Hmmm!!! Folks, let us say the
truth and shame the devil. Many Nigerian non-oil products exporters have been
defrauded of huge amount of money in the process of exporting agricultural
commodities and solid minerals to foreign countries. Do you know why? They were
not trained on export operations, management, documentations and the best
methods of payment in export trade. This is terrible!!! Nigerians cannot
continue to lose money to foreigners in the course of export business.
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packaging of commodities to receipt of payment by the foreign buyers? It
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As an exporter, you have to make sure
you get your export financing right. You also have to keep in mind that you
must be able to fund your export contract, and make sure you get paid on time.
There are so many ways to secure
finance for exports according to experts. Some of the funding options available
to help entrepreneurs in funding their export costs are governmental export
incentives; factoring; loans from commercial banks, family and friends; and
support of other financial institutions.
Export incentives
Export incentives are initiatives
designed to boost the export of some certain types of products that are
strategic to the economic diversification programme of government. Nigerian exporters could get access to
multiple and different incentives.
Already, the Nigeria Export Promotion Council is administrating two of these
incentives. They are the Export
Development Fund and Export
Expansion Grant.
The Export Development Fund, according
to experts aims to prepare, facilitate and support exporters to penetrate
global markets. The incentive is available for potential exporters and
exporters who just started. It aims to provide support on product development
for market access in international markets.
On the other hand, the EEG is an
initiative of the Federal Government that was meant to encourage exporters of
non-oil products, including agro-commodities in order to cushion the effects of
infrastructural deficiencies and reduce overall unit cost of production.
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It was introduced through the Export
Incentives and Miscellaneous Provisions Act, Cap 118 of 1986 to enhance the
contributions of non-oil export to the national economy. The mechanism is such
that a financial credit applied on the value of exports of products from
Nigeria ranging from five per cent to 30 per cent.
The financial credit is not cash-
funded, but provided as Negotiable Duty Credit Certificate which can be applied
against import duties on other items.
Factoring
Factoring, according to the Managing
Director, Nigeria Export Import Bank, Abba
Bello, is another attractive way to help your cashflow. Factoring is a
financial transaction where the receivables such as the invoice is given to a
third party, called a factor for a fee. Under this arrangement, the business
sells its accounts receivable (invoices) to a third party (called a factor) at
a discount. A business will sometimes factor its receivable assets to meet its
present and immediate cash needs.
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Bello said that since it was becoming
difficult for small businesses to raise funds from banks to finance their operations,
the bank had come up with an alternative financial instrument that would
facilitate trade. This, Bello noted, would help to reduce the level of
unemployment in the economy and create wealth for the people.
He said, “The
Nigerian Export-Import Bank is quite concerned about the high level of informal
trade in Africa, with the informal non-oil exports recently estimated at a
minimum of $12bn annually in Nigeria as against recorded non-oil export trade
averaging about $3bn annually in recent times.
“While this challenge is a
reflection of the large informal economy, it is also symptomatic of the poor
access to export credit, particularly among the Small and Medium Enterprises,
who are the principal players in cross border trade.
“Empirical data released by
the Central Bank of Nigeria indicates that less than one per cent of the total
loans and advances disbursed annually were allocated to the non-oil export
sector over the years.
“It is against the background
of the foregoing that NEXIM saw the need to partner trade facilitating
institutions to develop and promote Factoring as an alternative trade finance
instrument and an SME financial inclusion strategy.”
Loans
Another way of funding exports is
through loan from friends and family and a wide range of loan options at
commercial banks. Experts also said that a key factor that would determine the
granting of credit by banks to any business is the level of proper book
keeping.
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They said this is vital because without
it, attracting the interest of banks in areas of funding might be difficult. A
finance expert, Seun Onatoye, stated
that there was a need for entrepreneurs to have bankable projects in order to
enjoy credit facilities from banks.
Onatoye, a Chartered Accountant, also
noted that there was a need for an entrepreneur to have integrity, capacity and
a profitable business to benefit from banks lending. Others according to him
include the need to register one’s business, accurate book-keeping, and vision
and mission statements. All these according to him, will have to be based on
the company’s strategic intent. (Punch)
Insightful. I like it. Many thanks.
ReplyDeleteHarriman
As above. Thanks
ReplyDelete