INTERNATIONAL TRADE AND FINANCE

International finance is the branch of financial economics that is concerned with monetary and macroeconomic interrelations between two or more countries. It examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how they relate in the context of international trade. International finance is further concerned with matters of international financial management where investors and multinational corporations identify and manage international risks such as political risk and foreign exchange risk, including economic exposure, transaction exposure and translation exposure. Full knowledge of international finance is required as a subject for candidates majoring in banking in institutions of higher learning as well as those sitting for professional examinations of the Chartered Institute of Bankers of Nigeria and other professional bodies. Putting all these requirements together is what Mr. Joseph Okunato has done creditably in this book titled International Finance. The common slogan that the whole world has become a global village would have better meaning and applicability when citizens of one country can tap into the business opportunities in some other countries seamlessly. Such a feat can only be achieved by having a good knowledge of International Finance. From its beginning, this book elaborately discusses the core economic issue of exchange rate determination between currencies and the interrelationship of the subject to the roles of the monetary systems. It goes further to educate readers on what individuals and corporate entities must do to cover risks that are inherent in foreign exchange transactions. It emphasizes its essence for practitioners and students, and the need for them to understand the intricacies and implications in the handling of international trade transactions. These issues were explicitly handled in the book. International trade has grown significantly in recent time and the trend is bound to continue as nations meet their internal deficit of goods and services by drawing from the corresponding surplus of other countries. Exchange of currencies and correct documents still remains the medium widely adopted internationally for passing goods and services from the exporter to the importer. Hence, the author was particularly meticulous as he devotes space in giving detailed description and thoroughly explains the delivery of documents required in contracts of sale and the terminologies that traders and businessmen should be accustomed to. The book also discusses the various methods through which the contracts are consummated, including the recently introduced Bank Payments Obligations, coming on the trail of the Supply Chain Financing. All these give the reader a good grasp of the subject. The structuring of the book to contain updated information to reflect current practices should be of great delight to the reader. The chapter on financing international trade is a must read for bankers, students, consultants, businessmen and financial experts as they will find its content very useful in enhancement of knowledge and the discharge of their day to day operations. The author further deliberates on risks that are engendered in international trade and the ways of effectively mitigating them. Through clear understanding of these, investors, traders and financiers involved in international trade are expected to have insight into ways of ensuring adequate cover for the risks they take regularly in their international business transactions. The writer further devotes many chapters to deal extensively with Collections and Documentary Credit. These chapters are must read for students of international trade for avoidance of landmines in international finance. Practitioners would find the chapters very instructive. I feel greatly enthused by the way the author manifests deep research in his articulation of the historical development of the Foreign Exchange market, the structure of the market and the risks embedded in the market throughout the book. The basic elements of individual transactions, dealing with the basic arithmetic of exchange, book entries and how risks should be covered are thoroughly handled for easy assimilation by the reader. Following this is the role of the Central Bank of Nigeria and the various participants in the market, the regulatory framework, including documentation of transactions in foreign trade. The book also covers the various incentives that are in place for exporters in Nigeria, which those who are eligible should be encouraged to take advantage of. The book also delves on the roles of various international organisations in the development of international trade and how individuals and corporate entities should access them for various opportunities. I have known Mr. Okunato for well over two decades. I believe that his vast exposure and experience garnered in the course of working in the Foreign Exchange Department of Union Bank of Nigeria Plc. at various supervisory levels have influenced substantially in writing this book. I had a closer relationship with the author when he worked with Devcom Merchant Bank where I was the pioneer Managing Director and the responsibilities of Mr. Okunato included the supervision of the functions of the International Trade Department. Mr. Okunato was widely known for thoroughness and deep knowledge of international trade. I recall that Mr. Okunato was also a lecturer of International Trade with The Chartered Institute of Bankers Nigeria at some of the Institute’s training centres for preparation of banking students for the Institute’s professional examinations. He later served as an examiner of the subject with the Institute. He also lectured for Obafemi Awolowo University in their outreach station in Lagos between 1998 and 1999 in the same subject. I am therefore delighted that he eventually took the bold decision to share this vast knowledge and experience with a wider public. The Nigerian economy still needs substantial capital inflow through import finance, equipment suppliers’ credit and direct foreign investment to booster local resources for international competitiveness. Alongside, Nigeria needs to stimulate exports of locally produced goods and services where the country has competitive advantage. In recent time, some corporate entities that sourced long-term foreign funds reportedly ran into repayment problem due to their poor knowledge of the interplay of interest rate risk with exchange rate risk. This book titled International Trade would serve to provide succor to present and prospective importers of capital, goods and service. I therefore highly commend this book as a useful text for students of International Finance; as a reference book for consultants on international trade; for bankers as guide on foreign exchange transactions; for businessmen for guidance on international trade; and for financial experts for update of knowledge in the handling of international finance. Femi Ekundayo Past President, The Chartered Institute of Bankers of Nigeria October 2014