Experts outline requirements for export finance

Due to increasing difficulties in accessing loans among micro, small and medium scale enterprises (MSMEs) who are in export business, experts in financial matters have enumerated some of the conditions which commercial banks are looking out for before agreeing to grant facilities.

Fidel Anyanna, programme director, Dalehan Limited, who doubles as chief executive officer, Horeb Safety& Security Services Limited, said intending exporters who wished to have such facilities should understand that banks always sought to find out the integrity, expertise, experience and credit worthiness of the buyer, the capacity of the exporter to execute the orders within the stipulated delivery schedules as well as the status of the overseas buyers in case of bills for collection.

According to him, banks would also be desirous of knowing the status of the issuing bank, where exports were covered by letters of credit; and would equally wish to know the financial viability of the export contract; status of the buyer’s country in terms of political and economic conditions in the buyer’s contract; compliance with export trade control and exchange control regulations in force, as well as collateral or security for proposed lending.

Summarising the conditions the prospective borrower needed to meet, Anyanna said the first was the market potential or penetration.

This means that the intending borrower should be able to establish a market for his/ her products. The person should also have good cash flow, good reputation and standing, and foreign buyers’ credit report, among others, while ensuring that he/she acquired adequate training or capacity.

“As an intending exporter, do not try ignorance. Get some training from experts or from the Nigerian Export Promotion Council. Learn what these countries you want to export want or expect; their rules and laws. Why must you produce without a focus? During production, you should be able to know where the products are going. Are they for exports or for local market? The advantage is that it enables you to know how to package your products and what to expect in return,” he said, during the Business-organised seminar entitled, ‘Agric Transformation Agenda: The Role of Non-oil Export in Economic Diversification,’ held last Wednesday in Lagos.

To mitigate problems associated with poor access to export finance, he enumerated some mitigating factors as adequate capacity of the trader, good quality assets and receipts, supervision by the lender and collateral management and monitoring services. Others included effective price risk management and banks’ proper credit structuring for exporters.      

Ivana Osagie, managing director/ chief executive officer, Notore Seeds, said banks must come up with a model with which to finance SMEs in the country as it is done in other countries, but advised that small agric exporters be clustered and aligned with large-sized players so that they could acquire new knowledge of processes and procedures and have advantages associated with external economies of scale, which implies lowering of a firm’s costs due to external factors.

Joseph Idiong, director-general, Association of Nigerian Exporters, said beyond accessing finance, exporters must acquire capacity as the demands of the local market were often different from those of the international market, adding that since many farmers in the country were small-holders, efforts should be made to pay more emphasis on assisting them adequately in the areas of land acquisition and finance access.   

ODINAKA ANUDU