Work
Areas of focus, the working principles behind them, and one trade shown financed two different ways.
Areas of focus
Pre-shipment and pre-export finance, letters of credit, warehouse receipt and collateral management arrangements, and the paperwork a Nigerian exporter has to get right, from the Form NXP and the Clean Certificate of Inspection to the bill of lading and the repatriation of proceeds.
The same trade can be financed as a pre-export loan or as a Murabaha purchase and sale, and each has its place. I work on choosing and structuring the right one: term loans and invoice discounting on the conventional side; Murabaha, Salam, Istisna and Ijarah on the Islamic side, where the financing has to track a real asset. Both are documented and monitored so that they hold up for the bank and for the client.
How a bank decides whether an agro-commodity business is bankable. Cash flow across a season rather than a calendar year, the gap between what a company is registered to do and what its accounts show, concentration risk, and the role of risk-sharing instruments such as the NIRSAL credit risk guarantee.
Using transaction data, aggregator and farmer records and digital channels to underwrite agricultural businesses that collateral-led lending leaves out, and what that shift asks of banks, fintechs and regulators.
Working principles
Commodity trade is a sequence of movements: purchase, storage, inspection, shipment, proceeds. Structures that follow that sequence, such as Murabaha and pre-export finance, are repaid by it. Structures that lean on fixed collateral are repaid when the collateral can be sold, which is a different business.
A calendar-year set of accounts hides the shape of agribusiness. Cash goes out at harvest and comes back at sale, and a statement cut in between shows a company that looks stretched. Appraisal that reads the season approves the right businesses and prices the right tenor.
The Form NXP, the inspection certificate, the bill of lading and the repatriation of proceeds are each a control point as well as a compliance item. Lenders should read them as such, and exporters should treat a clean document chain as part of what they sell.
A raw bean exporter and a processor shipping cocoa butter are different credits. The processor earns more per tonne, holds better receivables and carries supply chain risk a bank can price. Every facility that only funds raw export is a vote for the status quo. The structures that matter are the ones that keep the processing node in Nigeria.
Transaction histories, aggregator records and satellite imagery can underwrite businesses that hold no title deeds, and they will reach far more borrowers than collateral ever did. They can also flatter a borrower. Somebody who knows what a good warehouse looks like still belongs in the appraisal.
Credit rationing persists where information is thin, contracts are hard to enforce and transaction costs are high. That is an institutional problem with institutional remedies: credit guarantees, collateral registries, warehouse receipt systems and standard documentation. My research asks which of these actually change lending behaviour in Nigeria.
Worked examples
A trader buying cocoa for export can be financed conventionally or under an Islamic structure. Both are shown step by step, as they actually run.
Conventional: pre-export finance
The exporter holds a confirmed sale contract with an overseas buyer, usually backed by a letter of credit or a documentary collection, stating grade, quantity, price and shipment window.
The bank advances a percentage of the contract value, typically against the contract, the NXP opened through the bank, stock monitoring and domiciliation of proceeds. Interest accrues on the amount drawn for the time it is outstanding.
The exporter uses the funds to buy and aggregate stock. A collateral manager or stock report confirms what is in the warehouse against what has been financed.
The consignment is inspected, the Clean Certificate of Inspection issued, and the goods shipped. The bill of lading and shipping documents pass through the bank.
Export proceeds are paid into the domiciled account and the bank recovers principal and interest at source before releasing the balance to the exporter.
Islamic: Murabaha trade facility
The client identifies the goods and the supplier and asks the bank to buy them, giving an undertaking to purchase the goods from the bank once the bank owns them.
The bank buys the goods from the supplier in its own name and pays the supplier directly. It may appoint the client as its agent to collect the goods, but the money goes to the seller of the goods, never to the client as cash.
For a period, however brief, the bank holds title and bears the risk of the goods. This is what makes the profit on the onward sale lawful, and it is why the goods must be identifiable and in existence.
The bank sells the goods to the client at the purchase cost plus a disclosed profit, payable on deferred terms. The price is fixed at the point of sale. It does not rise if the client pays late.
The client takes delivery, processes or exports the goods, and the export proceeds, domiciled with the bank, settle the deferred price on the agreed dates.
Stock reports, inspection certificates and shipping documents track the goods through the cycle. The facility is sound when the bank can see the goods it financed at every stage, from the supplier's yard to the vessel.