A new report has urged Nigerian banks to employ appropriate yardsticks in the evaluation of export credit risk, noting that only 11 percent of the total 227 exporters surveyed received at least one approval from at least one Nigerian bank for their export financing requests.
The maiden edition of the report by 3T Impex Consulting, an import/export firm in Nigeria, titled ‘Stimulating Export Finance Growth,’ noted that this means 89 percent of exporters were not able to get their export financing requests approved despite having presented their requests to more than one bank and most of them were Micro Small and Medium Enterprises (MSMEs).
“This implies that Nigerian exporters were unable to access export financing from Nigerian banks as shown by the 94 percent respondents that had at least one of their export financing requests rejected,” it noted.
According to the report, the fact that only a few exporters were able to get their export financing requests approved by Nigerian banks meant that a lot of work needs to be done on the part of the exporters, the banks, and the government.
The exporters, particularly the MSMEs, need to be export-ready before approaching a bank for financing, as “this will significantly reduce the level of rejection of their financing requests.”
Also, it noted they need capacity building to prepare bankable export financing proposals acceptable to the banks, revealing that “they need to work towards providing equity contributions by the banks and explore further in getting trade finance instruments from their prospective buyers abroad in order to provide the level of comfort required by their banks to disburse needed funds.”
For the banks, the report recommended that there should be a need to rethink and rejig the way banks analyse export credit risks, saying, “The use of novel but appropriate yardsticks in the evaluation of export credit risk should be employed.”
The report further highlighted that 42 percent of rejected export finance requests were done without any reason given to the exporters and 21 percent of the rejected export financing requests were based on lack or inadequate collateral security.
Others include 57 percent of exporters identified access to export finance, port logistics and delays by government agencies at the port as major challenges hindering export growth, 22 percent of export financing requests were approved within one month of application and 59 percent of exporters were attracted to a bank that has support services for exporters.
“The study/report which is also the first of its kind in the history of the international trade sector in Nigeria has been able to unravel the root causes of the lack of growth of non-export volume in Nigeria,” the company said.
It added that the report provides insights into what needs to be done by the government, banks, and other stakeholders in the industry to fix the problems.
“This kind of report has become necessary because different people have varying opinions on the reason for the low export volume from Nigeria; and this has made most efforts of the government not to yield the desired results,” it said.
