Mr. Kola Aderibigbe is a trade facilitator and the Managing Director of KSP shipping limited. In this Edition of Shippers’ Guide he explains what it takes to encourage non crude export trade in Nigeria.
How will you rate the current non crude export trade in Nigeria?
Presently, some of the non oil products that are exported out of Nigeria in large volume includes; cashew nuts, cocoa, animal feeds, sesame seed, animal skin, which is being exported for leather and yam, but the quantity is not encouraging at the moment because a lot of the produce is wasting away in the farms. Those are the major export products others includes mineral resources like iron core, lime, columbine, shea butter and others.
For food, we export beans, garri, ginger and smoke fish. For processed packed foods, we export noodles like Indomie to other African countries but it is also eaten a lot in America and in the United Kingdom (UK). Another product is, made in Nigeria Bornvita, which is on the shelf in America and the UK ,as well as so many other foods and beverages.
What impact does the Nigeria, Iran trade alliances have on export trade in Nigeria?
Actually, it has not made any impact, because to my knowledge I know that Iran came to Nigeria and we signed an alliance but majorly what they have been promoting is their own product for import to Nigeria.
There has been other trade alliance what impact has any of these trade alliances had on our export trade?
When we talk about trade alliances, I know of the African Growth and Opportunity Act (AGOA) which is between America and some Africa countries, has really impacted on our export out of Nigeria, because technically, America really tries to promote the trade alliances between America and West Africa, so that African product can be moved straight to America without restrictions.
AGOA has worked tremendously well, but there is something lacking in Nigeria and that is in the area of proper packaging of and exportation of our fresh yam. Ghana happens to be the largest exporter of yam to the UK and America, we have the potential to export more than Ghana because our yam is of very good quality but we lack the expertise to properly package and export it, if we can be well grounded in this area I believe that with the export alliance under AGOA we have a lot to benefit.
Other products like smoked fish goes out very well too but from my knowledge, it is only one company that is accredited to export smoked fish processed garri and even yam from Nigeria because they are the only one that have been audited by foreign auditors who came and audited their factory, and gave them a clean bill of health. If other importers can toe that line I believe we can increase the volume of export trade and benefit from the AGOA alliance agreement.
How viable is the export of non crude products from Nigeria, considering the regulation and standards that are placed on export products and the like hood of being banned if not compliant as in the case of beans and some other grains, recently?
Nigerian product export is a very viable business as I mentioned earlier, yam is a very good product for export out of Nigeria, unfortunately looking at the regulations, our packaging and mode of preservation is not up to standard, these are the areas we really need to develop, because when the packaging is bad definitely when it gets to the other side, it could be rejected.
These are consumable goods and since America and UK are our major markets where we have a large number of Nigerians, when these goods arrive there and they are poorly packaged or the preservations is low whereby there is weevil in the grains or Garri, or if there is too much preservative, definitely it will be banned by the importing country. When it is not properly processed and there is no proper certification to export it out of the Nigeria to those countries a ban will be placed on such products.
How much investment is required for an exporter to go into export of non crude products in Nigeria?
It depends on the scale that the exporter wants to start with , is it on a large or small scale and also depending on the kind of product you choose to export. For instance, to export a product like shea butter you do not need much capital and you need to have made sure that you have a buyer where you are exporting to, another product that that does not cost much to export is noodles like Indomine, you can start with four cartons of noodles, so, minimally with between N50, 000 to N100, 000 one can go into export depending on the product.
What is the government doing to encourage the export of non-crude product from Nigeria?
One of the incentives government used to give to encourage exporters is the Export Expansion Grant (EEG), which is no longer in place because people have been abusing it but I believe if the government can go back to that and make it accessible when it is needed to the exporters especially the small and Medium scale Entrepreneur (SME), they need it to have good standing, so if government can give encouragement by bringing back the EEG, I think it will go a long way. Apart from that there is no other direct source of funding from government to exporters.
Also the absence of steady electricity is a serious challenge because if there is regular power supply it will encourage exporters to increase their export volume, to process Garri, cassava chips, yam chips and all other processing needs electricity and the cost of production will be reasonably low, so from that angle if government can provide stable electricity this will go a long way to encourage export trade in Nigeria. But as of now there is no encouragement from our government.
How does the banks support export trade?
The Nigeria Export-Import Bank (NEXIN), is adapted to provide for this but it can take a very long process because I remember when a customer of mine in Kogi State wanted to start exporting processed cassava chips, he has been going through a lot trying to access credit facility from NEXIM. So, the money is there but how do we access it?
On the other hand exporters need to be true to themselves, because we have seen cases where people are given money and they diverted it to other use instead of using it for trade.
When we talk about soft loans for exporters there is not much prepared for exporters, because we are the ones shooting ourselves on the foot, in the area of financing export the banks have the money even the Bank Of Industries (BOI), have money to give as loans to people but there are some things that needs to be removed from their requirements which are too stringent for exporters to meet.
I do not blame them though for being careful but for the sake of the genuine exporters these conditions should be relaxed a bit. My advice to every intending exporter is to get started first so that they can develop a track record that the banks can access and be able to support, because one of the stringent conditions banks give is providing collateral for loan.
So the importer should be able to carry his financial burden first and develop to a certain level before going to the bank if he expects to make progress in that area. This might take between six to ten years in the business.
What are the step by step procedures of non crude export trade in Nigeria?
Anybody that wants to go into export of non-crude products from Nigeria, first and foremost, must be ready for it, the person must have a corporate account name, that is the first step, you cannot use your individual name because you need to register the name of your trading company with the Corporate Affairs Commission (CAC).
The person at the other side does not see you he does not want to deal with an individual, he wants to deal with a corporate entity, hence, the first step is to register your company. Once your company is registered and you have your money to trade , identify the product you wish to export , identify the buyer and the country , then conduct a survey, you do not have to rush into it, take your time and view who and who wants to buy this product and the level of profitability of the product.
Know the local market where to source for it and the packaging process, calculate how much the final goods will cost, for example your cost price against the international price, to avoid a situation where you get a contract and now discover that you have underpriced or overpriced your product. So you have to understand the product and the market, inside out.
After identifying the product you go to Nigeria Export Promotion Council (NEPC), which is the government regulatory agency on export and get your license for export, some people just want to export without license but it is very important that as an exporter you have a license and an active bank account in the company name. This is the fundamental principle that a prospective exporter must consider before embarking on export.
How does an exporter identify his buyer?
An exporter identifies his buyer via internet on the chamber of commerce of the country of the buyer, and then make an offer to the buyer after doing a proper homework and underground work, he tells them the quantity of the product that is available for sale , then they will tell him the quantity they are willing to buy, after the deal has been closed they will send you a contact he also will send them his contract and profoma invoice then if it is approved, then he takes the contract and profoma invoice to get an NSP form from the bank, fill it, get his insurance, submit it to the bank then, pay 0.5% export levy.
He also needs a professional freight forwarder who understands trade facilitation to guide him and assist him to do the booking with the shipping company, whether by containerization or by bulk or ship load. He needs a trade facilitator who understands the in and out of export trade , he also has to ensure that he fully understands the contents of his contract, it has to contain the proper International Commercial Terms (INCOTERMS); what he is offering, is it FOB (Free On Board), CIF (Cost Insurance and Freight), or (Delivered At Frontier) DAP?
He must understand these terms and what each implies, that is the reason every exporter must have a thorough knowledge of export trade or get the right trade facilitator who can put you through because there are a lot of pitfalls in export and if not done well it could lead to lose.
He has to understand the terms of payment, is it by cash on delivery or by Letter of Credit (LC), the LC is it confirmed revocable or confirmed irrevocable LC? So these are the proper procedures that all exporters must understand.
Your agent will help you to book, he knows when to book, considering the number of days your product can spend at the ports, knowing fully that within seven days your export must leave the ports because once it goes beyond seven days the product could start to go bad and the shipping company starts to charge demurrage, more especially if he did not make all the necessary payments on time.
He also needs to understand the right to sue and the right not to sue the shipping company. When a problem arises which arbitration process will he seek redress? If there are disputes where can it be addressed? All these are very fundamental when it comes to export.
What is NEPC doing to encourage people in non-crude export trade?
NEPC has been doing a lot , going for trade shows, that is what they do majorly, they encourage exporters by funding them to go for trade shows, so that they can go there and show case there products. and they also engage exporters in a lot of training activities but that was about four years ago, there used to be a lot of training, but lately there has been non.
In terms of helping importers whenever there is a trade show any where, they organize some of our importers and take them outside the shores of Nigeria to participate but the issue with our people is that when they go out they go shopping rather than marketing their product.
They do not face what they go out to do, there is a limit to what the government agencies can do, their own is to arrange for exporters and give them the opportunity and as the chief executive officer of their company, it now falls on them to market their product.
Meanwhile, there are some products that you just don’t travel and market because you have to be certain that the product is needed in that particular country , products like shea butter.
There are some countries who do not want to see made in Nigerian products because of some challenges we have had with meeting up with stipulated standards in the past. So NEPC has been trying their best but I believe they can still do better to promote Nigerian export trade.
How does insecurity in our territorial waters impact on export trade?
Basically, insecurity has to do with international trade and it has been affecting the charges of freight because Nigeria is classified as high risk as a result of the rate of insecurity in our territorial waters, so this means that any vessel coming to Nigeria must have a lot of security detail on board and that is at extra cost to the vessel owner which will be transferred to the importer and exporter.
By the time you look at the freight charges and calculate costs, it eats into the profit, so insecurity affects the freight charges of both import and export trade in Nigeria.
What is the future of export of non crude products in Nigeria?
If all the knots are tightened by the Federal Government, the cost of our crude has fallen because America is no longer buying from us, even though India and China is buying but America used to be our biggest buyer. So looking at the international price it is not encouraging, we need to look inwards to build export, so that we can have enough foreign exchange earnings in this country and by so doing export will be encouraged, with all the necessary facilities put in place as a soft landing for growth of export trade.