PT IndoOlien (PTIO) received a trade enquiry where Nigeria Noodles Company (NNC) is looking to purchase...

 

Transcribed Image Text:

PT IndoOlien (PTIO) received a trade enquiry where Nigeria Noodles Company (NNC) is looking to purchase 10,000 metric tonnes of Refined, Bleached, Deodorised (RBD) Palm Olien. NNC mentioned that it usually pays by Documents Against Acceptance 90 days from Bill of Lading (B/L) date but may consider having Zenith Bank, a Nigerian bank, to issue Letter of Credit if the cost of doing so can be absorbed by PTIO. PTIO Trader was very excited by this opportunity to enter the African market and approached PTIO Credit Controller for his views. PTIO Credit Controller commented that PTIO had never traded with an African customer. Moreover Nigeria's sovereign rating is B+ (Fitch, 2nd November 2018) which is below investment grade. NNC is also a name not known to PTIO. In recent months cash flow has been tight for PTIO, and it cannot afford any bad debts. As PTIO Trade Finance Executive, you are asked look into this matter. Recommend a solution to accommodate this trade with NNC and mitigate the Credit Controller's concerns. Use the following pointers as a guide to make your recommendation: Country Risk and Customer Credit Risk Acceptability of Documents Against Acceptance 90 days from Bill of Lading (B/L) date as payment terms Acceptability of 90 days Usance Letter of Credit as payment terms Acceptability of Zenith Bank as Issuer of Letter of Credit Letter of Credit (LC) Confirmation Letter of Credit (LC) Discounting Account Receivables Purchase Facilities Resource vs Non-Recourse Committed vs Non-Committed facilities PT IndoOlien (PTIO) received a trade enquiry where Nigeria Noodles Company (NNC) is looking to purchase 10,000 metric tonnes of Refined, Bleached, Deodorised (RBD) Palm Olien. NNC mentioned that it usually pays by Documents Against Acceptance 90 days from Bill of Lading (B/L) date but may consider having Zenith Bank, a Nigerian bank, to issue Letter of Credit if the cost of doing so can be absorbed by PTIO. PTIO Trader was very excited by this opportunity to enter the African market and approached PTIO Credit Controller for his views. PTIO Credit Controller commented that PTIO had never traded with an African customer. Moreover Nigeria's sovereign rating is B+ (Fitch, 2nd November 2018) which is below investment grade. NNC is also a name not known to PTIO. In recent months cash flow has been tight for PTIO, and it cannot afford any bad debts. As PTIO Trade Finance Executive, you are asked look into this matter. Recommend a solution to accommodate this trade with NNC and mitigate the Credit Controller's concerns. Use the following pointers as a guide to make your recommendation: Country Risk and Customer Credit Risk Acceptability of Documents Against Acceptance 90 days from Bill of Lading (B/L) date as payment terms Acceptability of 90 days Usance Letter of Credit as payment terms Acceptability of Zenith Bank as Issuer of Letter of Credit Letter of Credit (LC) Confirmation Letter of Credit (LC) Discounting Account Receivables Purchase Facilities Resource vs Non-Recourse Committed vs Non-Committed facilities

Answer rating: 100% (QA)

it appears that you are considering a trade finance solution for a potential sale of 10000 metric to... View the full answer