FACTORING, a financial transaction concept, which a business sells its account receivable to a third party, at discount, in exchange for immediate money to finance continued business activities is being proposed to boost Micro, Small and Medium Enterprises, MSMEs, in the country, by Nigerian Export Promotion Council, NEPC.
Also, in the pipeline of NEPC promoting MSMEs, is FORFAITING, a trade finance concept, that allows exporters to obtain cash by selling their medium and long-term foreign accounts receivable, at a discount on “without recourse” basis.
At the maiden National Conference on Factoring and Forfaiting Services in Nigeria, on Thursday, Olusegun Awolowo, Chief Exertive, Nigerian Export Promotion Council, NEPC, described the concepts as one of the fastest growing instruments for structured trade finance in the world. He said it will unlock over $1 billion annually, in financing for MSMEs.
Olusegun Awolowo, cited Pricewater House Coopers report, and stated that factoring could be directed at solving financial challenges MSMEs face with traditional banking, including high interest rate, credit profile constraints and insufficient collateral.
Factoring, he said, gives MSMEs, particularly, those with high quality receivables, access to cash flow and capital, that would help maintain and grow their businesses. The instrument is a viable and long-term solution to the problem of limited capital, which hinders the growth of small and medium-sized businesses in the country.
NIYI ADEBAYO, Nigeria’s Minister of Industry Trade and Investment, speaking at the event, said factoring would contribute to the implementation of the National Economic Sustainability Plan and Export Expansion Facility Programme. The minister was represented by Suleiman Adebayo, Director, Commodities and Export Department.
Stakeholders, the minister said, have role to play in making factoring succeed in Nigeria. He said roadmap with actionable points and definite timelines will be required to ensure smooth operation of factoring and forfaiting services in the country. And stressed the need for the passage of Factoring Bill presently before the National Assembly.
The minister, also, urged Central Bank of Nigeria, CBN, to issue necessary guidelines within extant laws to ensure the smooth operation of factoring. “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 Honourable 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.”