit, cost of lending and the high cost of power. This therefore has necessitated the need for policies that provide 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 the use of venture capital funding. It is there 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 channeled towards the support of the development of export clusters or zones with access to shared infrastructure and resources to reduce capital requirements for individual exporters.
In conclusion, I truly believe that 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.