THE ROLE OF FINANCIAL INSTITUTION IN EXPORT FINANCING IN NIGERIA
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THE ROLE OF FINANCIAL INSTITUTION IN EXPORT FINANCING IN NIGERIA
ABSTRACT OF FINANCIAL INSTITUTION’S ROLE IN EXPORT FINANCING IN NIGERIA
The major goal of this study was to investigate how financial institutions export finance in Nigeria, utilising the Onitsha branch of First Bank of Nigeria Plc as a case study.
I utilised the survey approach to collect data for this study, and I employed a questionnaire. The target demographic was the employees of the First Bank of Nigeria Plc Onitsha Branch, from whom an 80-person sample was taken. I employed research questions and hypotheses to guide my work. For the study, the relevant literature was evaluated.
The data was gathered, presented, analysed, and hypotheses were evaluated via chi-square. At the end of the study, a number of recommendations were given for future research and on how to strengthen Nigeria’s financial export and encourage institutions to expand and modernise.
CHAPTER ONE
INTRODUCTION:
Financial institutions are organisations that primarily deal in money, and they form the financial structure of an economy. Financial institutions assist in pooling savings and excess liquidity from millions of individuals and businesses throughout the country and making them available to those in need for a variety of purposes.
Commercial banks (joint stock banks), discount houses, the central bank, saving banks, development banks (BOI), insurance businesses, hire purchase companies, the national providence fund, the stock exchange building and so on are examples of financial organisations.
Prior to the establishment of the Nigeria Export-Import Bank (NEXIM) in Nigeria in 1999, commercial banks were referred to as retail bankers, while merchant banks were referred to as wholesale bankers.
ii However, the two operate and provide nearly identical services, making any distinction difficult- one can only say that the distinguishing factor between the two sectors of the banking industry is that commercial banks are members of the Central Bank of Nigeria (CBN) clearing house, whereas merchant banks are not.
Another problematic issue is the permission issued to merchant banks to take enterprises to the capital market, which the Nigeria stock exchange rejected them, as well as the implementation of the universal banking system of divide effect.
A trader could visit a commercial or merchant bank to obtain financing for his business. They can provide both short and long-term facilities and can design any product to fit any customer’s needs.
The Nigeria Export-Import Bank (NEXIM) was founded in 1988 but did not begin operations until January 1991. The bank was founded primarily to give short-term credit to exporters in need of working capital to purchase hair operations.
Among the functions of banks is the upkeep of a foreign exchange revolution fund, which is to be made available as loans to exporters who need to export machinery, raw materials, and replacement parts to meet export orders. It may also consider domestic trade loans that are likely to help exports.
1.1. BACKGROUND OF THE STUDY
The banking system has been an intrinsic part of structural reforms, and it plays a key role in policy change management. Financial institutions play the roles of a cartelist and a committed broker in export finance.
It includes everything from advising businesses and individuals on how to enter the export market via financing to handling shipping documents and collecting export proceedings.
In general, an export can fulfil his finance demands in a variety of methods.
1. advance payment from international buyers
2. general internal funds
3. Bank and other financial institution credit.
4. Credit given by the buyer country’s government.
ii
1.2 STATEMENT OF THE PROBLEM
It is unfortunate that, despite the various funding mechanisms and incentives put in place by financial institutions to stimulate export growth, the relative contribution to the economy is still very low. As a result of this low rectum, financial institutions face the risk of non-payment of loan and advance given to export.
First, there is the issue of policy stability; it is pointless to develop a beautiful export policy only to have it withdrawn, as in the case of the reintroduction of regulatory guidelines that primarily benefit the exporter. This was later reversed by the Central Bank of Nigeria (CBN) in September.
Following recent pressure, Nigerian export and import merely give funds and transfer risk to other banks. Another issue is that Nigerian exporters who venture into the foreign market do not have access to information about import countries such as culture, regulation, and wealth,
which results in low returns and increases the risk faced by the financial institution that finances them. Nigeria, as a result of the acts of certain of its citizens, has established an unfavourable business image both at home and abroad, including among the poor.
Long term credit is usually associated to a period of more than 5 years, whilst short term credit is usually related to a period of 3 days to 50 days. The exporters require pre-shipment finance to secure the raw materials and other input required for the execution of an export, as well as the shipment of goods to foreign countries.
The credit is thus regarded as a loan granted to finance goods on the basis of 1. A letter of credit opened in favour of the exporter by overseas. Bank for imports.
2. Warehouse Company Insurance. The term of such credit supplied in the past usually does not exceed 12 days after shipment credit is a loan or advance granted or any other sort of credit offered by a bank to an exporter of products from the date of export revenues to today.
The most common sorts of post-shipment advances are negotiated forms of export bills drawn with confound export contract will order.
ii The Nigeria Export and Import Bank (NEXIM) provides both long and short-term lending through commercial and merchant banks to boost non-oil commodity exports. a. Advance fee fund syndromes, often known as 419 b. Cheating
c. Providing a low-quality result d. Word and document manipulation
The practise of illegal export of products, particularly to neighbouring West African countries, cannot be overstated as a habitual component. Because of the difficulties in funding exports.
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