Managing Director/Chief Executive Officer, Nigeria Export Import Bank (NEXIM), Mr. Abba Bello was part of the Nigeria delegates to the recently concluded annual meetings of the International Monetary Fund/World Bank Group meeting in Bali, Indonesia. In this interview held on the sidelines of the meeting, he spoke on efforts of NEXIM to address challenges to boosting non oil exports, and efforts of the management to reposition the bank for improved performance. Excerpts
YOU recently assumed the leadership of the Global Network of Eximbanks and Development Finance Institutions (DFIs) G-NEXID, what does this imply for Nigeria?
G-NEXID was set up in 2011 and the main purpose is to facilitate trade investment within the South-South cooperation. Now what we found out is that the objectives of the founding fathers, which was driven by India EXIM bank and AFREXIM bank, was trade. What we found out was that South South cooperation countries in organisations like the World Trade Organisation and the likes, we don’t have a voice. Why because the size of our trade is very small compared to the developed countries. So, the group network to bring the South South countries together so that they would have a bigger voice. That is the first purpose. The second one is to be able to facilitate trade between the South South countries.
Yesterday, AFREXIM President was saying in the 1990s, Nigeria for instance or Africa as a whole, total trade with South South countries was about 17 percent of the total trade between them. But certain initiatives that have been taken has seen the growth that today, the South South is the biggest trading partner of Africa and it is about 54 percent today.
Even for oil, you will notice that India is the biggest buyer of Nigerian oil and you know how China has taken over. Now, this South South trade is even now more driven by India and China. So G-EXID in its own little way has also facilitated trade within south south. Who are the members of G-EXID? The biggest economies that are in G-EXID or EXIM banks that are in G-EXID, China is part of us but they hardly participate, but India, Brazil, currently Indonesia have joined but we have most of the other African countries as part of the G-EXIM network. Nigeria didn’t just get the presidency. The presidency was given to Nigeria even before I came. But almost immediately after the presidency was given to Nigeria, my predecessor, not the acting MD/CEO, but Mr Roberts Orya, held it for just a brief period. So when he left, there was like a hiatus, so when I came in, I just took over. I probably have less than 8 months left. I have held it now for close to a year and a half. It is usually for a period of two years.
It has been six months since you assumed duty as MD/CEO of NEXIM Bank. What are strategic measures introduced to reposition the bank?
In the first instance when I resumed, I did not find NEXIM in the state where I can meet the press and start making statements. We found a lot of things wrong. I do not like saying how bad it was but we found it in a state that it was partly wrong. Our loan portfolio was in a state of mess. The loans were not performing. So the first thing we did when we came in was to try and aculturise the bank. Get people to know that, see, look at yourself more as professional bankers than public service employees because you are a bank. Aside from being a bank, you are an international organisation. We belong to so many international affiliations that professionalism now becomes very key. We can’t keep relying on government to fund us. Most EXIM banks have lines between themselves. We get lines from other multinational institutions. And one of the key things they want to know apart from your financials is how professional that institution is run. So, we set out a strategy, we had to go back to the drawing board, rework our strategy and then set out deliverables for ourselves on what needs to be done. I would say since we came in, it has been quite successful.
Another matter we found out was that the bank was almost insolvent when we came in so we couldn’t even lend. So, we adopted two approaches to get liquidity into the bank. One was to go on a massive recovery drive. Some of the loans that were given, though the objective was good, but a lot of them were given without proper procedures followed, proper collaterisation. It was like they were in a hurry to just give loans, may be pressure from government, I don’t know, I don’t know what the issues were.
We had to do a lot of works to try and, one, recover the ones we know are not working, two, restructure the ones we think are noble enough and commercially viable and then three, those that we thought had some fraudulent motives and handed them over to a presidential panel that is called SPIB for recovery. But then, concurrently with that, we set out to also try to get funding for the bank which was successful. We got the Central Bank of Nigeria (CBN) to reintroduce the intervention for export which is N500 billion line and they even also refunded the bank with N50 billion which is what we call the export development fund. And since then, we are engaged because in all honesty, when we first came, we looked at the total customers of the bank, there was no significant exporter from Nigeria that was being funded by NEXIM. CBN, every quarter publishes a list of the top 100 exporters of Nigeria. We looked at our books, we found only two, and even the two were at the bottom of the top 100. So, for us, while we want to support Small Medium Enterprises (SMEs) to grow into major exporters, we looked at it, what are the low hanging fruits? Don’t forget we took over when the country was in recession and there was this drive to now diversify sources of revenue-international revenue, foreign exchange revenue. So for us, the low hanging fruit is for us to now see how we can expand the business of exporters that are already in it.
The risk of non-performance would have been mitigated because they know the risk, they know how export is done out of Nigeria. Which is majorly what we have been doing now, so we look at the top 100 and say this is where we want to put our money in but concurrently, we also have one of the pillars of our strategy, is that we should encourage processing. We still should not be taking out primary products into the global market. That is why we are susceptible to international shock of prices which by the way, as producers of those raw materials, we have no control over.
There is a statistics that the President of Africa Development Bank (AfDB) likes to give: He says Africa, West Africa specifically, produces 75 percent of global cocoa with Cote d’ivore, Ghana, Nigeria and Cameroon. But we only control less than 2 percent of global cocoa market which is from beans to chocolate. The current market size, global size is about $137 billion. So what it means is that Africa does less than three or four billion from that size. How? It is because we do not, at primary production level, for primary product trade, we have no control over price. You can have your cocoa and they will just tell you we are not buying and there is nothing you can do. If it stays on the high sea for some times, it starts getting spoilt. So, we are at the mercy of global trading. So, what we have put as one of our fundamental objectives is to encourage processing.
Another one I like giving example of is Sheer nuts where we are one of the world’s largest producers of Shear nuts but prior to last year, the first produced shear nuts was exported from Nigeria this year. But prior to that industry, there was no processing plant in Nigeria. The only processing that was done was by micro enterprises, that do it in the traditional way. But guess what happens to Nigeria’s shear, people come in from Ghana and India, buy up the shear and take it to Ghana for processing because they have three processing plants. So, we now said why, it doesn’t register as trade in Nigeria because it is bought in small small quantities. So, now we have got one. That is the Ikene you are supposed to follow us to. There is Lagbu, it is now processing shear nut into butter and exporting. We have done two or three exporting already.
There are two other plants, Niger state is the largest producer of shear nuts, that we are trying to set up in Niger state. We are trying to also resuscitate some of the cocoa plants. Most of them have had their own issues, largely management related. But we think a lot of them have learnt their lessons. We would get better value if we process cocoa, at least into butter in the first instance. Now, what we are doing right now is, before we get the processing plants back to life, we will finance the trade of primary products. If you recall, when we had the meeting with the governor, the governor said he will give a window of two years for those that are doing raw cocoa, cashew and sesame to now set up processing plants. We have an acronym, PAVE-Produce, Add value and then Export, and that is our focus now. Like cocoa, total processing capacity that is working in Nigeria now is somewhere around 65,000 tonnes. And we produce anything between 200,000 and 250,000 tonnes. But there is installed capacity well above 65,000 tonnes only that it is not working. One by one, we are trying to bring them up.
Multi-Trex for instance, we are working assiduously with Asset Management Corporation of Nigeria (AMCON) to see how we can revive it. That plant alone can process 65,000 tonnes. Immediately, it will double the processing capacity of cocoa. Incidentally, most of the cocoa plants were financed by NEXIM at some point. So, a lot have been privatised, some were government owned, south western states, but we need to upscale and retool them to get them to production.
What is the bank doing in the area of logistics to boost solid minerals?
Other thing we are doing that is key to diversification is development of solid minerals. Now, we know there are solid minerals in Nigeria but what is the major problem apart from policy, there is also the problem of logistics.
For instance, we are aware that Nigeria is losing somewhere between $1 billion of trade opportunity from Ghana for our coal because Ghanaian power plants are powered by coal. Our coal is one of the best in the world but the problem is getting it to Ghana. Coal is very heavy. And if we use trucking, by the time it gets to Ghana, it will become uncompetitive. Another example is Itakpe iron ore, has close to a million tonnes of iron demand from China but transporting it is a major problem.
Just to tell you how large that is, 1 million tonnes is 35,000 trailers. One of the problems that fertilizer distribution has is that there are not enough trailers to even take them around. So what are we doing in all these? Part of our mandate as a bank is also export or trade facilitation, not necessarily financing only. So, one of the things we are doing is to create the logistics, infrastructure to get some of the solid minerals, especially to the ports.
We are talking first of all, with inland water ways. In fact, we have reached agreement with them to give us the inland ports which incidentally are all near where the solid minerals for coal and iron ore are and also the railways. You know these days, you have seen how the current administration has resuscitated a rail line that most of us didn’t even know existed, which is from Itakpe to Warri. Now, it is working but we need it to carry cargo. And to carry that cargo, it can’t go to Warri port because the draft of Warri port is just four meters. Now you can’t dredge it again because there are pipelines. So, that railway line terminated about 23km from Warri. So, we are talking to Power China, one of the companies we are talking to, to extend it not to Warri but to Burutu which is a deep sea port. Now, the concessionaire is also our customer, we are working together to ensure that we can get the rail line which is about 50km because you can only do that logistics by rail. So, we are going to do the port which will help. The Niger is being dredged. We already have indications, going hand in hand with another initiative that we are promoting which is the sea link initiative where we are going to put vessels along West Africa and Central Africa ports to facilitate the intra-Africa trade.
So, from different angles, despite the limited resources we have, we are trying to make an impact on Nigerian trade of non-oil commodities. And so far so good, I think sea link before the end of the year, we keep shifting the date, our target was before the end of third quarter but we have shifted it to end of year. We have signed all the papers, we have vessel owners, the major problem with sea link in the past is that we try to run it as a company where shareholders will come and invest but there has been inertia in investment and why? Because there is nothing on ground, you are inviting people to come and invest in nothing, that they cannot see physically. So, when we came in, we also know that a lot of vessels are idle now. So, bring your vessel into sealink. We are going to run it as a pilot in the Gulf of Guinea between Nigeria, Cameroon and the other smaller countries there. Let investors see it working. We need badges for inland water ways. So, we already have interest where twelve badges have been committed. We have three or four different vessel owners who have indicated interest in bringing their vessels.