With emphasis on export trade by the federal government for the sake of foreign exchange earnings at a time of economic recession, stakeholders identify challenges facing export business in Nigeria, writes Francis Ugwoke
With oil trade on the downside in what has affected foreign exchange earning drastically, Nigeria is currently promoting export trade. Importation of major trade goods has for the past one year suffered a lot of setback. With the 41-item list which importers cannot access foreign exchange officially because of the Central Bank of Nigeria (CBN) policy. It has become tough for businessmen, who had over the years survived through importation.
Under the current policy, importers who manage to bring in goods into the country do so under very difficult circumstances, sourcing foreign exchange through the black market to trade with the fluctuating exchange rate. To exporters, this makes trade a herculean task. This trend has at the same time promoted export business as the fashionable international trade in Nigeria. But this is not without series of challenges which exporters have lamented to no avail.
Q2 Export Figures
The National Bureau of Statistics (NBS) had recently announced that the nation’s export trade had risen to N1.873 trillion in the second quarter of this year. From the statistics, this was about N725.6 billion or 63.3 per cent higher when compared with the figure recorded in the last quarter. Yet, there is not much celebration about the rise considering that the NBS had also explained that the increase was as a result of the depreciation of naira in value. Secondly, for those who think so much progress is being made is the clarification that the export trade was dominated by crude oil exports which value was put at N1.493 trillion or 79.7 per cent when compared with other domestic products.
This is not what the federal government and many Nigerians are expecting, as the target for export trade improvement is on other new domestic products. Incidentally, the value of trade for such products, including animal vegetable fats, oil and other cleavage products was N55.7billion, or three per cent of total export. The report also had it that other articles for export, such as base metals and articles of base metals accounted for N28.4billion or 1.5 per cent, while the value of prepared foodstuffs, beverages, spirits and vinegar and tobacco was put at N16.2 billion or 0.9 per cent.
Issues Affecting Export Trade
Big time manufacturing companies in Nigeria are into export trade. They have such products that are easily marketable within the West African sub-region. Those ones therefore do not encounter so much difficulty because they have been tested overtime and certified okay. But this is not the same for small scale businessmen who are just struggling to open up the market for their products. These categories of exporters encounter a lot of challenges, including the difficulty of infrastructure decay, bureaucratic bottlenecks and poor finance.
Executive Secretary, Institute of Export Operations & Management, Port Harcourt, Rivers State, Mr. Ofon Udofia, said that for Nigeria to benefit from export, the trade policy needs to be reviewed. Udofia spoke on the background knowledge of the fact that the nation’s oil export is based on Free on Board (FOB), which in effect means that the buyer of the product, as in the case of oil, is left with the power to choose who carries the product. With such trade term, the buyers of Nigeria’s crude oil are therefore the ones that determine which vessel transports the cargo from the point of loading to its final destination. Every year, the amount of income that could be generated from such trade runs into billions of dollars. If Nigerian ship-owners were privileged to carry such goods, it would bring multiplier effect to the national economy, providing so many jobs as well.
Udofia and many other concerned Nigerians, including indigenous shipping companies are of the view that the trade terms for the sale of oil should be changed to Cost Insurance and Freight (CIF) so that Nigerian indigenous shipping companies, such as the national carrier, would be in a position to participate in the affreightment of crude oil. But beyond the crude oil export issue, according to him, was the difficulty exporters go through to finance their businesses. He said that few banks were ready to promote export, adding that there was the need to educate the banks more on this line of trade. On the part of terminal operators, he accused the concessionaires who run the ports of high tariffs compared with what obtains in other climes.
Udofia who is equally the Chairman, Rivers, Bayelsa Shippers’ Association, complained of poor infrastructure, such as bad road, high cost of transport and power that have all combined to affect export business.
He specifically said many of the agencies in the ports and border stations that are supposed to promote export have been so much interested in revenue collection than trade facilitators. He called for the creation of the National Trade Facilitation Committee, comprising Nigerian Shippers’ Council and other agencies of government to simplify export trade in Nigeria. He also called on the NSC to be in the port, arguing that a referee cannot be outside the field of play in a football match. He equally called on the NSC to open up more offices in states to champion export trade.
Udofia advised the federal government to work with trade support institutes all over the country to promote export trade by talking to people on export. He explained that this had become necessary as a result of poor packaging and standards of products exported out of the country. To achieve export target, training, he said, was very relevant.
Similarly, a trade expert, John Chikere, also listed some of the constraints for export trade as logistics and storage facilities for those into export of farm produce. He said that poor storage for perishable items would be a big loss to the trade, adding that many items are damaged before they arrive their export destination. Chikere referred to the case of the European Union which last year rejected some food items exported from Nigeria, adding that this was a big setback.
It would be recalled that last year, United Nations Industrial Development Organization (UNIDO) had during the National Quality Infrastructure (NQI) forum hinted about its moves to improve on the nation’s quality and standards system as part of the efforts to address the challenges of exports trade. During the meeting, a UNIDO representative, Mr. Chuma Ezedinma, was reported to have said that the agency had trained over 500 people for this purpose.
Standardisation, Packaging of Export Products
On how Nigeria can earn a lot of foreign exchange from export trade, the Executive Secretary of the Nigerian Shippers’ Council, Hassan Bello, said Nigerian businessmen should work hard to do a good job on the products they want to export.
Bello, who described export trade as the hallmark for diversification of the national economy, also identified the problem with Nigerian export as infrastructure deficit and poor access to finance. But he said that despite these issues, there could not be any alternative to standardisation and packaging for the products to do well. He said that there were cases when export products were rejected overseas as a result of poor standards and packaging. He accused exporters of engaging in fraudulent practices of obtaining fake certificates for their export products, adding that this was the case with some of the goods that were rejected by overseas buyers.
“Many of our exports are rejected and brought back to Nigeria because they don’t conform to the standard. We need mahogany for example, this is the thickness, this is the specification and everything. And then, you have to have standard organisation here in Nigeria certifying them, saying they are up to the standard for export; but this is not done. Some of the certificates are faked.”
On the issue of poor packaging, Bello said some traders have not done enough to preserve what they are exporting, adding that this was among the reasons why some products don’t survive the stress before they get to the market.
He said: “We package to withstand the journey by sea and some Nigerian brothers don’t know that if you have a product, it goes through a lot of changes; chemical changes. If you have sorghum for example, the volume will change, it will expand, it will go through a lot of things. So you have to package your product to withstand the temperature.
“We have to package well for competition, because packaging is very important… The way we package our things, we just want to put things together, no. You have to package very well, attractive so that people will buy it”.
Bello disclosed that the council was planning to organise a workshop to educate exporters on the best way to package for export, among others.
Emphasising the importance of export trade, Bello said: “We either export or we perish because we really have to start exporting. That is very important for this country.”
He expressed optimism that with time the challenges of infrastructure deficit, such as poor road network and rail links to the ports would be addressed.