SME Exporter’s Challenges: Suggested Solutions I

• Inadequate flexible and SME export friendly financial Institutions.
• Dominance of the Asians and other foreigner with large financial muscles in the Nigerian export business.

Suggested Solutions- Government should make laws to encourage the establishment of specialized banks that will only finance export transactions. These laws should allow private individuals to establish export focussed banks and Government should own and contribute 50% of these banks capitalization so as to have a good control over its operations and thus enable the government to achieve her dreams of growing the SME exporters. The law should stipulate the following among other things:

a)    The export banks are to finance only export transactions and any financing done outside this should be penalized.

b)    The export banks should offer trade finance products like Export Credit guarantee, Export Credit Insurance, Factoring, Forfaiting, Invoice discounting etc.

c)     The interest rate on the export financing facilities from this bank should be set by the Central Bank and should be lower than the prevailing rate in the market at any point in time.

d)    The export banks should be given tax holiday to enable them maximizing profit.

e)    Government should reward any of the export banks that have the highest export finance facility portfolio at the end of each financial year.

f)     The export banks should offer both pre and post export financing to exporters.

g)    The banks should only finance SME exporting companies or cooperatives with at least 6 month experience in the business and with Bill of lading records of export and evidence of receipt of export proceeds from the buyers abroad.

h)    The banks should only finance SME exporting companies that are owned 100% by Nigerians

i)      The export bank should have a warehouse where all the products that they are financing are inspected to ascertain the quality before they are exported.

j)     The export bank should grant export facility that is as low as 1 Million Naira and as high as 50 Million Naira

k)    The goods should be used as collateral for post shipment financing while equity contribution of 30-50% must be a pre-requisite for pre-shipment financing.

l)     The export financing facilities from the export bank should cover the export of solid minerals and agricultural commodities, semi-processed products and finished goods.

m)   The export bank financing facility should only be granted to export transactions with Letter of Credit that is confirmed by a reputable Bank, Sight Bill for Collection and tenored Bill with Avalised Bill of Exchange.