ASSESSING The cost structure in export venture
|BANKING AND FINANCE|
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The structural deformity interest in the Nigerian economy since colonial era finally gave way to restructuring of the economy in July 1986 through the Structural Adjustment Programme (SAP).
This programme has is prime objective in the effective attering and restructuring of the consumption and production pattern of the Nigerian economy using market mechanism and proper valuation of the Naira as its major tools.
This singular effort redirected the focus of the government, financial non-financial institution and individual investors of this country towards expanding the economic frontiers of Nigeria away from the non-export status to diversify export orientation.
A situation that required among other encouragements.
The argument other people of the improved export financing in Nigeria are among other factors as: it allows for the diversification of the economy from the present dependence on crude oil allied products to the non-oil sector of the economy.
A part from this, improved export financing will equally improves the foreign exchange of the country its positive effect.
On the country’s foreign reserves and import financing.
Before having a detailed analysis of the benefits accruable to a country from paper and improved export financing, it will be in line to give brief historical perspective to the development and effort towards export financing in Nigeria, while in the interim, the problem, prospects encountered and envisage respectively by the institution (Nigeria Export-Import Bank (NEXIM) statutorily saddled will the responsibility of providing the potential exports.
Exporters and their banks will the necessary financial assistance and guidance will be looked in to the main body of the thesis.
Export financial has been defined as “the provision of short, medium and long term funds for export operation.
Historically, before 1945, there was no deliberate effort on the part of the colonial government to finance export, either with the use of export mechanism or specialized institution.
What obtains then was not that the multinational companies dominates the export sector of the economy source their fund directly from the existing banks or from their parent companies.
Afterwards, we tied the establishment of the West Africa produce board at the regional level and the Nigeria produce marketing companies limited at the state level.
These two body were given the responsibility of sourcing and marketing of local primary products like cocoa, palm kernel and Arabic gum, groundnut just to mention few.
But the most profound efforts was made in 1962, by the central bank of Nigeria (CBN), It Introduced the 90 days Bill Of Exchanged as a means Of export financing.
The introduction; of this monetary, in export financing, affords the marketing board the opportunity to meat their case need by drawing such bill on the Nigeria produce marketing company limited that stands as the export to all marketing boards in Nigeria.
When such bills have been accepted, the participative pool of commercial banks and acceptance house will now discount the bill with the supportive scheme of rediscounting and refinancing of bills provided by the Central Bank of Nigeria (CBN).
The scheme ran into a debt and finally collapsed in 1968 as a result of the uncertainty prevalent in the produce market.
This led to the final withdrawals of participating commercial bank and acceptance houses.
As a result of this withdrawal, the Central Bank of Nigeria has no choice but to take over the direct financing of export of the marketing boards.
But by 1979, the C.B.N shifted attention from direct finance to direct control as a means of financing exports.
This monetary policy stipulates the percentage of the commercial and merchants banks loanable funds That must be made available for export financing or the non-oil export sector of the economy.
Based on this, credit control mechanism, the export sector moved gradually from its former point of funds to the sector even on the increase.
But the introduction of (SAP) in 1986 saw the non-oil sector financing wearing a new look courtesy of decree 18 of 1986 tagged “Export incentive and
miscellaneous provision decree.
This decree brought to existence various incentive that will encourage the active participation the financial, non financial institution and individual investors like in the export sector of the economy, with specific emphasis on non-oil export.
The main objectives of this incentive that will be analyzed in detail in chapter of this thesis.
1.1 BACKGROUND TO CASE STUDY (NEXIM)
The final realization and the subsequent establishment NEXlM was rightly observed by Musa Badamosi thus “In the resuscitating ruling economic of both developed and developing countries.
Import-export banking has assured a global Phenomenon from Japan to Jamaica from China to U.S.A.Today Nigeria has also established a similar bank called Nigeria Export-Import Bank (NEXIM) with the man-data of pivoting the country’s economic recovery.
The dream to have a specialized financial agency in charge of export and import financing was a result of various steps from the first National Development plan of 1960 to 1988 Decree No. 15 as amended by Decree 38 of 1960, that brought the establishment of NEXIM.
The contribution that led to this long delay was the mobility of the Federal government to decide on the type of export-import agency that will has as its that argued that a NEXIM Bank is the best credit agency that the export-import sector of the economy needed.
This contention was brought to an end by the recommendation with the assistance of European Economic Community (EEC).
In collaboration with AFINEX company, a specialist in Export-Import and related matters that finally led to the establishment of NEXIM Bank instead of a risk bearing agency.
This recommendation led to the mandate given to the Central Bank of Nigeria (CBN) of draft the necessary action that will guide the functioning of NEXIM.
A draft that was finally backed by Decree 1 No. 15 of 1988 and later amended by Decree No 38 of 1981. Statutory, the Bank at inception was to perform the under listed function:
I. The provision of export credit guarantee and export credit insurance facilities to this client.
II. To provide foreign exchanged credit from revolving fund to exporters who need to import foreign input to facilitate export production.
III. To provide credit in local currency to its client in support of exports.
IV. To provide trade information and export advisory service in support of export trade.
V. To provide credit insurance in respect of external transit trade an inter-port trader.
VI. To establish and manage fund that are connected with export.
1.2 OBJECTIVE OF THE STUDY
Until recently, there has not be existence of deliberate effort by government to look into the problems faced by the exporters, potentials and their Banks in terms of sourcing financial at the right, place and at the right conditions for their exports.
Even rate, place and at the right conditions for their exports.
Even with the ever declining growth of loanable funds for export of non-oil products, the country’s real sector economy. More so, with the simultaneously decline in the revenue generated from oil exports.
But the recent sudden interest could be attributed to urgent need to improve the welfare state of the majority of the masses through positive growth in the economy.
As such, there was the country by diversifying the sources of foreign exchange earning.
This in effect, could be made possible by the easy available of finance availability to the exporter of non-oil product and the agencies responsible for their provision.
I. The various sources of finance available to the exporter of non-oil product and the agencies responsible for their provision.
II. The need to have an autonomous Nigeria exporter bank that will be independent in declining on the allocation of the necessary incentive to exporters or importers of export input as to where and when needed.
III. The need to acquire, the exporter of where to source their export information and the nature of such information.
IV. The cost structure in export venture.
V. The various documents used in the export financing.
VI. The problems of NEXIM Banks and the possible ways of solving them.
1.3 STATEMENT OF PROBLEMS
The greatest aspiration of every exporter is to get the needed finance at the right quantity, time, condition and rate.
This aspiration has only remained a mere dream than a .j. As a result, what has remained a common sight is that every potential exporter that goes in the export business I greatest enthusiasm leaves the sectors dissatisfied and disappointed.
In view of this experience, the NEXIM ha an uphill task to see to the happiness of the participants in the export sector of the economy.
As such below, that NEXIM will be confronted with. The study will among other things.
I. How NEXIM will solve the problem of lack of enthusiasm on the part of the financial institution to participate actively the non-oil export sector of economy.
II. How the issue of death information in the export financing sector in grapple with.
III. How prices will be stabilized to ensure that changes in the produce prices will do not always direct effect on the exporters.
IV. How the risk in the export market could be shared by the government with the financial institutions.
V. How the exporters will have easy access to their foreign exchange by easy reparation and retention process
VI. How legal, tectricial and professional advise will be made easy available its little earnings to inflation.
1.4 SIGNIFICANCE OF STUDY
The importance of the research work cannot be over emphasized, in view of the constant fluctuation in its prices.
Above all, this study is very important for these reasons:
i. Export financing will further attract the export sector of the economy fund with no viable project to invest.
ii. The study is significant because with highlight of the various incentives available to exporters and there will be exporter the economy will be boosted with flow of fund and participation.
A situation that will result in the expansion and diversification of the economy from the dependence on mainly oil and its allied product exports to real economic sector agriculture industry.
iii. The study is importance because a positive export growth will lead to increase in foreign reserve.
iv. The study into export financing equally important when the usefulness of the information that it will provide the prospective exporter and the exporter is fully considered.
It will in effect become a handbook for exporters.