At the just concluded Intra Africa Trade Fair, Nigerian Export Import Bank Managing Director, Abubakar Bello spoke to the media about the effort the bank is making to revive cocoa precessing and plans for Sealink to move export products across the continent
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NEXIM MOU with AfreximbankBank
If you recall on that day two signings were done. Ours was for $I billion between NEXIM Bank and Afrexim and the other was between Afreximbank and the Federal Ministry of Industry , Trade and investment for $1.3billion. The $1.3billion was strictly for infrastructure business and industrial parks in parts of Nigeria. But NEXIM facility is for trade facilitation and development within Africa. So that means there are two different purposes for the facilities. But the $25 billion they are referring includes the total deals companies in the various countries in Africa would transact during this Fair to support trading among themselves including those others that do not even concern Nigeria. It is the sum total of trade finance initiatives targeted at helping African businesses in various countries through the platform of the IATF
Export promotion
Every time there are goods for export the various regulatory agencies must be involved, whether it is , NAFDAC, Standards Organisation of Nigeria or quarantine if you are exporting agricultural produce. Some people have said those are some of the challenges that exporters encounter in Nigeria. But it is important one should comply with their regulations. For us in NEXIM, our mandate is basically trade facilitation because we are not the owners of the business .So when we have challenges be it with tariffs, non-tariffs or regulatory barriers in the process of export, what we will do is to continue to advocate ways of making it work better. But as an exporter you cannot do without meeting the regulatory demands Now one of the things that the Vice President is doing with the MSME clinics is that we have what we call one stop shop that any exporter who needs the NAFDAC, or SON certification can get it from the one stop shop and once you get this done, export becomes easy.
Reviving moribund Industries
Today we have Multitrex and Plantation Industries all financed by various government intervention facilities. Some of them were financed under this scheme but some of them have been taken over by creditors. Plantation Industries for instance was taken over by LadGroup. However it is imperative too to find out what caused their failure. From our reviews of their status, we discovered it was a combination of mismanagement and the international economics of cocoa market which suddenly made it difficult for them to export processed cocoa. This was because cocoa buyers in Europe and America attempted to knock Nigerian cocoa producers off the market by introducin ad valorem taxes and duties on processed cocoa while taxes on raw beans was zero.
So it became more profitable for them to export raw cocoa beans than processing them before exporting. But while this phase was going on, some of them that also had loans that needed to be repaid to creditors stopped servicing them. For others that were taken over by creditors could not utilize the excess capacity they had or even service the loan they acquired before the market dynamics changed. But now what NEXIM is trying to do is to identify the problem confronting them, fix the problem and perhaps restructure their loans so that it be repaid over a period of time. After that, we can then look at the possibility of injecting fresh funds into their operations to enable them resume production.
Recently a colleague in the office reminded me that if we don’t process cocoa and continue to export it raw to other countries, we would only have succeeded in handing over the processing of our own products to other countries and they are going to be making more money than us. This invariably means that we are exporting jobs to other countries who will be employing their people and making money than us from the raw products we sold to them. So despite the protectionism in Europe, we believe it is still better for us to export processed products, be it cocoa or any other goods. Currently, Nigeria has about 200metric tonnes of processing capacity for cocoa lying idle because our total production for now is between 20 and 30 metric tonnes. But we have capacity to do about 200metric tonnes. Multitrex alone has capacity for 65metric tonnes,. So if we can resume processing of all our cocoa production estimated at over 250,000 tonnes, you can then image how much we are likely to make in one year. Imagine other indirect products we can get in the process. One of the bye products of the Plantation Industries is cocoa butter. We also want to go there. For its part Multitrex can produce up to chocolate and cocoa drinks and with idle capacity that is just wasting, NEXIM is determined to bring them back to life including other businesses in other sectors of the economy outside agriculture . We are still working on how to add more value to cashew, sesame seed and ginger because we have observed that processing these products is not rocket science.
Conflict resolution affecting manufacturers
For Multitrex we are working with AMCON to resolve the debt issue although its huge. Their own is even easy because it involves government. The ones that are still with the banks are rather more difficult to handle because when the assets of such organizations like their factories cystalise, you cannot even be able to sell them easily except you want them sold as junks for ridiculously low prices. Now apart from the owner managers who do you think would want to come and buy a cocoa factory when those that have been in the business for over 30 years have failed ? Nobody would buy. What I have been telling the banks is that its better we restructure these loans and allow the companies to resume production than to liquidate them because even selling their assets upon liquidation is a problem. The banks are not better off by liquidating those companies, but would be better off by getting their loans restructured so they can resume production. In that case they would be earning some money to service the debt and retain or create new jobs that can even deposits money in the banks. Again for all the cocoa plants, apart from settling their debt overhang, they also need to retool because some of their processes and plants are obsolete and may need additional working capital. That’s why we would need to assess them on a case by case basis. However for Plantation Industries we financed with African Development Bank facility still needs working capital although there may also be need to get more of the state of the art equipment.
Does NEXIM suffer capacity constraints
Not necessarily. At some point, we were, but the Central Bank of Nigeria through Export Finance Facility is there to support us. At the Bankers retreat recently, the governor of the Central Bank of Nigeria still re-echoed the need to support development finance institutions execute their mandate, so we are not financially challenged
NEXIM’s key challenges from inception
Like every other development bank, there is the issue of funding and erosion of available capital from inception, because as long as people take loans from a development bank and see it as “National Cake”, and fail to repay at maturity, the problem of working capital constraints to support the business would always arise. Naturally over a period of time the bank’s capital was heavily eroded leaving it crippled for several years. But right now we are very liquid to the extent that just while we were still at the Intra Africa Trade in Cairo, Egypt, I signed off an export deal for a client to the tune of N3.5billion. I can confirm to you that business is picking up.
Afreximbank’s $1billion MoU with NEXIM
As part of activities lined for the first Intra Africa Trade Fair in Cairo, Egypt, we signed a $1billion MoU with Afreximbank to facilitate the export of Nigerian produce, and manufactured goods and other exports into the African market. It is specifically for export of Nigerian goods and services to other African countries. That is also why it is called the Nigeria Africa Trade Promotion Programme where Afreximbank is making available $1billion line of credit to support the trade. Now how is this going to work.? We have a list of eligible transactions that can come into the conditions for financing. The list is long but typically any business that ultimately supports Afreximbank’s current drive to grow Intra Africa trade can qualify to benefit from the $1billion facility. If you recall South Africa signed their own about three months ago so its the same programme signed with South Africa that we signed with Afreximbank during the IATF programme
There is some irony in Africa trade because most of the products we sell to other countries in Africa are mainly manufactured goods, FMCG, cosmetics, plastics among others.Our formal exports are mainly primary goods. But we cannot trade the same primary products among the African countries because they also have the same primary products and we have same structure. Benin Republic for instance may not need our raw cocoa because they have cocoa. Same as Ghana and other countries. That is why the only market we have for cocoa is across the seas. So what we want to do now is to bring back the regional value chain. We want to bring back the cocoa processing companies back to life. So when we bring back our regional value chain, such that we can restream cocoa trade between Nigeria and other neighboring countries, we can then start supplying raw materials to African countries that are into processing.
Trade with countries outside Africa
This facility does not stop our exports outside Africa, but what it is trying to emphasize which is also happening in every continent is that we should begin to trade more with our neighbors. In other continents the larger percentage of their trade is done with their neighbours. In Europe the trading is about 70 per cent among themselves, in Asia it’s about 50 percent, America is over 70 per cent. But its only in Africa that our trade is always over the seas and we are not trading with ourselves at just 18 per cent. Now what we want to achieve which necessitated the NEXIM -Afreximbank MoU is to increase Africa to Africa trade which now stands at about 15 to 18 per cent and take it to a level where we will be comfortable trading among ourselves over the next five years. How do we do that.? We are all aware of the challenges that have inhibited African trade over the years in including tariffs and non tariffs barriers, and logistics constraints. That is also why I love what the Managing Director of the Intra Africa Trade Initiative, Mr Kanayo Amani said in one of the sessions here. She said that in spite of those constraints, trade between African countries is still going on whether they are informal or formally captured. So while we know there are challenges, we should not be discouraged by them. We should rather continue to navigate through the challenges to continue to trade with ourselves while efforts are being made to fix the infrastructure impediments.
Marketing goods made in Africa
I thinks one of the many ways of getting this information is why we are here. I believe this Fair a very wonderful initiative. Before this Fair most of us would never have imagined that some of the wonderful products we are seeing are coming out of Africa. In fact before we started this discussions, I was talking with somebody from Tunisia, and we just discovered that he was doing the same thing we doing in his country to promote export of Tunisian products. All the products we have here are coming from our countries and it is no longer a question of getting them from somewhere. People are seeing the producers and the goods live and it’s no more a question of getting them from somewhere. In addition to that ,a lot of interests are being expressed on both sides.
But we can’t say that the only way of getting information is through trade fairs. The best way is to information now is to leverage technology after this meeting. So one of the things that is coming out of this Fair and from the interactions we have had with businessmen from across the continent is that we need to provide a platform in each country in addition to the Continental platform that this Fair has created where market information about what is available in Africa and the various countries can be uploaded so that people who are interested can go to the platform and get information. That is why we all know that one of the key challenges frustrating trading in Africa is the lack of information . Even when you go to some of our embassies, they don’t know much about what is happening in the area of trade and business opportunities . So that platform that makes businesses leverage technology is a powerful toll.
Sealink project
There is no doubt we have challenges especially transportation logistics in West Africa and within the continent making movement of goods from one location to the other tough especially the obstacles we have today at the border posts in virtually all the countries. So seven years ago, NEXIM recognised this major obstacle to trade facilitation within the continent. So between us and the West African Chamber of Commerce and Industry, we decided to set up the Sealink Project within the region and Central Africa. The initiative has also gone through its own challenges largely due to the difficulty of getting investors because the way we started it was that we wanted to bring it to investors to come on board. But most of investors wanted to see something on ground before they could invest. So within the last one and half years we decided to promote it by setting up interested shipping charter coming on board and giving their vessels. As we speak, we now have 12 vessels that have already come on board to start operations from the ports of west and central Africa. We have three bulk cargoes, two vessels and the rest are barges.
We have also while trying to set up Sealink, discovered we may have problems shipping goods from traditional ports , so we are trying to divert traffic away from Apapa to some inland ports . To achieve this objective, we have held extensive discussion with Nigerian Inland Waterways Authority (NIWA) and Ajaokuta Steel for the use of Ikorodu Inland port and Barro, Ajaokuta jetty for movement of bulk exportable goods on Sealink which is why we also acquired barges. We are equally held discussions with NIWA on charting the sea routes for the vessels. So we have gone very far, and as my colleague would say he wants it to start In January , but I don’t want to be too aggressive and raise people’s expectations. I am looking at it that before the end of first quarter of 2019, we will sail the first vessel on Sealink from Nigeria . Incidentally one of the key challenges on Sealink was getting assured cargo and that is who is going to put cargo into the Sealink . But one of the major exporters , Dangote Group has already agreed to come on board. They are excited about it because it would help them move their products across Africa. We also have the Manufacturers Association of Nigeria Export Group on board. NEXIM is also partner Nigerian Export Promotion Council (NEPC) in what we call Exportrade to set up export warehouses in Nigeria and other West Africa countries who would be ordering nigeria products . They would have started since but we were constrained by lack of logistics. So that have bought into Sealink to make it profitable for the ship owners,.
With all these arrangements we believe Sealink will have the cargoes that would make it profitable.
