…To unlock investments in export manufacturing, agro-processing, solid minerals, ICT, others
…Nigeria posts miserable performance in trade y-t-d
Ben Eguzozie, in Port Harcourt
The African Export-Import Bank (Afreximbank) and Nigeria Export-Import Bank (NEXIM) have entered a memorandum of understanding (MoU) to establish a joint project preparation fund that will provide early project preparation financing and technical support services to public and private sector entities operating in Nigeria’s trade sector.
Under the terms of the MoU, Afreximbank and NEXIM will collaborate through the joint project preparation fund to unlock investments into sectors such as export manufacturing, agro-processing, solid minerals development and beneficiation services, healthcare, ICT (information and communications technology), and creative industries.
NEXIM bank is a Nigerian government-owned financial institution established in 1991 with N50 billion capital, with mandate to finance the country’s export trade. The bank said it is currently implementing initiatives to unlock opportunities and attract investments towards Nigeria’s effective participation and competitiveness under the AFCFTA framework.
Nigeria, though has a bustling non-oil sector, especially the creative industries (film, music, arts, others), the country has not managed to make impact on the African and global stage.
For example, the country accounts for only 0.33 per cent in world trade; while its share of African trade is just 19 per cent.
Over time, the central government has made some approvals such as the $200 million federal government approval in 2014-2015 by the Goodluck Jonathan administration for the film, music industry; but it is uncertain if anything had been drawn down by the practitioners since then.
However, it is believed that the incoming joint project preparation fund constitutes a direct response to complement Nigeria’s initiatives to address the twin challenges of the COVID-19 pandemic and existing economic difficulties associated with the country’s dependence on crude oil revenues, which account for 50 per cent of consolidated government revenues, 30 per cent of banking sector credit and 90 per cent of export earnings.
The partnership aligns with Afreximbank’s broader mandate to develop, facilitate and accelerate intra-African trade. The pan-African bank has total asset base of $21.5 billion at the end of 2020.
Officials said the Afreximbank-NEXIM joint project preparation fund will support public and private sector investors by providing technical and financial support services that will result in a steady pipeline of well-structured, bankable projects that Afreximbank, NEXIM and other financial institutions can readily finance.
The fund will assist the early development process of projects from concept stage to bankability by covering the preparation of feasibility studies, project development and advisory services and related costs.
Afreximbank and NEXIM said they aim to mobilize up to $50 million in the form of project preparation funds for investments in Nigeria.
Benedict Oramah, president of Afreximbank, said, execution of the MoU marks yet another significant milestone in the pan-African bank’s collaboration with NEXIM.
“I am particularly pleased that Afreximbank and NEXIM are boldly venturing upstream to help investors develop well-structured projects that meet market standards. This intervention is timely as the Fund will play a catalytic role in accelerating the diversification of the Nigerian economy by ensuring a steady flow of bankable projects in priority tradable sectors in a timely manner. In addition to enhancing bankability, the Fund will, on a case-by-case basis, undertake feasibility studies to assess the viability of accessing markets in the sub-region, thereby promoting intra-African trade under the AfCFTA. We are pleased to be replicating a similar initiative we pioneered in Malawi in partnership with Malawi Export Development Fund (EDF) and look forward to more opportunities across the continent,” Oramah, who is serving his second term at the bank, said.
Abubakar Abba Bello, managing director of NEXIM, said: “we are quite pleased by this opportunity to, partner with Afreximbank in proffering solution to one of the major challenges that have limited the flow of credit to the Nigerian export sector.”
He said the fund is designed to mitigate the project selection challenges, particularly amongst the SMEs, towards boosting their contribution to formal exports. “This technical expertise will therefore enhance NEXIM’s implementation of its export development programme, especially with regards to the State Export Development and industrialization initiatives. This partnership strongly aligns with the NEXIM’s mandate and strategic plan and will no doubt facilitate its intervention towards attracting critical investments in trade enabling infrastructure and the promotion of value-added exports,” he said.