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Securing Sustainable Funding For Export Business

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Export business requires sustainable funding over a period of time. The amount of money needed for export is largely dependent on your product and export destination. It also includes components like marketing and market access, as well as direct and indirect working capital.

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.

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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.

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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 incentives.

Already, the Nigeria Export Promotion Council is administering two of these incentives. They are the Export Development Fund and Export Expansion Grant.

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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.

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 range 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 cash flow. 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.

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.

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He said, “The Nigerian Export-Import Bank is quite concerned about the high level of informal trade in Africa, with 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 amongst 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 with 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 bookkeeping.

They said this is vital because without it, attracting the interest of banks in areas of funding might be difficult. A finance expert, Mr. Seun Onatoye, stated that there was the need for entrepreneurs to have bankable projects in order to enjoy credit facilities from banks.

Onatoye, a chartered accountant, also noted that there was also the need for an entrepreneur to have integrity, capacity and a profitable business to benefit from banks lending.

All these, according to him, will have to be based on the company’s strategic intent.

  Source: The Punch 

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