Foreign ECA’s and Market/Value Chain Development in Nigeria

Can Nigerian Businesses leverage the UK ECA’s ‘Buyer Loan Guarantee Scheme’ for Market and Value Chain Development Purposes?

On the 9th of May 2018, I was privileged to attend the UK government’s first ‘UK Trade and Export Finance Conference’ at the Queen Elizabeth II Centre in London. It was a very well organised and attended gathering of about 500 delegates comprising C-suite executives from both the public and private sectors including members of the House of Lords,/Trade Envoys, Ministers, heads of the respective UK Finance and Trade departments, as well as CEO’s and directors of several multinational and national companies including GE Capital, Kier Group and Atkins Acuity.

At issue was how the UK Government could support UK businesses in accessing new markets for their respective goods and services in light of BREXIT, and the consequent need to pivot to non-EU markets, especially within the commonwealth.

I was particularly interested in attending this event as over the course of my previous role leading on fundraising at the Nigerian Economic Summit Group (NESG), where I also anchored the SME, Finance and Financial Markets Policy Commission, and worked on a number of job creation initiatives on the platform of the Jobs Creation Unit of the office of the Vice-President, I observed a number of recurring challenges including market and value chain development across key sectors (including Agriculture, Renewable Energy and Infrastructure), and crucially; access to finance.

Last year the Director General of Nigeria’s Federal Institute of Industrial Research, Oshodi (FIIRO) Mrs Gloria Elemo,  lamented that Nigeria’s post-harvest losses had risen to about $9BN annually (approximately £6.7BN).  According to her,  “We have bad roads, appropriate transportation suitable for perishable produce are in short supply, value added to agricultural produce is low, there is poor maintenance of storage and handling facilities”, all of which when you think about it, represents massive business/investment opportunities.

During the ‘Developing Markets’ breakout session at the UKTEF event, I raised these issues/opportunities as a follow up to Lord Popats’ (Prime Minister’s Trade Envoy to Rwanda and Uganda) observations that the UK had over the years more or less neglected Africa and was missing out on opportunities being seized by other European and Asian powerhouses. In her response, Baroness Northover (Prime Minister’s Trade Envoy to Angola and Zambia) gave her assurances that these opportunities were currently being looked into by the UK government.

Anywhere in the world, a £6.7BN/annum market value represents a significant business/investment opportunity and other than an enabling business environment, access to finance to procure storage/processing/logistics machinery (or equipment) and set up going concerns along these lines, has unfortunately been a major stumbling block for many would be Nigerian entrepreneurs.

Another example is the renewable energy sector which is still very much in its infancy. Both project promoters and off-takers suffer the common challenge of access to finance where on the one hand, indigenous RE (solar energy) start-ups have to contend with stringent loan requirements (even from local DFI’s) no different from what is required from well established businesses, while off-takers (consumers) on the other hand, contend with little to no access to consumer financing which is required as initial purchase costs are typically quite high.

For me, it was interesting to note that the UK government’s response to potential EU market share loss as a result of BREXIT, was to agressively put ‘Finance‘ at the heart of the British export strategy. In the government’s thinking and in line with the mandate of its ECA; no viable UK export should fail for lack of finance or insurance.

The UK ECA helps UK companies;

1. Win export contracts by providing attractive financing terms  for overseas buyers of UK goods and services;
2. Fulfil export contracts by supporting working capital loans; and
3. Get paid for exports by insuring against non-payment by overseas buyers.

In 2016/17, it provided £3BN of support to help 221 UK exporters sell to 63 countries around the world. Currently it has an appetite of up to £750MN in buyer loan guarantees and can structure local currency (Naira) loans for export contracts worth over £5MN. The UK ECA also helps to bring more overseas businesses to the UK.

So how can Nigerian businesses benefit from such ECA opportunities? For one, and much like their UK counterparts, Nigeria businesses need first take a long term, strategic view of sectoral opportunities and establish market/value chain development partnerships with UK counterparts in order to ensure a win-win situation for both parties.

The Nigerian Investment Promotion Council (NIPC) currently offers ‘Pioneer Status‘ (which includes 5 year Corporate Tax Exemptions) in over 70 categories across sectors ( I will elucidate on these in a subsequent post). UK businesses can partner with Nigerian businesses to take advantage of these sorts of opportunities.

For guidance on how to establish market/value chain development partnerships, leveraging both the UK ECA buyer guarantee and the NIPC Pioneer Status schemes, kindly write to us at info@khepera-associates.com. We are particularly interested in hearing from organisations operating within the Agriculture, Infrastructure/Construction, Oil and Gas and Renewable Energy sectors.

Thank you for reading.