Saturday 8 October 2016

THE ROLE OF FINANCIAL INSTITUTIONS IN EXPORT FINANCING IN NIGERIA



CHAPTER ONE
INTRODUCTION
1.1       Background to the Study
Financial institutions are organizations which deal basically in money. They constitute the financial framework of an economy. Financial institutions help to pool savings and excess liquidity from millions of individuals and firms within the country and make them available to those who need them for various purposes. 

Financial institutions include commercial bank (Joint stock banks) discount houses, the central bank, saving banks, development bank (BOI), insurance companies, hire purchase companies, the national providence fund, the stock exchange building etc. 
Before the introduction Nigeria export- import bank (NEXIM) in Nigeria as at 1999 the commercial banks were generally referred to retail bankers, while merchant banks were known as wholesale bankers.
However the two operate and offer almost the same services that any line of demarcation is now rather fussy- one can only say that the distinguishing factor between the two sectors of the banking industry is that the commercial banks are members of the central bank of Nigeria (CBN) clearing house, While the merchant bank are not members of the Central Bank clearing house.
Another contentious factor is the licence granted merchant banks to take companies to capital market which the Nigeria stock exchange denied the commercial licensed them to do so, the introduction of the universal banking system of divide effect. A trader could approach either commercial or merchant bank for financing facility for his transactions. They can provide both short and long term facilities and can design any product which meets any requirements of customers.
The Nigeria export-import bank (NEXIM) was established in 1988 but commenced operations in January 1991. The bank was established to provide mainly short term financing for exporters who need working capital to buy hair activities. Among the function of the banks is the maintenance of a foreign exchange revolution fund which is to be made available as loans to exporters who need to export machineries, raw materials and spare parts to satisfy export orders. It can also consider loans involving domestic trade which are likely to assist exports.

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