Exportation is a
major foreign exchange earner for any economy in the world, but it has to involve
multiple products for it to be sustainable. In Nigeria for example, the major
foreign exchange earner is the exportation of crude oil and gas with both
constituting more than 90% of the exportation from Nigeria. Despite the huge
prospect that the exportation of other products (like Agricultural products and
Solid minerals) presents, the challenges in the export business has prevented
the country from realising the export potentials in these other sectors.
According to the
world top export, the total export volume from Nigeria in 2016 was $34.9B and
the top ten items exported from Nigeria in the same period include Crude Oil -
$31.9B, Cocoa -$899.1M, Wood -$279.4M, Oil seeds -$279.2M, Hides and Skin -$216.7M, Raw Minerals -$169M, Aluminium -$134.9M, Copper $109.8M, Fish -$102.7, Fruits & Nuts -$65.6M. Apart from Crude Oil on this list, six
of the items exported are Agricultural products, while the remaining three are
solid minerals. The fact that this volume of exportation of Agricultural
products was done despite the shortcomings (huge post-harvest loss, over 70%
being peasant farmers and less than 50% of the arable land are under cultivated)
in this sector, is a pointer to the fact that we can do a lot more exportation
from this sector.
The world export data
showed that there is a huge potential for increase of the Nigerian market
share. This can be seen in the very wide gap between the volume of the top
items of export from Nigeria and the world export volume of the same products.
For example, in 2015, Nigeria exported Cocoa products worth $504M while the
volume of Cocoa traded globally was about $9.5 in 2015. For Oil seeds like Sesame seeds,
Nigeria exported $290M worth of this commodity in 2015 while the world traded volume
in the same year was about $2.91B. Another potential foreign exchange earner that is not on this
list is Cashew nut. In 2015, Nigeria exported Raw Cashew nuts that was worth $152M while the world
traded volume of this product in the same was $6.1B. A product like wood charcoal generated an
export inflow of about $38.5M for Nigeria in 2015 while the world traded volume in the same
year was $1.08B. On the other hand, we have huge potentials yet to be tapped
from the exportation of solid minerals. In 2015, Nigeria was only able to
export lead ore that is worth only $16.2M whereas the total volume traded in the world in the same year was
$5.96B.
These huge potential
will remain at the level of potential if the myriads of challenges confronting
export businesses in Nigeria are not resolved. These challenges revolves around
Products, Pricing, Purchasers, Paperwork, Payment, Promotion and Policies.
These are hydra-headed problems that militates against export growth not just
in Nigeria but also in any nation of the world. I will attempt to summarise the
issues around each problem in this article.
The challenge of
product is in two parts, on one hand it has to do with the quality of product
being exported, and on the other hand is the focus on only exportation of
primary products. The quality issues are mainly due to knowledge gap on the
part of Exporters, dubious practices among exporters and local suppliers,
inadequate quality inspection agents, inadequate laboratories for testing and
sometimes unprofessional and dubious inspection agents. All these hinders the
exporters from getting paid after shipment and this makes them to be discouraged
and halt further shipments. The focus on the exportation of primary products
also reduce our foreign exchange earnings, because the more the value addition
to the product, the more buyers are willing to pay.
The problem of
pricing is majorly due to the high cost of doing business in Nigeria, which is
a direct result of the huge deficit in the infrastructure especially the very
poor road network, inefficient railway system, inadequate power supply etc.
Also contributing to the high cost of exportable commodities is the high
exchange rate of Dollar to Naira. This should have been a good news for export
but due lack of price control in the local market, the farmers and middlemen
increase their commodity prices in line with the increase in the foreign
exchange rates in the parallel market.
Purchasers is another
important factor that hinders the export business growth. This is mainly due to
the bad image created by either lack of credibility, (which result from
inconsistency) or lack of competence to the deliver the right quality on time
and in line with the sales contract. These two factors makes getting buyers a
herculean task.
The importance of
Paperwork in international trade cannot be over emphasised. The buyer is likely
going to pay for the goods sometimes before receiving it. The documentation is
what gives the buyer the comfort that the goods has been shipped and also that
it is the right quality and quantity. Depending on the nature of the product
and the degree of processing involve, there could be international
certification or licensing that will qualify the product for sales in the
export market. These can be very expensive and involve a rigorous and
bureaucratic processes that discourage a number of Exporters.
Payment is another
very critical challenge that discourage exporters especially the new entrants
in the business. The fact that over 80% of world trades are done on Open
Account (shipping goods to the buyer and waiting for payment after the buyer
must have cleared and sold the goods), which invariably increase the risk of
non-payment after shipment makes many exporters to either reduce the volume
they ship per time or avoid doing the transaction altogether.
The cost of
Promotion, a critical elements in marketing a product abroad, is too high for
many SMEs to bear. This is because it involves traveling to the targeted export
markets abroad to promote the products at trade shows, fairs, conferences etc.
Inability to do will mean you have to use the online channels which is less costly
but more risky because of the difficulty in confirming the genuineness of the
intending buyers on the online trade portals.
On a final note, I
will like to say that, to resolve all these problems, there is need for
practical training (in all the critical areas highlighted above) of the
intending and existing Exporters on one hand and a Public-Private Partnership
Arrangement on the other hand. The government has to work with the private
sector to come up with policies and support to address these challenges and do
everything possible to ensure that there is strict adherence to these policies
through enforcement. Some of these policies include an export growth desk in
the presidency to fund and drive a well articulated promotional strategies. A
completely tax free regime should be given to company that add value to their
products and export them. A quarterly intensive training that will last for one
week should be organise free of charge only for those that have already started
production of their products to build their capacity, connect them with sources
of funds and potential buyers in the export market. A committee should be setup
that will review the progress made on a monthly basis, address the challenges
and report to the export growth desk in the presidency through the Nigeria
Export Promotion Council.
In conclusion, if
these two tools (practical training and relevant policies) are adequately
deployed, Nigeria will soon convert her export potentials into actual benefits,
which means a massive increase in the foreign exchange earned via non-oil
exportation from the country.
Bamidele Ayemibo
3T Impex Trade Academy
bayemibo@3timpex.com
