Leverage non-oil export activities to create an alternative source of foreign exchange | The Guardian Nigeria News
Division Manager, Export and Agric Business, Fidelity Bank Plc., Isaac Ndukwe, in this interview explained how investing in exporting has increased the bank’s profitability. HELEN OJI was there.
WHY is Fidelity Bank investing heavily in the non-oil export sector?
Fidelity Bank is addressing the business space for non-oil exports for two strategic reasons. The first reason is to help stimulate the growth of the Nigerian economy and in so doing expand our market share in the banking business landscape.
It is quite logical. When you help build a bigger economic pie, the ripple effect translates to more transactions for you as a bank in the midst of the transformation. As you know, there are two models of growth.
One is the import substitution growth model and the other is the export driven growth model. The more sustainable growth model, or the strategy most suited to the Nigerian economy, is the export-driven growth model, albeit the more laborious of the two because it requires a lot of heavy lifting.
It simply makes the economy more competitive over time, for example by improving business processes, product design and quality. China is a prime example of an economy that has leveraged the export-driven growth model to become a global manufacturing power.
The second reason is that our export banking activity is a strategic axis to improve the competitiveness of our company in the industry. Oil price shocks create fiscal and exchange rate problems for Nigeria.
For example, reduced public spending and, of course, because oil accounts for over 60 percent of our national income, a reduction in what you and I spend, in addition to the effects of macro elements and finally negative variations. from the trade balance wash to the exchange rate.
The pass-through effects of everything I have highlighted negatively impact banking operations. For example, this leads to a limited supply of dollars to cover the foreign currency obligations of importing customers. Our non-oil export business helps us create an alternative source of foreign currency supply to serve our importing customers.
In what specific ways does your company support exporters?
While it is tempting to lead the way with our financing offers, I would say that the most crucial way we support exporters is in the area of developing the management capacity of export companies. This is what sets us apart from other banks.
From a business operations perspective, non-oil export trade requires a total change of mindset. It’s a very competitive business landscape, especially if you’re in the value-added export business. Therefore, the development of human capital, especially around the readiness of companies to export, is an essential element in positioning Nigerian exporters to become more competitive in the global market.
The world market is a brutal “free market” arena akin to the Roman “death fight” coliseums. He takes no prisoners and will punish you if you are not prepared and do not have competitive and comparative advantages.
If you are exporting something from Nigeria to the UK, for example, you are competing with companies in other countries that are exporting to that same market. So if you don’t offer your product at a lower price or higher quality to outweigh the competition, you will be out of the market. The world market does not care about your feelings or the macro and micro issues of the origin of the product / country. The primary consideration is the value to the end consumer of your product. How we help fill these gaps in business management capacity is through export business management capacity development programs, the flagship offering being our Export Management Program (EMP), an export management program. capacity building program that we co-created with Lagos Business School (LBS), and the Nigerian Export Promotion Council (NEPC).
Here, we teach aspiring and existing exporters how to become better at what they do. Some of the areas we cover include, but are not limited to, product or raw material sourcing and effective supply chain management; quality control and assurance process; global standards and best practices; packaging, contract negotiation and advertising, export documentation, shipping, financial management and governance. We then create well-tailored and competitively priced financing offers to help exporters grow their business operations. We also provide free advisory services to exporters to help them optimize their businesses.
Another way we support exporters is in the area of market access development. For example, we have brought over 10 of our clients to the Durban Intra-Africa Trade Fair (IATF), and most have secured product sales contracts and partnership agreements. We also support export trade documentation and advisory services.
Did the IATF meet your expectations?
Absoutely. The only quick win for us is the development of market access for our export customers. We were at the first edition of the IATF in Cairo, Egypt, and the relationships opened our eyes. We took several of our customers with us and also gave them platforms to exhibit and showcase their products. They all got product sales contracts and partnership agreements. The total amount of transactions concluded in Cairo exceeded $ 75 million.
The same thing happened on this release with a total transaction amount over $ 100 million. Another advantage is the opportunity it presents for partnerships, collaborations and knowledge transfer. I firmly believe that if we can work towards improving the overall ease of doing business and the competitiveness of enterprises, Nigeria can be the biggest winner from the African Continental Free Trade Area (AfCFTA).
As you know, the IATF is one of the main levers of the AfCFTA in driving regional trade integration in Africa. The take off is that the AfCFTA will help connect Nigerian businesses to the continental and global manufacturing value chain.
This is why this is so important to us and the reason why we are taking proactive steps to improve the preparedness and positioning of our clients to take advantage of the growth opportunities that IATF and AfCFTA present to them. companies. These opportunities are not only limited to expanding market share, but also include knowledge and technology transfer gains to drive optimizations.
How much did the bank’s non-oil export activities contribute to the bottom line?
As I said earlier, our export business sector is strategic in the sense that it contributes to increasing the competitiveness of our banking activity. You’ve seen our half-year figures, in which profit before tax rose from N12b in the first half (S1) of 2020, to N20.6b in H1 2021, a growth of 72.4%.
The growth in our customers’ export business and our increased share of this portfolio, as well as the expansion of our new customer footprints and export business are part of what drives the bottom line. This is one of the key pillars of our growth initiative as it extends to other critical areas of our banking business. To further reinforce the importance of our export business segment for all banking activities, our Managing Director, Ms. Nneka Onyeali-Ikpe was present at the IATF and actively participated in facilitating some of the transactions that we have concluded for our clients.