It's been a particularly busy month for us in Wema Bank. The first edition of the long-awaited Wema SME Business School, which we told you about in our last newsletter, kicked off successfully earlier this month, with an attendance list that featured 50 business owners, just like yourself! If you were a part of this first-class, we say a hearty congratulations! to you, and if you haven't been invited (or if you haven't applied yet), please keep an eye on this space for more details.
For the August edition of the SME newsletter, we will be moving back to our usual focus on identifying growth opportunities for our customers. On this note, we will be talking about exporting for Nigerian businesses.
With a population of over 200 million, Nigeria is perceived as the largest market in Africa. In theory, such a number of people offers up vast business and sales opportunities to business owners domiciled in the country, as they have access to more than enough potential customers that will allow them to attain a reasonable scale. The reality of things, however, is very different. Factors such as income distribution, regional behavioural characteristics, and other demographic qualities, mean that the actual available market size for any business owner is generally lower than the nation's total population, often by a significant percentage—and this figure varies by industry. This article by Stears Business breaks it down for the Nigerian market very clearly.
In light of this market reduction, the enterprising entrepreneur must seek out the means to maximize the obtainable market and create an entirely new one where possible. One of the ways to do this and remain in the same line of business is to look beyond the shores of your country (Nigeria) and explore other nations as potential markets for you to sell your goods and services.
Keep in mind that African countries have become more open to exporters from within the continent since the launch of The African Continental Free Trade Area (ACFTA) on January 1, 2021. In summary, this agreement opens up the entire African continent to local companies - an opportunity too good to miss.
As a business owner, exporting your products offers up benefits and opportunities such as:
- Access to more customers and new markets, which will bring added revenues
- Diversifying market opportunities beyond the vicissitudes and limitations of your home market
- Increased brand recognition
- More income in the form of foreign exchange or dollars
These benefits also filter out to the larger Nigerian state, as the nation as a whole earns much needed foreign currency, which can then be channelled to other equally beneficial activities.
With this in mind, this is how you become an exporter in Nigeria:
- Do some research: "He who fails to plan plans to . . ." When exporting products to other countries, make sure that you carry out your research correctly. Try to know everything about the export business itself, as well as the requirements or standards for goods you plan to export. This research also includes building a knowledge base of the applicable tariffs and the documentation that will be required.
Key points to note:
- Try to determine how quickly you can establish contacts in your desired country and find enough customers there. Also, think about how you will advertise and promote your product in the new country.
- Think about the cost involved (fees such as export duties add to this) and decide if your business will be able to stay competitive and profitable
- You will also have to think about the means of transportation that you will use to move your products to the new country. Do some research on the most convenient (not necessarily the cheapest) shipping companies or cargo flights available.
- When you are done with transportation and market research, look into the legal requirements within your home country and the export country. You need to find out the kind of documents required and the conditions your company must adhere to. This includes the certification process; in most cases, you will be required to certify your goods or register them somehow. The Nigerian Export Promotion Council (NEPC) is available for more professional support.
- You can also learn by seeking out other individuals in this line of business and learning from them.
3. Register your business: All non-oil product exporters in Nigeria are required to have a Certificate of Incorporation and export licenses. There are two government agencies vested with the power to grant export licenses in Nigeria. The Nigeria Export Promotion Council (NEPC) issues out export licenses for agricultural commodities & manufactured goods, and the Federal Ministry of Solid Minerals Development, which grants permits for extraction & exportation in Nigeria.
An exporter must also complete the e-form NXP. Payments to the exporter will be credited to an account maintained with an Authorized Dealer Bank once the business is completed. If you need further clarification please email us via TradeServices@Wemabank.com and we will be happy to guide you.
4. Process your documentation: Note that the documents required will depend on the country of origin (Nigeria) and destination. Usually, the papers will have to be prepared in a particular way to comply with all the countries' requirements. For example, in Nigeria, the export documents need to be submitted to the customs authorities for cargo clearance. In addition, certain countries require a consular invoice, which is used to identify and control the movement of goods.
Generally, all countries have three stages of processing for exports; a one-time registration procedure to obtain an export licence, some documentation needed for exportation, and customs clearance formalities. You can also visit the NEPC website here.
In closing, here are some fun facts about the export business in Nigeria according to the National Bureau of Statistics:
- At ₦2.91 trillion, the value of total exports in Q1 2021 decreased by 99% against the level recorded in Q4 2020 and 29.26 % compared to Q1 2020.
- Nigeria's top five export trading partners in Q1, 2021 were India (₦488.1 billion or 79%), Spain (₦287.2billion or 9.88%), China (₦190.1 billion or 6.54%), Netherlands (₦160.billion or 5.50%) and France ((₦133 billion or 4.59%). ₦282.2 billion worth of goods were exported to ECOWAS countries.
- Nigeria had a trade deficit (in goods) of ₦3.94 trillion in Q1 2021.
- The value of Crude oil exports stood at ₦1.93 trillion, representing 38% of the total exports recorded in Q1 2021, whilst non-crude oil exports accounted for 33.62% of the total exports.
- Nigeria exported mainly mineral products, valued at ₦49 trillion, or 85.52% of the total export value. This was followed by Vehicles, Aircraft and parts, and vegetable products.
- The major traded agricultural products in the quarter are sesamum seeds, fermented cocoa beans, cashew nuts (in shell), coconuts, ginger, sesame oil, raw cocoa beans, cashew nuts (shelled), palm nuts and kernels, ginger (neither crushed nor ground) and shea cakes, in that order.
In conclusion, exporting your products will allow you to diversify your market, grow your customer base, improve your standards, and earn income in dollars (which is always a good thing). This is a business direction that every business owner should seek to explore.