export finance

Are you a Nigerian entrepreneur looking to export goods to international markets? If so, you have come to the right website. This article will give you all the information you need to understand export financing, including what it is, how it works, and the key benefits of using it. We will also look at the challenges associated with export financing and how best to navigate them in order to ensure a successful transaction.

Export financing is an important part of doing business in Nigeria, and an understanding of it can result in improved profitability for your business. It can be a complex process but with the right knowledge and advice, it is possible to secure better terms and conditions for your exports.

This article will provide detailed information on export financing in Nigeria, explaining the different types of finance available and the advantages they offer. It will also advise on best practices when dealing with financial institutions and help you understand the legal requirements involved. Read on to find out more about export financing in Nigeria.

What Is Export Financing?

Export financing is a type of financial arrangement to help businesses participate in international trade. It involves providing the necessary funds and support needed to fulfill an export contract, including letters of credit, loans, and trade-specific insurance.

In a typical exporter-importer relationship, the exporter will agree to provide goods or services for an agreed-upon price in exchange for payment from the importer. Export financing can allow these transactions to take place by providing the financing for the exporter upfront—making it easier for them to undertake contracts with other countries.

The purpose of export financing is to reduce the risk associated with international trade, both from a financial and logistics standpoint. This form of financing is often provided by commercial banks, export credit agencies (ECAs), foreign governments, and even private investors.

By understanding all aspects of export financing in Nigeria—from types of providers and services offered to guidelines and regulations—businesses can more easily navigate global markets without having to worry about their finances getting in the way.

Types of Export Financing in Nigeria

There are three primary types of export financing in Nigeria: credit insurance, letter of credit, and standby letters of credit.

Credit Insurance

Credit insurance protects businesses from bad debt or where buyers fail to pay. It helps protect the financial interests of companies by mitigating the risk associated with exporting to countries that have different legal and financial systems.

Letter of Credit

A Letter of Credit (LC) is a payment method used in international trade that requires the importer’s bank to guarantee payment to an exporter. The exporter will draw up an LC which will be presented by the importer’s bank to its issuing or confirming bank. The confirmation gives additional assurance that payment will be made, even if the importer defaults on the transaction.

Standby Letter of Credit

A Standby Letter of Credit (SBLC) is a guaranteed commitment to pay by a third party in the event that an exporter fails to fulfill an obligation as agreed upon in a contract. SBLCs provide additional protection for companies exporting goods, as they guarantee that they will be paid regardless of what happens with their customers overseas.

Financing Options for Exporters in Nigeria

You’ve done your research and you know that exporting requires some upfront capital. To stay competitive in the global marketplace and ensure your export business succeeds, what financing options are available in Nigeria?

Bank Financing

Local banks in Nigeria can provide small business owners with loans to help get their exporting businesses off the ground. These loans will typically come with interest rates depending on the size of the loan, the credit score of the applicant, and the track record as a business owner. Additionally, some banks may require collateral or a personal guarantee before granting a loan.

Government Grants

The Nigerian government provides export-specific grants to support small businesses and entrepreneurs who are looking to enter international markets. To be eligible for these grants, businesses must meet certain criteria regarding their size, product offerings, and location within Nigeria. Additionally, most grants will require documentation to prove that these requirements are met before they can be granted.

Private Investment Funds

There are also private investment funds in Nigeria that provide financing to small businesses looking to enter export markets. These include venture capital firms, angel investors, and other private equity groups that specialize in investing in early-stage companies looking for export growth opportunities. However, these investors typically require the business to have achieved certain milestones prior to investing in order to ensure the business is a reliable investment opportunity.

Advantages of Export Financing in Nigeria

Export financing in Nigeria offers several advantages to exporters, including easy access to funds, improved risk management, and increased profits.

Easy Access to Funds

Export financing helps exporters in Nigeria access funds quickly and easily. The Export Credit Guarantee Scheme (ECGS) is a government-run scheme through the Nigerian Export-Import Bank (NEXIM) to provide export financing for Nigerian companies that are exporting goods or services abroad. This scheme can be used to cover up to 50% of the cost of exporting goods or services.

Improved Risk Management

The ECGS also helps reduce the risk associated with doing business abroad by providing insurance against non-payment from foreign buyers. This insurance helps protect exporters against any losses they may incur due to buyers not paying their invoices on time or at all.

Increased Profits

Export financing can also help exporters increase their profits by giving them access to larger orders from overseas buyers and faster payment terms that can help increase cash flow. Exporters who have access to export financing are also able to offer more competitive prices than those who don’t have access to these funds, making them more attractive partners for international buyers.

Challenges of Export Financing in Nigeria

The export financing environment in Nigeria can be challenging for companies to navigate, but there are a few key strategies that can help.

High-Interest Rates

One of the major issues when it comes to export financing in Nigeria is the high-interest rates associated with it. Interest rates for export financing can range from 10-14%, which can be difficult for businesses to manage.

Limited Accessibility

Access to export finance is also limited in Nigeria due to the fact that there are few banks offering this type of financing and those that do have very stringent criteria that must be met in order to qualify. This can make it difficult for small businesses to access this type of funding.

Unstable Currency

The Nigerian currency is notoriously unstable which puts exporters at an increased risk of currency fluctuations and losses if they are not able to adjust their pricing models in response. Additionally, currency instability can lead to delays in payments and other complications when dealing with international buyers or suppliers, making it important for exporters to have contingencies in place such as hedging contracts or foreign exchange management services.

Government Policies Backing Export Financing in Nigeria

In Nigeria, export financing is an important driver of the economy. But without government backing, it can be difficult to secure funding for exports. Fortunately, the Nigerian government has put a number of policies in place to support export financing.

These policies include:

  1. The Export Expansion Grant (EEG): Under this scheme, exporters are eligible for grants that cover up to 75% of their export-related costs. The EEG is aimed at encouraging small and medium-sized enterprises (SMEs) to enter the international market.
  2. The Export Credit Guarantee Scheme (ECGS): This scheme provides guarantees for up to 90% of the value of an export contract for exporters who have difficulty accessing credit from commercial sources due to their size or risk profile.
  3. The Export Development Fund (EDF): This export financing Scheme was set up by the Federal Government of Nigeria to provide funding for exporters who need additional capital to pursue export opportunities that might not otherwise be available due to their size or high-risk levels involved with international trade activities.
  4. The Export Incentive Scheme (EIS): This scheme provides incentives for exporters such as tax credits and cash grants for meeting pre-determined performance criteria related to exports and re-exports.

By supporting exporters with these various initiatives, the Nigerian government hopes to encourage local businesses to explore global markets and create sustainable growth within the country’s economy through increased foreign exchange earnings from exports.

Challenges Overcome With Export Financing in Nigeria

Export financing in Nigeria can provide the necessary funds to make international trade easier and more profitable. However, there are some unique challenges faced when operating in this market. Fortunately, export financing can often be used to overcome these issues.

Exchange Rates

Nigeria operates on a floating exchange rate system which means that rates for the local naira currency are constantly changing in relation to international currencies. This makes it difficult for businesses to accurately budget their export activities and plan for long-term success. Financing can provide capital to help businesses buy foreign currency today at a given rate, instead of waiting until rates may be more favorable later on.

Credit Availability

In Nigeria, getting access to credit Lines or Loans can be difficult due to high-interest rates, stringent conditions, and limited competition among lenders. Export financing can offer access to funds without these stringent conditions, allowing businesses to focus on their export plans instead of worrying about credit availability.


Nigeria is known for its complex and constantly changing regulatory landscape which can often pose challenges for exporters. Export financing offers a streamlined way of getting the necessary capital needed as quickly as possible so businesses don’t have to worry about working around difficult regulations or waiting for approvals from multiple parties with conflicting interests.


In conclusion, export financing can provide a critically important source of financial support when exporting goods and services from Nigeria. By understanding the financing options available, businesses can gain access to the resources they need to facilitate their international trade activities. Furthermore, when exporting to countries that have favorable terms of trade agreements with Nigeria, businesses can benefit from lower tariffs and other costs associated with international trade. With the right export finance strategies in place, businesses can ensure that their export activities are properly managed and supported.