News Column

Uju - in the Eye of the Storm

July 24, 2014

Chas Uju

PRIOR to the reconstitution of the Board of Directors of the Nigerian Export-Import Bank on August 14, 2009, the bank was at its lowest ebb. It experienced a decline in risk assets. Its total loan portfolio as at August 20, 2009 was N14.6b out of which 72 per cent was non-performing. Within that category N10.03b or 69.05 was classified lost. This led to the bank's income decline with the called-up capital standing at N32.74b; depletion of its shareholders' funds; significant decrease in income and tolerance of excess and escalating overheads; worsening assets quality and poor record keeping; lack of strategic focus; ineffective risk management framework; non-adherence to corporate governance tenets, and over-bloated staff strength.

The new board under Mr. Roberts Orya initiated plans to enable the bank to contribute significantly to Nigeria's economy. The board, in 2010, undertook a corporate transformation exercise on strategy, risk management and corporate governance, financial performance, operations, organization and people, with assistance from KPMG Professional Services.

The corporate transformation project tagged Project Spring led to the re-definition of the bank's mission to channel its resources into the development of manufacturing, agro-processing, solid minerals and services which have high employment and foreign exchange earning potential aimed at becoming a major contributor to non-oil exports, build a world-class institution which imbibes best-in-class corporate governance and risk management practices; become a relevant player in the export market, build a profitable institution with a robust balance sheet size, and improved workforce.

There were also a five-year strategic plan with clearly defined market penetration action plans, robust corporate governance and risk management architecture/frameworks to improve visibility and project the bank's image. They encompassed organizing action-wide key performance indices and scorecards to enhance monitoring of the bank's operations and its shareholders; redesign policies to ensure efficiency; initiate IT-transformation project; reduce redundancies and ensure adequate controls.

The bank currently complements commercial banks and other development financial institutions by focusing on unserved markets globally. It also adopted an optimal operating model with a robust structure and structured market-facing departments along the key target sectors of manufacturing, agro-processing, solid minerals and services.

Nexim adopted a performance-driven organizational culture which has led to strong shareholders' support through fresh capital injection, as well as institutional support through supervisory and regulatory oversight and guidance from the CBN and Federal Ministry of Finance. This increased the bank's capacity to support the growth of the non-oil exports and complement the export credit support of commercial banks.

Within 16 months, the bank became profit-making with an impressive performance in 2010, with an audited profit of N189.00m as against the loss of N5.460b incurred in 2009. Since the inception of the bank in 1991, this is the first time it made profit consistently from 2010 to 2013 and declared dividends for the CBN and Federal Ministry of Finance Incorporated.

Nexim, via its operational interventions, generated direct jobs of 24,139 as at May 2014, plus indirect jobs. It has also, between August 2009 and May 2014, generated foreign exchange earnings of US$325.25m annually. The management has maintained appreciable returns on equity investment of its shareholders. A dividend for the 2010 financial year performance was declared and paid, which was the first time since 2003. Dividend for 2011 has also been declared and paid, while that of 2012 is in the process.

The bank achieved a cumulative loan recovery of N1.96b. To sustain it, a remedial management department was created. The ratio of NPL as reduced from 72 per cent in August 2009 to 14.95 per cent as at April 2014. The management initiated Enterprise Risk Management Framework to take care of all risk-related issues. It includes all aspects of the risk buckets, including environmental and social risk. A loan monitoring unit was also created to maintain a healthy loan book. The success story abound. Awareness has been created on the bank's objectives, products and services. The improvement in corporate performance and market standing globally led to its being adjudged as one of the leading development finance institutions in Africa in 2013 by the Association of African Development Finance Institutions based in Abidjan.

To ensure sustainability of its success, the bank re-established partnerships with other export credit agencies and multilateral financial institutions towards attracting/availing concessionary lines of credits. Thus, over $80 million has been attracted as investment by way of commercial lines of credit from the African Export-Import Bank (Afrexim), Exim India and ECOWAS Bank for Investment and Development (EBID).

To enhance access to credit by the SMEs, Nexim obtained an approval for a loan of US$200m from African Development Bank, backed by the sovereign guarantee of the Federal Government. The bank has strong transactional relationships with the United States Export-Import Bank (US EXIM), the Guarantee Fund for Private Investments in West Africa (GARI Fund) and the Africa Biofuels and Renewable Energy Company (ABREC), while it has signed a memorandum of understanding with the Industrial Development Corporation of South Africa.

Nexim has credit insurance agency collaboration with the Islamic Corporation for Insurance of Investment and Export Credits, a division of the Islamic Development Bank. Sequel to an application by the Federal Ministry of Finance on behalf of the Federal Government, and subsequent presentation by NEXIM in November, 2013, the bank was admitted into OECD in observer status. OECD is a multilateral development organization based in Paris. Membership of the organisation integrates Nigeria's financial sector into the global financial system.

The bank partners the Borderless Alliance, a private sector-led partnership in collaboration with USAID/West African Trade Hub and other stakeholders, to promote regional integration and seamless trade in West Africa by addressing the problem of non-tariff barriers through policy advocacy. The alliance operates a border information centre, which provides pertinent information to assist exporters and also acts as a collation centre for trade data to support evidence-based research and policy advocacy.

Nexim supported the entertainment industry through funding intervention with lending commitments of about N1b in the industry's various value chains in the last three years. The intervention is to address issues regarding the establishment of credible structures, attract investment in the development of content and facilitate improvement in production standards, distribution, marketing and exhibition standards.

It sponsored the Nigerian Pavilions at Cannes International Film Festival, France, in partnership with the Nigerian Film Corporation and DISCOP Africa, South Africa to showcase Nigeria's creative talent and attract investment capital and partnerships. Nexim also collaborated with the Federal Ministry of Culture and National Orientation on the first National Policy Dialogue on the Development of the Creative/Entertainment Industries in Nigeria, British Council on Creative Industry Expo and Mapping of the Industry and also engaged in policy dialogues with development partners, relevant regulatory and statutory institutions in the entertainment value-chain on ways of improving industry structures on issues relating to access to finance, monetizing intellectual property/copyrights and risk mitigating instruments.

It also initiated the establishment of a transnational shipping company in collaboration with the organized private sector associations in west and central Africa in partnership with the Federation of West African Chambers of Commerce and Industries and Transimex S.A Cameroun to mitigate current non-tariff barriers and high logistical costs that hinder intra-regional trade and competitiveness of Nigerian manufactured exports regionally.

The Sealink Project is essentially a public private partnership initiative and the private placement for the raising of US$60 million; while the shipping company is expected to commence operations within the fourth quarter of this year. The offer is being handled by FBN Capital, Nigeria (Issuing House) and SGI, Benin Republic. The initiative is endorsed by the ECOWAS Commission with technical support by the African Development Bank, the Directorate of Technical Cooperation in Africa, Maritime Organization of West and Central Africa (MOWCA) and the Nigerian Shippers' Council, amongst others.

This transformation has led to increase in the demand for its products and services, leading to huge amount of pipeline projects under processing. It, therefore, requires significant increase in its capital to perform more, considering the recent rebasing, which placed Nigeria as the largest economy in Africa with a GDP of $510bn. There is need to provide the Seed Funds to enhance some of its activities viz the Political Risk Fund to support its export credit insurance service; the Interstate Road Transit Scheme to mitigate non-tariff barriers in cargo movement by road transport within the ECOWAS region, and rediscounting and refinancing facility designed as an interbank window to liquefy the books of commercial banks, lower the cost of credit to exporters and boost the intervention of commercial banks to the export sector.

The author, a financial analyst, wrote from Abuja.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters