The Nigerian Export-Import (NEXIM) Bank has called for the speedy passage of the Factoring Bill presently before the national assembly to enable the country tap into €2.6 trillion global factoring market.
This was emphasized by the chairman of the board of NEXIM and deputy governor, Economic Policy, Central Bank of Nigeria (CBN), Dr Joseph Nnanna, at the Nigerian Factoring Roundtable held in Abuja.
According to him, Africa’s share of the €2.6 trillion global factoring volume was less than one per cent with Nigeria not having a share.
Factoring is a form of structured trade finance, whereby a trader sells its accounts receivable to a third party at a discount, in exchange for immediate cash with which to finance continued operations.
Factoring therefore relieves the first party of a debt for less than the total amount providing them with working capital to continue trading, while the buyer, or factor, chases up the debt for the full amount and profits when it is paid.
Factoring is a very common method used by exporters to help accelerate their cash flow. The process enables the exporter to draw up to 80 per cent of the sales invoice value at the point of delivery of the goods and when the sales invoice is raised.
NEXIM Bank in collaboration with some key players in the public and private sector, seeing the need to develop an alternative trade financing instrument to boost access to funding by the Small and Medium Enterprises (SMEs) had drafted the Nigerian Factoring Bill.
Nnanna noted that the Bill, if passed, would not only promote a suitable regulatory and legal environment to support the rapid development of Factoring services, but would also contribute towards integrating Nigeria into the global factoring market.
Whilst calling for the speedy passage of the bill which has passed the second reading at the National Assembly, the managing director and chief executive of NEXIM Bank, Abba Bello, stressed the need for continued sensitization, constructive engagement and capacity building to stimulate necessary investment interests and sustain the momentum towards rapid development of factoring in Nigeria.
He noted that NEXIM Bank had observed a high degree of correlation between the global growth in factoring volumes and the increasing preference for trading under open accounts, which currently accounts for over 80 per cent of international trade, saying the bank would continue to lead the debate and analyse the impact of such a review within the context of the peculiarities of the domestic market.
On his part, head, Strategic Planning of the bank, Tayo Omidiji, noted that only six African countries, South Africa, Tunisia, Morocco, Mauritius, Egypt and Kenya account for 0.8 per cent of the €2.6 trillion global factoring volume.
He noted that Nigeria did not even feature in the current African Factoring Statistics, adding that the African Export-Import Bank (Afrexim) has projected that factoring volumes in Africa would rise from €24 billion in 2012 to about €200 billion by 2020, based on the rapid increase in Africa’s merchandise trade over the past ten years, with prospective new entrants like Nigeria, Ghana, Cote d’ Ivoire, Zimbabwe, Zambia, Mozambique and Senegal expected to drive this Factoring growth.