The Nigerian Export Promotion Council (NEPC) has announced it will implement factoring and forfaiting as instruments of financing export and trade in Nigeria. It also stated that it would unlock $1 billion financing for Micro, Small and Medium Enterprises (MSMEs) annually.
This was disclosed by NEPC’s Executive Director, Mr Olusegun Awolowo, at the 1st National Conference on Factoring and Forfaiting Services in Nigeria, on Tuesday, in Abuja.
The NEPC boss said factoring was one of the fastest-growing instruments for structured trade finance in the world, as it is mainly used as a finance tool for a business to sell its account receivables to a third party at a discount in exchange for immediate money to finance other activities.
What the NEPC boss is saying
Awolowo said that factoring in Nigeria would unlock over $1 billion per year in financing for Micro, Small and Medium Enterprises (MSMEs).
“As a result, factoring gives MSMEs, particularly those with high-quality receivables, access to cash flow and capital that will help in maintaining and growing their businesses.
“Also, it is a viable and long term solution to the problem of limited capital and availability that threaten the growth of Nigeria’s small and medium-sized businesses,” Awolowo added.
The Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, added that factoring could contribute to the implementation of the National Economic Sustainability Plan and Export Expansion Facility Programme, calling for a roadmap with actionable points and definite timelines to ensure a smooth implementation of factoring and forfaiting services in the country and also the cooperation of the Central Bank of Nigeria (CBN) in issuing the necessary guidelines.
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Nairametrics recently reported that the NEPC highlighted 22 products that can enable Nigeria to achieve a zero oil plan and attain $30 billion in non-oil exports by 2025, plus 500,000 additional jobs created annually.
The NEPC placed the 22 priority products into 2 categories:
- Category A: Petrochemicals & Methanol, Soybean, Sugar, Cotton & Yarn, Nitrogenous Fertilizer & Ammonia, Palm Oil, Rice, Rubber, Hides and Leather, Cocoa and Gold.
- Category B: Cement and Clinkers, Tomato (fresh and partly processed), Banana & Plantain, Oranges, Cashew, Cassava, Sesame, Spices, Ginger, Shea Butter and Cowpea.
Nigeria’s target export volume for category A products according to the NEPC is $28 billion, compared to $400 billion globally, with Petrochemical and Methanol having the highest of Nigeria’s target export volume at $7.5 billion.