Basic Challenges of exportation of goods in Nigeria.
Exporters always face with challenges of dealing with international buyers. Many business men and women often prefer to engage in local businesses that their money can be tracked easily. Exportation business in Nigeria requires comprehensive knowledge of how the modality works. As exporter, you need to acquire basic skills on the policies, workflow and the dynamism of international exportation business.
In this article, I will analyze the common challenges of exportation of goods in Nigeria. It will assist the exporter to plan their business because it gets them ready for the tasks ahead.
Challenges are as below:
– Getting reliable buyers for international deals
– Products sourcing and quality
– Source Financing the export contracts
– Payment solutions with the international buyers
– Issues with trade terms
– Transportation systems in Nigeria
– Documentation and licenses
– Export process with freight forwarding company
Challenges of how to get reliable buyers for international deals
First of all, getting buyers for products is the most important aspect of exportation of goods in Nigeria. Nigerians’ sellers have issues with getting reliable buyers for their agricultural and mineral resources products. Exporters have to be careful in dealing with potential because not all buyers have good intentions for clean international deals.
Moreover, the exporters can contact buyers on different platforms. Real buyers are also afraid of fraudulent activities of fake sellers. Sellers can contact real buyers on the following platforms:
– Through online B2B (Business to Business) platforms
– Through companies referral
– From the international commerce chambers
Above all, exporters need to verify the activity and the claims of buyers due to the frequent buyers fraudulent claim with Nigerian exporters by claiming that products shipped are not up to the standards. Whereas, the products can be up to standard but the trading terms may also affects the claim.
Products sourcing and quality of exportation of goods
Exporters always have the challenge with products sourcing combine with products quality. Products sourcing are major issues due to the facts some exporters are not the producers of the goods. The sellers have to investigate and get goods analyze in order to get best products for their buyers. In Nigeria, most exporters have to source for products from northern part, eastern part and south part in order to get all the quantity that the buyers require. The sellers have to go through thorough investigation to get quality products to meet buyers’ standards.
Source of financing the export contracts
I can remember one of clients contacted to assist on funding like 500 tons of sesame seeds. The total money that we will need is more than 100 million naira, The client has already got a buyers to for the goods. I reached out to some of my freight forwarding partners abroad; some said they can’t just give out such money because their bank needs to verify the business.
Also, Nigeria business environment has not been supportive to most exporters. Commercial banks can never borrow you such money because there is no collateral to cover such risks. Hence, most buyers will not give you all the money need because of the risk involve in giving out such support.
Payment solutions with the international buyers
Recently, some intending exporters asked me if what payment solutions is the best for them. With my international business skills and understanding, standby or other secured letter of credit from the buyers’ bank is the best. Payment solution should be one of the issues that sellers need to settle with their buyers. Imagine you borrow money for procurement, documentation and exportation, the lender expects you to pay as promised that is the reason you have to settle with best payment solutions that suite you.
Issues with trade terms
With my experience, no buyers will initially go Free on Board (FOB) shipping terms. Most of them will tell you to procure, ship to them after confirmation of the goods, they will pay. CIF (Cost, Insurance, Freight) shipping terms is not the best for Nigerian exporters because of the lead time to get the goods to the buyers for confirmations.
Transportation systems in Nigeria
Nigeria transport system is one of the challenges of exportation of goods in Nigeria. The bad road network is not supportive. The bad road can delay the delivery of goods to the port terminals. As a result of bad road, cost of transport from farms, warehouses to port terminals is high. The high cost of transport consequently affects the profit of exporters in the long run.
Documentation and licenses
In Nigeria, exporters of goods need to meet some requirements by acquiring some licenses.
– Export license from Nigerian Exportation Promotion Council
– NXP or NCX forms from Commercial banks
– Incorporation certificate from Corporate Affairs Commission
– Federal Produce Certificate
Most times, the get these documents ready may be tedious. The system and process of getting them can be slow which can result in delay of exportation of goods
Export process with freight forwarding company
Finally, the documentations of the goods will be processed by freight forwarding company. The function of the company is to finalize the process with agencies and shipping lines. The government agencies will examine the documents, which the freight forwarder will present. The shipping line that will ship the goods issues Bill of lading. The freight company receives the bill of lading from shipping line. The exporter has to send the necessary documents to the buyers in order to have smooth customs clearance at ports of destinations.