Shippers Guide is the learning page of MMS Plus. Here we answer the five W’s and H of several issues in the shipping industry. This week’s edition focuses on the Nigerian Export-Import (NEXIM) Bank Foreign Input Facility.
The Direct Lending Facility, NEXIM would grant short, medium and long term fixed or floating rate loans, to exporters directly and/or under co-financing/syndication arrangement with eligible banks.
Direct loans are available to assist exporters complete their export sales, by providing working capital and/or facilities and funds for procurement of equipment. Services include, but are not limited to consultancy, tourism, oil and gas services provided by Nigerians. Loans are granted directly to a Nigerian exporter in both local and foreign currencies up to 80% of the total project cost.
The following items are not eligible for financing:
1. Armaments, ammunitions and other military equipment:
2. Psychotropic drugs and narcotics
3. All items prohibited by international conventions or environmental constraints
4. Ponographic and obscene materials; and Items prohibited for importation/exportation by prevailing government policies/guidelines
Banks wishing to participate in co-financing a project with NEXIM must be in good financial health as evidenced by three years Audited Accounts, and meet additional criteria set by NEXIM from time to time.Where NEXIM is invited to join a syndication arrangement, member banks must be ready to provide the working capital requirement of the borrower and subsequent cost overrun.
A borrower must be a creditworthy limited liability company, cooperative society, existing/new production units with a minimum of 50% export orientation or an existing provider of export services. The borrower must establish that the loan will develop or expand his export business.
The security may be one or more of the following:
Bank guarantee or insurance bond
Landed property belonging to the borrower/directors of the company in a location acceptable to NEXIM;
First lien or fixed charge on machinery and equipment of the borrower;
Share certificates of quoted companies acceptable to NEXIM;
Investment certificates or commercial bills acceptable to NEXIM; and
Floating charge on moveable property of the borrower or directors of the company.
The following documents should accompany the application
A certified true copy of Certificate of Incorporation;
Three years audited statement of accounts or a complete set of management report signed by two directors of the company for the accounting period for which their audited statement of account is not available;
A feasibility study report/business plan;
Certified true copies of forms CO2 and CO7;
Certified true copies of proforma invoice(s) for new/used equipment from a reputable supplier(s);
Evidence of licence/permit from relevant agencies where applicable;
Evidence of export commitment or any other arrangement acceptable to NEXIM;
Copy of Environmental Impact Assessment Report;
Evidence of availability of counterpart funding (for new projects);
Copies of title of documents that are available as security; and
Any other document that may be required.
For local currency loans
“NEXIM may charge a fixed interest rate over the duration of the loan, of NIBOR plus 200 basis points (2%) p.a., or as may be determined by the Bank from time to time.b. For foreign currency loansNEXIM may charge a floating interest rate based on the prevailing six month London Interbank Offered Rate (LIBOR) for US dollars plus 200 basis points (2%) p.a., or as may be determined by the Bank from time to time.“
For project related financing, interest payments shall be made in the currency of disbursement and on a semi-annual basis in arrears on outstanding balances commencing within six-months from the date of first disbursement or as may be determined at the time of disbursement. Subsequent payments shall be made on the installment dates of loan balances.
Fees and Charges
Commitment fee: A commitment fee of 0.5% p.a. shall be charged on the undisbursed balance of a direct loan. This fee begins to accrue 60 days after loan signature and shall be synchronized with interest payments;
Administrative fee: A once only fee of 1.0% flat shall be charged calculated on the loan amount and payable on acceptance of loan offer. For short term facilities of less than 180 days, the fee shall be 0.5% flat.
Legal fee: Where the service of external legal counsel is used in the preparation of loan documents, borrower will be required to pay the legal fees of 0.5% calculated on the loan amount;
Others: The borrower would be obliged to pay the charges with respect to monitoring visits, stamp duty, other duties or taxes payable in relation to the loan.
NEXIM shall disburse funds to the PB upon fulfilment of all the conditions precedent to disbursement, and shall advise the beneficiary client accordingly.
The PB shall, within twenty-one (21) working days of receipt of funds establish the Letter of Credit (L/C) and advise NEXIM accordingly with a copy of processed Form “M” and the L/C.
NEXIM reserves the right to do witness testing or engage the services of a consultant to do so on its behalf, at the expense of the PB, before shipment.
NEXIM may consider repayment terms of up to 7 years including a moratorium period of up to 2 years depending on the loan amount and the project being financed. For spare part and raw materials, the repayment terms is a maximum of 2 years, while for packaging materials, the repayment terms is a maximum of 1 year. Payments will normally be made in the currency of disbursement and in a set number of equal and consecutive semi-annual installments. After the moratorium period, semi-annual installments of loan principal and repayments of interest would be synchronized.
The PB shall satisfy itself with the viability of the project being financed under this facility.
NEXIM may request for an acceptable technical report or warranty on the equipment acquired by exporters.
No new equipment should be purchased with the proceeds of this facility from sources other than the manufacturers or major/accredited distributors of the manufacturers.
Where discrepancies are noticed between information provided on the Proforma-Invoice and what is physically delivered, NEXIM shall review the entire transaction and may recall the facility immediately.
PB’s are to ensure the provision of adequate working capital and also bear any cost over-run during the tenor of the facility.
NEXIM shall on an annual basis set borrowing limits for PB’s. These limits will not however exceed 25% of the Bank’s paid-up capital plus accumulated reserves adjusted by provisions for loan losses.
NEXIM shall finance up to 100% of the invoice value of the equipment or raw material provided that it shall not be more than 80% of the total project cost.
Where necessary an extension of the tenor of the facility or due loan installments shall be granted if the problems are adjudged to be of a short-term nature. However such extension shall be made only once.
Where the funds are used for purposes other than for which they were granted, or other forms of abuse such as false declaration etc, NEXIM shall immediately recall all outstanding amounts on the facility and the PB blacklisted. A written report will be made to the Central Bank of Nigeria accordingly.