- NEXIM Mulls Factoring to Boost credit to SMEs
The Nigerian Export Import Bank (NEXIM bank) is likely to perform factoring function or support a company that is registered as a domestic factor.
The plan is meant to support tMicro Small and Medium Enterprises (MSMEs) search for credit.
What factoring does is that when you supply to bigger company, you more or less take the invoice that has been issued and transfer it to a third party (the Factor) who himself can then go and collect it when it matures because he has the capacity.
Also, the small enterprise has received the money on that same day he issues the credit and removes it from its balance sheet so the Factor takes the risk of the possibility that the obligor cannot be able to pay.
When the factoring laws is passed, signed and it becomes operational what NEXIM bank will be doing is that they are going to go into what is known open trade, in other words, Afreximbank is going to provide a lot of money to NEXIM and NEXIM bank in itself will then be able to support a lot of small and medium size enterprises.
These revelations were made yesterday by Osaro Eghobamien, Managing Partner, Perchstone and Graeys on the sidelines of the ongoing 25th anniversary and Annual General Meeting of the Afreximbank in Abuja.
According to him, “when you introduce this law with the support of the central bank we will find Afreximbank providing a secondary market service which means they say they have funds to give to NEXIM, NEXIM either performs a factoring function or they have companies that are performing factoring functions and then the money flows down to our exporters.”
NEXIM bank he said “already has a number of people who are on their books some of them they already support, some of them they like to support, they are not bankable as we speak today, what will then happen is that automatically they become bankable and therefore enhance export trade.”