Nigerian business magnate Aliko Dangote
Nigeria has asked India to provide export credit to its major Indian suppliers in heavy engineering, petrochemicals and the food-processing industry among others.
The proposal to provide a “company to company” export credit facility has also been backed by Nigerian business magnate Aliko Dangote, who on a recent trip to India pointed out that China offered this facility.
Globally recognised as the richest person of African descent, Dangote told Business Standard he did business worth $3.5 billion with India for sourcing equipment for his petrochemicals, agriculture, and power businesses.
He added New Delhi should emulate Beijing, which has graduated from simple sovereign 'lines of credit' to trade partners. Now, it uses the scheme to arm its major exporters with enough capital to capture the African market.
"China was earlier 'government to government' but now they give a lot of credit support to companies. But the quality and competitive pricing of Indian equipment make us prefer them. We wish to get export credit facility to strengthen our relations with India and make us buy more from here. Currently, it is cash and carry. We want to convert it into some kind of support from the Exim Bank in India," he said.
However, the Export-Import Bank (Exim Bank) is still out on the proposal, which had been pushed by other nations earlier. The Exim Bank acts as an intermediary between the government and exporters on export financing.
“We have begun the process of analysing how the available funds may be disbursed and classifying which sectors are hit by credit scarcity the most. But traders have to understand that funds are limited and tough decisions taken by the government to allocate export credit for certain priority sectors may not be to everyone's liking," a senior Exim Bank official said.
Dangote's statements echo those of other major importers of Indian industrial goods from the developing world. India had remained a crucial supplier to these nations till 2005-06, when China began to provide huge capital to state-owned firms to boost exports, a Delhi-based trade economist said.
Dangote batted for a larger African footprint in India's $465 billion import bill. "We have 10 per cent of the world’s oil reserves and 40 per cent of coal reserves. In coming years, we can meet the energy demand of India. You’ll need raw materials and energy and the next supplier will be Africa. India will be our biggest trading partner," he said.
Africa has been classified as a high-priority region by the Commerce Department, which has been pushing industry bodies to establish linkages with partners on the continent, a senior functionary of the Confederation of Indian Industry said.
It says Africa is a largely untapped export market with a major demand for labour-intensive products such as hardware and textile, an industrial space China is moving away from.
Nigeria, along with other African nations, has made China its largest trade partner, substituting the US. China has been Africa’s largest trading partner since 2009 and their merchandise trade stood at $170 billion in 2017.
Exporting mainly machinery, electronics and textiles, and importing crude oil, iron ore, cotton and other natural resources, China has the closest trading ties with South Africa, Angola and Nigeria, according to the China Africa Research Initiative.
On the other hand, the latest available official statistics show India's bilateral trade with African nations stood at $52 billion in 2016-17 and $34.5 billion in the April-October period last financial year.
"Currently, few companies provide credit to their sourcing partners. But mandating a policy allowing export credit to specific companies may prove difficult as the credit worthiness of the sourcing partner has to be assessed," Federation of Indian Export Organisations Director General Ajay Sahai said.