SME EXPORT FORUM TRADE FINANCE

SME EXPORT FORUM TRADE FINANCE A-Z SME Network 7th July, 2016

CONTENTS INTRODUCTION OPPORTUNITIES IN NON-OIL EXPORT EXPORTABLE COMMODITIES BENEFITS IN NON-OIL EXPORTS EXPORT SUPPORT FACILITIES EXPORT DOCUMENTATION EXPORT FINANCE SME FINANCING (AFDB &NEXIM) CBN EXPORT STIMULATION FUND – N500BILLION

INTRODUCTION In International Trade, export refers to selling of goods and services produced in the home country (Nigeria)to other markets. Export is a major source of revenue for Nigeria(both oil and non-oil exports) It contributes significantly to the gross domestic product (GDP) of most countries.

Opportunities in Non-Oil Exports Source NEPC There are about thirty-four minerals that have been identified in the country, of which only 13 are being actually mined, processed and marketed for exports. Largely SME based. 21 Solid minerals, though in demand are untapped. Nigeria is blessed with about 32 agro commodities which are in high demand for Exports, ranging from Cocoa, Rubber, sesame seed to sheanuts etc. SME sectors dominates non-oil exports business in Nigeria having 60%, with only 20% contribution from the corporate, while the informal sector contributes the remaining 20%. OSOP is an NEPC initiative being embraced by States government to develop export value chain in partnership with banks..

EXPORTABLE COMMODITIES IN NIGERIA

BENEFITS IN NON-OIL EXPORTS • Top export commodities include Cocoa, Rubber and Sesame seed. • Most of the major export items are found in the Northern part of Nigeria. • Most Solid minerals (SM) which are economically and commercially viable are in Nasarawa state. SM like Silica, Galena,Clay, Mica, Marble, limestones, Gemstones, Salt etc. • Other SM in large quantities are found: Niger (Talc) Sokoto (Limestone) Kano (Silver), Jos (Lead, Tin) Bauchi ( Copper, Kaolin), Kebbi/Katsina (Maganesse)

BENEFITS IN NON-OIL EXPORTS Exports provides alternate source of FX for the Bank to finance imports for both SME and Large Corporate customers It enable the bank harness the SME opportunities in the Export Value Chain through trade financing. Provides liquidity for the SME and the Bank through refinancing facility from government lending institutions e.g. NEXIM, BOI, BOA and of recent CBN. Stocking and equipment financing facility are also available from AFDB/NEXIM to support SME

San Carlos Farm – PPP with the State-Set on 3400 hectares Land cleared February 2013- First harvest – 20 Sept. 2014- 40,000 fruits harvested for export Source NEPC

EXPORT SUPPORT FACILITIES. • 1, CBN • As at February this year the Central Bank of Nigeria put the value of its intervention fund to stimulate non oil exports as about N1.3trillion. The break down of the funds are as follows: • N300 Billion – Real Sector Support Facility (RSSF) • N220 Billion - Micro-Small and Medium Enterprise Development Fund (MSMEDF) • N500 Billion – Export Stimulation Facility • N50 Billion - Export Refinancing & Restructuring Facility • N213 Billion - Nigeria Electricity Market Stabilization Fund • N75 Billion - Nigeria Incentive Based Risk Sharing System for Agricultural Lending • 2. NEXIM/AFDB • Apart from direct funding from NEXIM to Exporters, there is also AFDB $200M export facility available to SME through NEXIM, • The real sector under CBN classification are Agricultural, Industrial, Building and Construction and their subsectors. • Larger portion of these funds will be managed by the government funding agencies like NEXIM, BOI, and BOA to be made available to exporters through Banks.

BASIC EXPORT DOCUMENTATIONS (NON-OIL) Duly Completed NXP Form Pro-forma Invoice or Sales Contract Copy of NEPC (Nigerian Export Promotion Council) Certificate Clean Certificate of Inspection Other Certificates An Exporter is expected to open an NXP with a bank. The NXP Form should be utilized within six (6) months and subject to renewal for 3 months by CBN The exporter is required to pay the Nigerian Export Supervision Scheme (NESS) administrative charge of: 0.5% of the FOB value (non-oil export). 0.12% of the FOB value (oil export).

BASIC EXPORT DOCUMENTATIONS (NON-OIL) NXP form is the Nigerian export proceeds form. This is a regulatory control form which has to be completed for all items of export. All goods (including oil/its derivatives and non-oil goods) exported from Nigeria be subject to inspection by Inspection Agent(s) appointed for that purpose by government Inspection agents: The Federal government nominated Companies responsible for carrying out destination inspection with the Department of Customs & Excise are:

EXPORT TRADE FINANCE • Export Trade Finance • A wide range of tools that determine how cash, credit, and other assets can be used for export. • It facilitates a trust system between buyers and sellers. • Helps exporters gain competitive advantage by sourcing for produce early. • A typical export finance can be structured as follows:

STOCKING FACILITY (SF) • Designed to assist exporters with adequate working capital to stock local raw materials/produce • It is made available in local currency to exporters FCMB finances exporter when we have the equivalent value of the stock verified by any of the following below: • Collateral manager • Independent appointed agent of the off-taker • Company representative (a staff of the off-taker) • The products will be stored under a collateral management arrangement (CMA), where fund will be released upon certification of quantity and quality of the

POST-SHIPMENT FINANCE • Financing for the exporter to cover funding gap arising from the exportation of products or commodities before payment is received. • Made available in local currency Types of Post-Shipment Finance • Discounting facility – The proceed is discounted by the Bank @ 80% if under LC and 65% under Document against Payment. • Rediscounting & Refinancing facility – Funding provided by Nexim through FCMB to exporters at lower rate under the bank’s guarantee. FCMB shall issue a substitution bill in the form of promissory note and irrevocable transfer order (ITO) in favor of NEXIM and CBN respectively.

DISCOUNTING FACILITY • The bank will advance 65%-80% depending on the transaction and mode of payment. • The buyer forwards the notice of assignment of proceeds to his bank and his bank acknowledges the request to domicile export proceeds with the exporters bank. • Using FCMB UK: A facility is created and the exporter is availed the discounted value as a loan. • On the due date FCMB UK receives proceed from buyers bank ,liquidates the loan and credits the customer with the balance • Bills for collection 60%- 65% • Letters of credit 70%- 80%

REFINANCING & REDISCOUNTING TERMS: Tenor • Pre- and post shipment rediscounting : Maximum 120 days • Combined pre and post shipment finance: Maximum 180 days • Refinancing: Maximum 12 months and cover instalments of long term financing. Security • Letters of Credit Or Bills for Collection at sight. • Notice of Assignment to buyers, informing buyers that export proceeds are to be domiciled with FCMB. • Personal Guarantee of Key-Man and/or MD/CEO supported by statement of net worth • Where products are to be financed for export, Legal Mortgage on properties or tangible Securities would be required in addition to items above. • 20% to 40% Equity Contribution require Rates for RRF and stocking Facility as prescribed by NEXIM • Management Fee: 1% flat. • Interest rate: 13% per annum, concessionary interest rate by NEXIM.

SME FINANCING (AFDB &NEXIM) • AFDB/NEXIM $200 million line of credit to support the importation of industrial raw materials, plant & machinery and spare parts needed for the production of goods for export. The loan would be utilized for: • SME Project Finance – Private sector enterprises in the real sector. • Revolving trade finance facility to aggregators/ processors to purchase/ stock higher volumes of commodities. Basic components • The facility is for the funding of capital and non capital transactions (Non- oil sector SMEs) • The facility shall be short( 0-2 years), medium (2-5 years), and long term (5-7 years) ( maximum tenor 6 years inclusive of 1 year moratorium). • Available in foreign currency and repayable in the currency of disbursement. Eligible beneficiaries: • Export oriented SMEs duly registered in Nigeria. • Eligible beneficiaries must have a rating from a SEC approved credit rating agency or in house credit scoring model. Rates: • Between 0-2 years 5.5%), 2-6 years 6%-7%)

SME FINANCING (AFDB &NEXIM) • CRITERIA • A company duly incorporated in Nigeria under companies and allied matters act (CAMA) • An enterprise with verifiable export off-take contract(s) • Export of goods wholly or partly processed or manufactured in Nigeria • Export of commodities and services, which are allowed under the laws of Nigeria • Imports of plant and machinery, spare parts and packaging materials, required for export oriented • production that cannot be produced locally • Verifiable export services with foreign exchange generating potentials such as logistics • & transportation warehousing & conditioning and quality assurance infrastructure • capable of facilitating and promoting non-oil export activities • Resuscitation, expansion, modernization and technology upgrade of non-oil export • industries • Stocking facility/working capital/structured trade finance agreements • Transactions of specific projects, established for the production of inputs, export goods • and materials • meant for exportable manufactured goods • Export facilitating imports such as agricultural raw materials excluding raw materials • that can be source within Nigeria

CBN EXPORT STIMULATION FUND – N500BILLION • OBLIGOR LIMIT • The facility shall not be more than 70% of the total project cost subject to a maximum of N5 billion . • TENOR AND INTEREST RATE/MARGINS • The ESF shall have a maximum of ten (10) years, including a moratorium not exceeding two (2) years and shall also not exceed the December, 28th 2025; • ESF shall be availed at an interest rate of 9% per annum inclusive of all charges • Pricing structure and Interest computation shall be as follows: • Participating financial institutions – maximum spread of 6% per annum • Managing agent (NEXIM) – 1% per annum • CBN – 2% Per annum.

CBN EXPORT STIMULATION FUND – N500BILLION • PROCESSING OF ESF • FCMB submits request to NEXIM on behalf of her customer and it will be accompanied with documents below: • Application form • Request from the beneficiary seeking funding under the ESF • Certificate of business incorporation • Audited statement of account for the last 3 years • Management account for existing companies and statement of affairs for startups (where applicable). • Business plan or feasibility studies for the project • Relevant permits/licenses/approvals (where applicable) • Verifiable export contracts or other export agreements and arrangements or commitments • Environmental impact assessment report (where applicable) • Copies of duly executed offer documents between the bank and the company, evidencing existence of an export oriented facility in the case of refinancing and 6 months loan account statements showing the current exposure • Copies of executed warehouse arrangements with acceptable collateral managers for structured trade transaction • Any other document(s) that may be required by CBN/NEXIM

CBN EXPORT STIMULATION FUND – N500BILLION NEXIM shall be the management agent for ESF. It shall be responsible for the day to day administration of the facility by processing and appraise all applications received to confirm completeness of the documentation and eligibility. It shall also provide it status report to FCMB within 20 working days of receipt APPROVAL PROCESS Applications that meet the eligibility criteria and fulfilled all conditions precedent to availing the ESF shall be forwarded to the management of CBN for final approval/disbursement ON-LENDING AGREEMENT An on-lending agreement shall be signed between NEXIM and FCMB for all approved projects SECURITY ARRANGEMENTS FCMB shall provide NEXIM/CBN with serial promissory notes and corresponding ITOs on her account with CBN in line with repayment schedules of facility (principal and interest) The following additional risk instruments may be considered to minimize the risks of lending (collateral inadequacy): Administration of a structured trade finance frame work against acceptable guarantees or performance bonds issued by or on behalf of highly rated CMAs and warehouse agents An acceptable credit guarantee instrument.

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SME EXPORT FORUM TRADE FINANCE