Abstract
This research sought to examine the impact of Nigerian Export Import Bank credit terms on non-oil export in Nigeria; examine the impact of Total banking export credit on non-oil export in Nigeria and examine the relationship between non-oil export and Nigeria’s gross domestic product. The study adopted the ex post facto research design for the period 1990 to 2007 and data were gathered from secondary sources. The study utilized the simple linear regression analysis where the Nigeria Export-Import Bank Credit (NEIXMC), Total Bank Export Credit (TBEC) and Non-oil Export (NOE) were used as the independent variables and Non-oil Export (NOE) and Gross domestic Product GDP as dependent variable for the hypotheses respectively. The result of the hypotheses tested revealed that Nigerian Export Import Bank credit have positive significant impact on non-oil export in Nigeria; Total banking export credit have positive significant impact on non-oil export in Nigeria and Non-Oil Export have positive significant impact on Nigeria’s gross domestic product. Thus the study recommends that; Local manufacturers should be encouraged to expand production and source market globally; export policy implementation agencies should be made to improve on their strategies to boost production and Government should ensure pre and post shipment finance in local currency through rediscounting facility among others.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The growth of any economy is a function of the quality and quantity of goods and services it produces. There is always a tendency to produce and market to earn a living. In the wider society, the quality of life enjoyed very much depends on the quality of goods and services available to the citizenry. There is the development aspect of growth that enables equitable distribution. This entails getting products from one part to the other.
Production in one country could be transported to another to enhance quality of life. Developing nations have the tendency to import greater part of their goods and services from developed nations. To square up with the developed nations, they have to increase production of exportable goods.
Nigerian economy has depended predominantly on crude oil since the discovering of crude oil in the early fifties. Prior to this theirs, cash crops like cocoa, palm produce, cotton, groundnut and cassava have been the mainstay of the economy. These cash crops earned so much foreign reserve of the economy.
Nigerian Bauxite and Cable are the best in the world and are sought for globally. (Soludo, 2009:20).
One would have expected a balance of payment that tilts to the favor of local production. This, however, is not the case with Nigeria as imports far outweigh exports. Export financing is a means of helping local producers process their products for a better market abroad. It is designed to make funds available for local producers to seek for market abroad. The essence of every productive business is to sell to a wider range of customers to reduce cost and continue in business. Oftentimes, it is propelled by the desire to increase the market share, and thus, the clientele. According to Nigerian Export Promotion Council (2009:12), export financing makes fund available for exporters to process there good for export. It notes that in Nigeria, there are many opportunities to explore for exports created by government, noting that there could be logistics that may hinder continuity. Nigerian Export –Import Bank (NEXIM, 2008:19) notes that a lot of exporters do not want to take the risk of assessing funds from NEXIM due probably to high interest rate. But it states that the risk involved in export financing is such as to secure the financier’s investment while monetizing the exporter.
According to Chartered Institute of Bankers of Nigeria – CIBN (2008: 14), export financing enables businesses to take their products all over the world, by enabling the exporter get to many places round the globe to market his products. There are a lot of benefits to a business selling overseas, but there can be a lot of
financial risks involved as well. It is important to understand the risks and government regulations before selling overseas. According to International Monetary Fund (2007:122), export credit scheme aids export financing and boosts a country’s Balance of Payment. It notes that if done right, it can be profitable and can sometimes bring a business more profit than selling within the country. Export financing, notes Soludo (2009:15) is loan meant for shipping of products outside a country or region. If you have a product that is good, appealing to another country, and has great potential to sell, you could also consider a venture capitalist to help bring your business where it needs be. “CBN greatly encourages venture capital as export finance. There are also some creative methods of export financing. One of such methods is utilizing a factoring house overseas. Basically the factoring house will purchase the exported products at a discount below invoice value. The factor sells the products at a higher margin. This ensures that the exporter receives his money upfront, which reduces the risk greatly” (McJones,
2010:112)
According to International Development Agency (2010:13), funds are provided to developing countries to help them purchase United States goods and services. McJones (2010:13) observes that IDA services are no longer highly operational in Nigeria, but there are Export Assistance Centers, EAC, that offer technical assistance to exporters of which the Nigerian Version is Export Processing Zone
(EPZ). This research work looks at the problems, causes and prospects of export financing in Nigeria.
1.2 Statement of the Problem
Export financing is the prime mover of the economy of industrialized nations. Goods are produced for consumption both locally and internationally. Export financing is, therefore, a key factor in any successful international trade. Exporters naturally would want to get paid as quickly as possible, while importers usually prefer to delay payment until they have received or sold the goods. Because of the intense competition for export markets, being able to offer attractive payment terms customary in trade is often necessary to make a sale. In many cases, government assistance in export financing for small and medium scale business are not easily accessed by exporters themselves. It is either that the conditions given to exporters are too high for them from various finance sources or they are not willing to take risk associated with the finance sources.
There are, however, crucial points to note that pose great problems to successful export financing:
1) The extent of competition in the product being exported.
2) Security of credit terms. If the exporter waits for long to receive his money, the aim of export financing is defeated.
3) Cost of alternative export financing. If the exporter assumes all or greater part of the risk of export financing, he is often discouraged.
4) Risks associated with financing the transaction. The riskier the export transaction, the more difficult and more costly it will be to finance.
5) Excessive protocol at export finance firms. If the exporter passes through too much protocol, which leads to spoilage of his products before they are shipped, the tendency will be to disembark from seeking that finance.
1.3 Objectives of the Study
Based on the identified problems above, the following objectives are formulated by the study:
1 To examine the impact of Nigerian Export Import Bank credit terms on non-oil export in Nigeria
2 To examine the impact of Total banking export credit on non- oil export in Nigeria?
3 To examine the relationship between non-oil export and
Nigeria’s gross domestic product?
1.4 Research Questions
Based on the objectives the following research questions are raised by the research:
1 To what extent do Nigerian Export Import Bank credit has a positive significant impact on non-oil export in Nigeria?
2 To what extent do Total banking export credit has a positive significant impact on non-oil export in Nigeria? and
3 What is the relationship between non-oil export and Nigeria’s gross domestic product?
1.5 Research Hypotheses
Based on the research questions the following research hypotheses are formulated by the research.
Ho1: Nigerian Export Import Bank credit does not have positive significant impact on non-oil export in Nigeria.
Ho2: Total banking export credit does not have positive significant impact on non-oil export in Nigeria.
Ho3: Non-Oil Export does not have positive significant impact on
Nigeria’s gross domestic product.
1.6 Scope of the Study
The study covers the period 1990 to 2007 and also looks at causes, problems and prospects of export financing in Nigeria. Data is got from various sources including: Nigerian Import and Export Bank, Federal Ministry of Finance, Central Bank, and US Embassy and Foreign Affairs library. Foreign Affairs and US Embassy meant that the researcher traveled to Abuja, which made visitation of other relevant sources very easier. Besides, their Internet sites were visited.
1.7 Limitations of the Study
To get relevant information from the sources was very difficult. Federal Ministry of External Affairs helped only after fours consecutive days of trials. Central Bank Abuja could only give data after a week. All these engulfed much time and prolonged the time marked for the completion of this work.
1.8 Significance of the Study
The study is significant in a number of ways as follows:
1. To policy makers and regulators of the export financing, it will present a schema, through its analysis that could assist them in enunciating policies and reforms that will positively impact on the performance of the stock market in the light of globalization.
2. To economic watchers and the interested public, it will provide some insight into the performance of export business.
3. To investors in general, it will expose the relationship existing between relevant variable used in the study.
4. To students, the research will assist those who which to take a career in economics banking and finance to advance their understanding of the concept and mechanism of export financing and it’s inter-relationship with the financial markets of nations of the world.
5. Finally, the research work will serve as a reference material for future researchers on similar topic by providing them
with some index of and the Nigerian sources of business finance, export finance.
1.9 Definition of Terms
Rediscounting and Refinancing Facility (RRF): The RRF is a facility designed to assist exporters and banks to provide pre- and post-shipment finance in local currency. The RRF is made available in two ways. Namely; Rediscounting Facility and Refinancing Facility. The facility is available for a maximum tenor of 180 days. Stocking Facility (SF): This facility, given in local currency, is to enable manufacturers of exportable goods procure adequate quantities of local raw materials (which may be seasonal in nature) needed to keep production at optimal levels during periods of scarcity. The duration of this facility is 12 months.
Direct Lending Facility (DLF/SDLF): In an attempt to create a wiser means of accessing NEXIM facilities and reduce observed lapsed in the on-lending arrangement, the Bank in the third quarter of year 2002 introduced both the Short-term (SDLF) and long –term Direct Lending Facilities (DLF) for exporters. The SDLF is available for the financing of commodity and value added exports. The DLF, on the other hand, is available for a maximum duration of 180 days and 365 days respectively.
Local Input Facility (LIF): The Local Input Facility is a medium/long-term facility disbursed in local currency for the purpose of asset acquisition/modernization, and/or expansion of existing of existing production units for exports. The facility is also
made available for the acquisition, rehabilitation and/or expansion of plantations/farms for the production and processing of exportable products.
Export Credit Guarantee Facility (ECGF): This facility is operated as a guarantee provided to banks in respect of credit given to exporters in support of the export of goods and services from Nigeria. The facility is the usual guarantee, which a lender received from a suitable party as security to protect it against a borrower’s default. It is hoped that this facility will encourage banks to provide credit to exporters.
Export Credit Insurance Facility (ECIF): This facility insures exporters against risk of non-payment by buyers where such default is ascribable to commercial causes. Payment defaults due to political reasons are covered separately by NEXIM for the account of the Federal Government of Nigeria.
ECOWAS Inter-State Road Transit Scheme (ISRT): in line with ECOWAS protocol on free movement of persons, goods and services, NEXIM was appointed the National Guarantor under the ECOWAS Inter-state Road Transit Scheme to guarantee goods transiting Nigeria to other ECOWAS countries. The scheme, which is designed to promote free flow of goods among members state, seeks to eliminate the time wasting escort system and diversion of goods consigned to specific destinations in the ECOWAS sub-region Structure is it an Export Credit Agency (ECA): owned by the Federal Government of Nigeria to finance export.
Product Offerings the Banks has in its portfolio a total of 8 products and services that meet the customers various export needs:
a. Competitive interest rates.
b. Flexible tenors, which meet shot, medium and long-term credit needs to our export customers
c. Underwriting services which cover commercial and country/political risks
Confirming – A financial service in which an independent company continues an export order in the seller’s country and makes payment for the goods in the currency of that country.
This material content is developed to serve as a GUIDE for students to conduct academic research
A1Project Hub Support Team Are Always (24/7) Online To Help You With Your Project
Chat Us on WhatsApp » 09063590000
DO YOU NEED CLARIFICATION? CALL OUR HELP DESK:
09063590000 (Country Code: +234)
YOU CAN REACH OUR SUPPORT TEAM VIA MAIL: [email protected]
09063590000 (Country Code: +234)
