The Legal Framework For Pre-Export Financing In Nigeria: An Overview

Abstract

The berthing of the biggest container vessel to ever berth on a Nigerian port was a widely celebrated event in Nigeria. The vessel, Maerskline Stardelhorn, has a 300m length, a width of 48 metres and while this news was wildly celebrated, a fundamental question was asked about the fate of the Nigerian market, viz, what is the fate of the country’s economic indicators when its imports significantly outweigh its export. A commentator on a social media platform remarked: “it would have been interesting if this vessel could leave Nigeria as full as it came”. While this may sound like one of the common phrases of the Nigerian market, it is instrumental to consider one of the ways to revive Nigeria’s exportation process and procedure. The above narrative is exactly the concerns of Nigerians within the International Trade and Finance space. Nigeria is a big player in the importation space but hardly makes equal volume of exports. While this piece does not whine about this situation, it considers a solution rarely used in Nigeria - Pre-Export Finance. Pre-Export financing (PXF) is an aspect of trade finance implemented to enable the exporter to have sufficient liquidity to maximise production for export of products in the exporter’s country to demanding consumers in the international sphere. It is common in transactions involving capital intensive production and operations. Export-Import banks and Development financial institutions (DFIs) are mostly involved in this aspect of trade finance, as well as commercial and merchant banks in providing long and short-term facilities to applications that meet the requirements of customers. This piece looks at the regulatory framework for pre-export finance in Nigeria and suggests, in accordance with the standard Loan Market Association's PXF security structure, a structure that can work in Nigeria.