The potential of the Nigerian export market is huge and reports indicate
that it will remain so for decades to come. But to play and succeed in
this sector, smart entrepreneurs need to be familiar with the challenges
in the export sector (especially those peculiar to Nigerian exporters)
and how to overcome them. In this issue of SuccessDigest, experts in the
Nigerian export sector identify these challenges and show the way
forward.
Opportunities In Export Business
Evang. Godwin Oyefeso - an export consultant - is the Managing
Director/Chief Executive Officer, Success Edge International Ltd. He
says, “Beyond every doubt, there are lots of opportunities embedded in
export business (non-oil export business to be precise) for all, not
just for people with millions of naira only. The agro-commodity export
sector is waiting for all Nigerians to tap into it because the market is
large enough in the sense that our agricultural and natural resources
have a place in the international market. Lots of Nigerians living
abroad need our local foods. But despite these opportunities and lots
more, there are some hinderances in tapping into the opportunity.
Challenges New And Aspiring Exporters Must Note – And How To Overcome Them
Oyefeso Speaks
The first one to be discussed is lack of awareness, knowledge and
information. Information is what brings about transformation and I
usually say this: if you are not informed, you are deformed, if you are
deformed, you cannot perform and eventually if you cannot perform, that
leads to poverty. So, the poverty rate of Africans and Nigerians in
particular is based on lack of information.
Secondly, export has been viewed by many as an exlusive realm for large,
multinational companies and corporations - those with tonnes of
millions. This not true; many people believe that without having
millions of naira, export can't be done but if you know the stuff or
commodities you want to export, the better. For instance, you can
actually export 10 to 25 kilos of bitter cola to some Asian countries
and you will make your cool money. So, that shows that an average
individual can go into export of agro commodities.
Many small scale entrepreneurs have been responsible for the momentum in
the non-oil export sector in Nigeria today. Let me give you a striking
testimony in terms of figures. In 2012, Nigeria realized N2.5 billion,
while in 2013, Nigeria realized N2.9 billion from non-oil export. It is
dicovered that almost 45 percent of this is from small scale
enterprises. What this means in essence is that a lot of people are
going into export, but the major challenges are lack of knowledge and
the notion that the business is for big boys.
But if there are no problems, there wouldn't be solutions - according to
a popular saying, "If you don't have a challenge, you can never be a
champion." Export is something that is very interesting, important and
very good, but the basic thing is that you need knowledge, exposure and a
good mentor.
Once you have those things, the sky won't be your limit. Opportunities
in oil export are based on people growing it to discover ways of earning
a living, where you can make billions of dollars, as Nigeria has relied
heavily on oil. You should also know that the United States of America
has given a red alert to Nigeria that there is going to be a drastic
decrease in what they buy from us in terms of oil products.
Thirdly, let's talk about challenges in the area of funding; which many
people are facing. Most Nigerian banks do not fund starters and majority
- almost 60 percent of new entrants don't have money. These new
entrants know where to get the commodities, they know the quality, they
know the specifications, but they don't have the money to run it.
So, funding is also important - we have a lot of import and export
banks, which are basically for big players in the economy, so those who
are coming in don't have access to such funds. Solution-wise, if
government can provide funding like the N400 billion set aside for SMEs,
which we have not yet heard anything about. So, if government can set
up fund for small scale exporters, I think it will help the economy to
grow.
The fourth challenge facing exporters is proper documentation. I will
say if you don't have proper documentation, exporting will be difficult.
For instance, there are some things Customs require:
1. All exports should be properly documented.
2. All exportable items must be properly examined to ensure that clean certificates of inspection are issued.
3. Exporters should not break any probity law.
Documents:
1. All exporters must have a corporate identity - this means they must
be registered with Corporate Affairs Commission CAC to obtain a
certificate of incorporation. You cannot go into export without a
registered company.
2. All exporters must also obtain a certificate of membership of Nigerian Export Promotion Council, NEPC - export license.
3. Exporters must open a domiciliary account with any viable bank. When
you are eventually paid in foreign currency, you can't receive it except
you open a Dollar, Pound or Euro account.
4. Nigerian Export Proceed form must be filled and submitted to
exporters' bank for registeration and endorsement. This form is
obtainable from commercial banks - the exporter thereafter pays into the
bank, NESS fees, which is just 0.5 percent of the Free On Board FOB.
So, after all these have been certified, a clean certificate of inspection will be issued.
5. For export of agricultural commodities, there must also be
certificate of quality issued by quarantine - Federal Produce Inspection
Office of the Federal Ministry of Agriculture. When all the above
requirements are met, the exporter or the agent will have to complete a
SGD form - Single Goods Declaration which is Custom document for
processing and releasing.
So, SGD form must be accompanied with: Certificate of Incorporation,
membership form of NEPC - export license, invoice of acceptance or
evidence of value of local and foreign currency, which must be duly
stamped and endorsed, clean certificate of inspection, the Nigerian
Export Proceeds form, the certificate of quality issued by the
quarantine department and other relevant documents.
The fifth challenge is about getting buyers and sustaining them. Well,
getting buyers is not difficult at all - there are various ways you can
get buyers.
1. You can get buyers on the internet by registering with various
portals on the internet - there are lots of them. There are some that
are free and there are some you will have to pay for.
2. You can get buyers through existing exporters like me, who has a
larger heart and can assist you with buyers you can send commodities to.
3. You can get from attending training programmes - like in our
organized export training programmes. We give attendees places to send
their commodities in the international market. What that means is that
you use money to buy knowledge.
4. Getting directly through various chambers.
5. You can as well place a classified advert in the Nigerian and
international dailies. So, we also advice exporters not to base
everything on the internet because of scammers. There are contacts
abroad that can't be traced at all.
For Gum Arabic, which Nigeria is the second largest producer with three
grades of it. It is usually used in food beverages, and for
pharmaceutical and industrial products. It's purity: 98 percent, maximum
moisture content: 10 to 12 percent, total ash content: 4 to 6 percent,
maximum acid insolvable residue: 0.4, starch: negative, turning bearing
gum: negative... If you are able to meet this specification, rest
assured that you will be tired of buyers.
Obiora Madu Speaks
Obiora Madu is the Chief Executive Officer and Programme Director of
Multimix Academy. He’s spent over 30 years in the export industry. He is
popularly called Mr. Export because of his total commitment to the
improvement of standards in export practice and management in
Nigeria. In 1999, he was a recipient of the prestigious Economic
Community Of West African States (ECOWAS) Gold Award for his
contributions to international trade development within the sub-region.
Madu Says: There are even more challenges in
exportation than in importation business because in importation business
all you need is money in your account. But in exportation even if you
have money in your account, there are the chances that you will lose
that money if you do not take your time to understand the rudiments of
the business.
These challenges are surmountable but people need to understand that
going into exportation business is not the cheapest thing to do. Now
what are these major challenges, what are these risks? Most of these
risks are self inflicted. Reason one, people don’t believe that there is
anything they need to learn when it comes to exportation businesses,
they have this notion that is it not just to take that thing, package it
and just send it to the address you have, but at the end of the day
they will find out that it is not so, but by then they have lost money.
There is this challenge that people face in exportation businesses that
is outside their control. One of such challenges is access to market;
and access to finance is the second one. These are the two major
challenges that both companies and individuals who either are already
into exportation business or want to do the business face.
This is outside the fact that they have to get the actual technical
knowledge for the business, understand the logistics of the transactions
and also understand the issue of payments. Ensuring that you get paid
after every transaction is very important.
Access To Market
Access to market is a very major issue, reason one; as a nation our risk
trading is very, very high, occasioned by our attitude to contacts, 419
and a whole lot of other issues. Now as a result of this, getting
foreigners to deal with you the way they deal with other people leads to
problems.
Also the other option is to come together as a body or group to get
assistance and to gain strength. It is called cooperative exporting,
again it makes the group stronger - it gives you a bigger capacity to
negotiate and a whole lot of other benefits. But you do know that coming
together as a group or a body is one of the most difficult things to
do.
I personally tried to nurture a cooperative before, for a very long
time. I somehow tried to nurture one and I said thanks be to God, but
somewhere along the way the whole thing scattered and everyone one went
back to their tent. So the challenge of access to market can be tackled
if the people involved understand what it takes, if they get the
adequate support that the government agencies responsible for export
promotions is able to give them.
They will go far if the support is there and if they cooperate they will
get a stronger support. This is as far as access to market is
concerned.
Now Let Us Look At Access To Finance
This is the very major problem in most businesses in Nigeria. The banks
are not interested in financing exportation businesses simply because
they say the risk is higher, the profit is slightly lower and that their
money will be tied down. But the fact is that, national development is a
good reason to finance exportation businesses.
What has happened in the past with exportation and banks is the annuity
to throw the baby and the bath water away. Because they don't understand
the transactions, and this is wrong.
Fortunately, NEXIM is there and there are facilities although NEXIM is
not structured to deal with such issues of individuals directly, NEXIM
is structured to deal with these individuals through their banks. So
what NEXIM is doing is that if for instance the bank interest rate of
about 25%, NEXIM can give 14% to the bank and tell them that the profit
you make is maximum of 4% so that will amount to about 18% interest that
you will be paying.
This is one of the incentives that NEXIM offers because if you are left
alone to deal with the bank you may not be able to access the facility,
some have tried to deal with the banks directly and they got their
finger burnt.
From Your Words Sir, In Regards To Solution To The Challenge Of
Access To Market You Mentioned That People Don't Want To Learn. What Is
Government Doing To Get Interested Or Already Established Exporters To
Get The Knowledge Required For Maximum Profit?
A lot is in the hands of the exporters, we all know that access to
market and access to finance are surmountable challenges but there are
still issues with the exporters themselves.
There is also assistance from development agencies like USAID and the
rest of them that come up once in a while, we have not been able take
advantage of the facilities they present.
If the exporter has done his own part of the deal every other part of
the challenge will become smaller. It will not disappear but it will
become smaller.
Occasionally, Export Promotion Council runs seminars and workshops but
as a professional I know that, that is not enough because export thrives
on a tripod; development, promotion and capacity building. You need to
actually design a program or courses that will address all the issues.
One thing that is crucial that I also think they should be doing, that
is the government agencies, is that they should create more incentives.
How do exporters access the existing government incentives available?
These incentives are for everyone but the percentage each person
receives is different from one another depending on the terms and
conditions reached. For instance if you export manufactured items, of
course your percentage will be at the higher margin, if you export a bit
processed item, you will be at the middle margin and if you export raw
produce then of course you will be at the lowest margin.
What you get in the chain is clearly spelt out, you don't expect someone
who exported raw cashew to get more incentives than someone who has
taken pains to process the raw cashew into peanuts other finished
products.
The Importance Of Sound Technical Knowledge
For me as a consultant and a businessman, I will expect that before
funds are mentioned you need to have a very sound technical knowledge of
how the business of exportation works, irrespective of the funds needed
to complete that transaction, you can actually export without
necessarily having your own funds.
If you come to me and say you need money, I want to see your business
plan, I want to be sure you understand the transactions. Imagine someone
saying he wants to export laptops from Nigeria to other nations.
Even if you are getting that money from the banks, the bank wants to
know what you are going to use that money for and how profitable that
transaction will be, who are you selling to? Even if you have not
concluded the transactions, how far have the discussions gone?
The bank will want to know who you are buying from and who are you
selling to? Because the banks know that if your suppliers fail to supply
you, then you cannot sell to anybody. And they also want to check your
antecedents, what have you done in the past? Who have you done business
with in the past and how did it end? Now some people just go into
business or go into anybody or any financial institution without answers
to these questions.
The truth is that the lots of people who complain do not have the
capacity to export. The fact about business generally is that money is
scarce, unless you’re rich dad has left you a fortune, and also, no
matter how much you have, you cannot just go in and just walk out with a
lot of money. You must show a business plan; you must demonstrate a
thorough understanding of the business you are going into before you
will be able to attract investors or financiers.
And you must also have a percentage of the amount you are asking for no
matter how small. You can't come to me and expect me to carry 100% of
your risk.
Advice For Exporters
First things first, go get the knowledge. Two, know that there are no
elevators to export success but only ladders or steps - it is step by
step. And this is why we say that in exportation it is all about
processes not transactions. If you don't follow the process even if you
came in with so much money, you are likely going to lose all that money.
Also they need to realize that any business or deal that looks too good
to be true and easy is 419.
Otherwise people could advertise for seminars, make promises that they
are not going to fulfill and you fall prey to them and you start
complaining. The man did not drag you by force. You only fell into his
trap because you were gullible but if you take your time to do first
things first, when you see such things you will know that what they are
saying is not true.
So, do the first things first, get the services of a competent
consultant, my emphasis is on competent not all consultants that pose
around are actually competent. Another thing you need to know: once you
have engaged the services of a consultant, once it appears like he wants
to run your business for you for the rest of his life, then he is not
competent.
Competent consultants will help and as soon as he sees that you are able to do it by yourself he leaves you to do it.
If we do this very shortly we will become the real consultants that will be helping others.
Mrs. Abimbola Alawode, CEO, Rhabe Ventures Limited, Speaks On Opportunities In Food Exportation
The opportunity for food export is huge, there is almost nothing we eat
here in Nigeria that is not demanded by Nigerians in diaspora. From pap,
ewedu, ugu, ogbono, crayfish, yam, iru, plantain, cassava, to palm oil.
The list is inexhaustible.
On The Challenges In Food Exportation
You will have to cross the first hurdle of identifying genuine buyers
who also are licensed to import your product. When a contract is then
issued, we have challenges of overcoming specifications and standards
which are common problems for us.
Most of our local producers have yet to confirm with consistency in
quality, pack sizes and acceptable packaging materials and labelling. We
have huge issues with contamination such as aflotoxins which has
constantly created huge losses for our exporters due to inexperience or
inability to carry out analysis to certify our products before shipping.
As our receiving countries are more careful with the life of their
citizens, safe food becomes an issue for most African exporters. We need
more discipline in food handling.
On Overcoming The Challenges
I will recommend proper research of the country you are intending to
export to. Ensure you are working through licensed agents. Do small
volume export before huge container loads. It is worthwhile if you
ensure that for example in the USA, that you have filled out your prior
notice document before you ship your product and also understand the
common issues your product has been facing from other exporters so you
have your answers ready in your notice. Always analyze your product
before shipping. That way, you can identify the contaminants before
shipping. And in sourcing for produce, be sure to know how your food is
processed. Stay away from open markets, contaminants may be introduced
in the market which you cannot track in any way. Ensure you source from
places where you can guarantee origin of product or source of
contamination.
On Specifications And Standards Of Packaging Of The Food Product For Various Countries And Shipping Processes
Specification is not an issue for me; as you have seen the international
market is more mature than we are and therefore when you get a
specification, you determine if you can fulfill the order. Most people
who have issues try to cut corners by shipping foods of different
specifications which are different from the sample approved. I know we
also have some buyers who also get very finicky. They expect precision
which sometimes can affect payment, I don't have such experience and
don't hope for it. It can be dangerous for the business, as people loose
huge sums when they get involved in such situation.
On Challenges In Terms Of Getting Finance, Getting Buyers And Sustaining These Buyers
Finance is an issue for any business, we are constantly looking for
finance for expansion of operation. Research online is a good way to
look for buyers. Also, have a website or Facebook page that is
interactive. NEXIM Bank supports export and will finance your project if
you have a contract. Once you have a good product, fulfill contract
terms and manage your customer like every industry, chances of
sustaining buyer is high.
Her Advice To Anyone Who Wants To Go Into The Food Export Business
My advice to anyone who wants to go into food export is to start with a
business plan. Research is key to understand the market you are trying
to get into. We have other African countries doing this, paying
attention to competition is essential. Don't focus on export market
only, Nigeria has a huge market; do something special for this market,
it is over 160 million people waiting for different food products to be
on their shelf.
Culled From
SuccessDigest Extra
