CHAPTER ONE
THE ROLE OF FINANCIAL
INSTITUTIONS IN EXPORT FINANCING IN
NIGERIA
INTRODUCTION:
Financial institutions are
organizations which deal basically in money.
`They constitute the financial
framework of an economy. Financial institutions help to pool savings and excess
liquidity from millions of individuals and firms within the country and make
them available to those who need them for various purposes.
Financial institutions include
commercial bank (Joint stock banks) discount houses, the central bank, saving
banks, development bank (BOI), insurance companies, hire purchase companies,
the national providence fund, the stock exchange building etc.
Before the introduction Nigeria
export- import bank (NEXIM) in Nigeria as at 1999 the commercial banks were
generally referred to retail bankers, while merchant banks were known as
wholesale bankers.
However the two operate and offer almost the same
services that any line of demarcation is now rather fussy- one can only say
that the distinguishing factor between the two sectors of the banking industry
is that the commercial banks are members of the central bank of Nigeria (CBN)
clearing house, While the merchant bank are not members of the Central Bank
clearing house.
Another contentious factor is
the licence granted merchant banks to take companies to capital market which
the Nigeria stock exchange denied the commercial licensed them to do so, the
introduction of the universal banking system of divide effect. A trader could
approach either commercial or merchant bank for financing facility for his
transactions. They can provide both short and long term facilities and can
design any product which meets any requirements of customers.
The Nigeria export-import bank (NEXIM) was
established in 1988 but commenced operations in January 1991. The bank was
established to provide mainly short term financing for exporters who need
working capital to buy hair activities. Among the function of the banks is the
maintenance of a foreign exchange revolution fund which
is to be made available as loans
to exporters who need to export machineries, raw materials and spare parts to
satisfy export orders. It can also consider loans involving domestic trade
which are likely to assist exports.
1.1.
BACKGROUND OF THE STUDY
The banking system has been integral part of the
structural reforms and it has a leading role in management of policy change.
The role of financial institutions in export financing is that of a cartelist
and a committed broker. It ranges from assisting company and individual on how
to enter export market through financing and handing shipping document and
collect export proceedings.
Generally an export can meet his financing needs in the following
number of ways.
1. advance payment from
overseas buyers
2. internal general funds
3.
Credit from bank and other financing institution.
4. Credit provided by the
government in the buyer country.
1.2
STATEMENTS OF PROBLEMS
It is regrettable that despite their various
funding mechanism and incentives put by financial institution s to stimulate
the growth of export in relative contribution to the economy is still very low
because of this low rectum, financial institution face the risk of non-payment
of loan and advance given to export.
Firstly, the problems of policy
stability it is needless to formulate a beautiful policy on export only to be
discontinued, shortly, example the re-introduction of regulatory guideline in
domilarily account was discentives to the exporter. This was reverse later by
central bank of Nigeria (CBN) circulated in September. After much pressure
recently Nigeria export and import only provide fund and transfer the risk to
other banks. Another problem is that Nigeria exporters who ventures into
foreign market do not avail themselves with the information relating to import
countries such as culture, regulation and wealth this result in low returns
those by increase the risk being faced by the financial institution that
finances them. The Nigeria through the activities of some of its citizen has
activities of
some of its citizen has developed a negative business image both at
home and abroad the poor included.
Accommodation for a period of 3
days to 50 days, while long term credit usually related to a period of more
than 5 years. The exporters need pre-shipment finance for security the raw
material and other input required for the execution of an export also ranging
from the shipment of goods to foreign countries the credit is therefore regards
as a loan granted to finance goods on the bases of
1.
Letter of credit open in favour of exporter by
overseas. Imports bank.
2.
Insurance of ware House Company. The duration of
such credit provided by the past does not usually exceed 12 days post shipment
credit is a loan or advance granted or any other type of credit, provided by
the bank to an exporter of goods from the date of export proceeds within today.
The main types of advance for post shipment are negotiated form of export bill
drawn with confound export contract will order.
The Nigeria export and import
bank (NEXIM) provides both long and short term credit through commercial and
merchant bank to support export from non oil product
a.
Advance fee fund syndromes popularly called 419 b, Cheating
c.
Supplying of poor quality product
d. Manipulation of words and
document
The practice sign through
illegal export of goods especially to neigbouring west African Countries which
cannot be over worked as a in habited factor. In view of there problems
counters in financing export.
1.3
PURPOSE OF THE STUDIES
The purpose of this research work is as follows:
i.
To study the modalities adopted by export that
need export assessing
ii.
To determine the economy polices finance and
their effectiveness on the export business
iii
To ascertain the problems encountered by the
financial institutions in export production finance.
iv.
To examine the prospective of export financing in
Nigeria
vi.
To ascertain the extent to which oriented
industries benefited from export financing.
1.4
SIGNIFCANCE OF THE STUDY
The research work on the role of
financial Institutions in export
financing
will be beneficial to the Nigeria economy in the following
ways.
1.
GENERAL ECONOMY: It
will help the nation in devising the foreign exchange and revenue of the
nation as well as receiving pressure on the balance of payment
2.
MANUFACURERS: With the
introduction of the structural adjustment program (SAP) in 1986, many
manufacturers have been oriented into the system and hopefully manufactures
export good with the financial institutions incentives will improve the
production potentials as well as production producing large qualities of export
purpose.
3.
EXPORTERS: The
financing of export will go a large way in helping Nigeria exports to
compete favorably with the international world.
4.
STUDENTS: This research work will
be valuable to the students who may carry out the similar research work
in related field for reference purposes.
5.
FINANCIAL INSTITUTIONS: The
research work will work into the problems and the prospect of
institution the export finance and the recommended ways to improve on it.
1.5
RESEARCH QUESTIONS
1.
Are the problems encountered by financial
institutions in export financing in Nigeria.
2.
Are there modalities adopted by the financial
institutions in assessing goods for exports?
3.
Has export oriented financial institution
affected financial industries to an extent?
4.
Are there prospects of export financing in Nigeria.
5.
Are there difference economic policies adopted by
the government to support export financing and their effectiveness on their
export financing in Nigerian
1.6
FORMULATION HYPOTHESIS
HO: Export financing does not have prospect in
Nigeria
HI: Export financing have prospect in
Nigeria
HO: Modalities are not adopted by
financial institution is
assessing goods for export.
HI: Modalities are
adopted by financial
institution in
assessing goods for export.
HO: Financial institutions in export
financing in Nigeria does
not encounter Problems.
HI: Financial
institutions in export
financing in Nigeria
encounter problems.
HO: Export oriented financial institution has not
affected
financial industries to an extent.
HI: Export oriented financial institution has
affected finance
industries to an extent
1.7.
SCOPE OF THE STUDY
The scope of the study is very
wide it focuses on the roles of financial institution in export financing in
Nigeria. As a result of this, the researcher has consulted with several reviews
on the issues of the roles of financial institution in export financing in
Nigeria which are appreciated for employees at a particular point in time. It
also serves
as a
useful guide to organizations. In their future decision making
process
on training related issues, knowledge of private sectors.
1.8.
LIMITATION OF THE STUDY
For the nature of the research work the researches Intended to
limit its work because of the time of this research work the economic
of the nation is also battered that the research cannot afford to visit all the
financial institution and has a limited time.
ii.
TIME FACTOR: The
research has witnessed some months duration in season. However the
researcher was able to utilize the available period
iii.
WORK LOAD: The
department worked load is numerous for the research work coupled with
the fact that the researcher must attend lectures there by prevent a through
and intensive work.
1.9
DEFINITION OF TERMS USED
- 1. EXPORT ORIENTATION GOODS: Goods produced with the sales intention of exporting them to countries in order to generate foreign exchange.
FOREGIN EXCHANGE: Currency of other countries reserved in a given country.
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3.
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PRE-SHIPNAMENT AND POST
SHIPMENTS: This is a
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loan
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granted to any credit granted by the
bank to exporter of the
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date of extending the credit before and
after shipment of goods
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to the date off receipt of exporter
proceeds within 60 days.
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4.
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