The Executive Director/Chief Executive, Nigerian Export Promotion Council (NEPC), Mr. Olusegun Awolowo, yesterday said it planned to establish factoring and forfaiting as instrument of financing trade and export in the country.
Factoring entails financial transaction whereby a business sells it account receivables to a third party at a discount in exchange for immediate money with which to finance continued business activities.
Similarly, forfaiting is a method of trade finance that allows exporters to obtain cash by selling their medium and long-term foreign accounts receivable at a discount on a “without recourse” basis.
Awolowo, at the maiden National Conference on Factoring and Forfaiting Services in Nigeria, described the concepts as one of the fastest growing instruments for structured trade finance in the world.
He pointed out that factoring could help unlock over $1 billion annually in financing for Micro, Small and Medium Enterprises (MSMEs) in the country.
Citing a report by Pricewater House Coopers, the NEPC boss said factoring could
could be directed at solving most of the financial challenges witnessed by MSMEs with traditional banking including excessive interest rate, credit profile constraints and insufficient collateral.
He said factoring gives MSMEs, particularly those with high-quality receivables access to cash flow and capital that would help maintain and grow their businesses.
He said the instrument remained a viable and long-term solution to the problem of limited capital which threatens the growth of small and medium-sized businesses in the country.
Also speaking at the occasion,
Minister of Industry Trade and Investment, Mr. Niyi Adebayo, said factoring would contribute to the implementation of the National Economic Sustainability Plan and Export Expansion Facility Programme.
Represented by the Director, Commodities and Export Department, FMITI, Mr. Suleiman Adebayo, he said all stakeholders have a role to play in making factoring a success in Nigeria.
The minister called for a roadmap with actionable points and definite timelines to ensure a smooth operation of factoring and forfaiting services in the country.
He also stressed the need for the passage of factoring bill which is currently before the National Assembly.
He further called on the Central Bank of Nigeria (CBN) to issue necessary guidelines within extant laws to ensure the smooth operation of factoring.
He said, “Nigeria has the size of the market and business volumes to operate the services successfully. It is time the Nigerian stakeholders come together to partake from the huge market.
“I am also aware of the factoring bill which is still undergoing legislative processes and I wish to use this opportunity to implore the distinguished Senators and Honourables members present to facilitate the speedy passage of the bill within the shortest possible time.
“I can assure you that Mr. President is keenly interested in any programme or projects that will grow the Nigerian economy.”
