Challenges of export trade in Nigeria

Why African countries remain raw material export-based economies  

 

Exporting goods and services helps countries gain exposure to new ideas, management practices, marketing techniques, and ways of competing, which helps to better position a country’s business. It stimulates economic growth because countries derive a sizeable portion of their annual revenue from exports. Export trade facilitates economic expansion, promotes international cooperation, improves the balance of payments and boosts foreign currency earnings.

Export trade is a catalyst for sustainable economic development and through export trade; Nigeria earns vital foreign exchange, increases its revenue base and avoid trade deficits. It also helps to consolidate economic diversification. The Observatory of Economic Complexity (OEC) ranked Nigeria as the 49th largest export economy in the world, having exported goods/products worth well above $47.8 billion and imported goods worth $39.5 billion.

Export oriented policies provides incentives to sales in both domestic and foreign markets, lends to resource allocation according to comparative advantage, allows for greater capacity utilization, generates technological improvement in response to competition abroad and in labour-surplus countries, contributes to increased employment.

Exporting in Nigeria is governed by some laws which include the Nigerian Export Promotion Council Act and Customs and Excise Management Act 2004 (CEMA) but albeit these laws, there are many challenges rocking the export industry in Nigeria.

Some of the problems are extended and cancelled vessel arrival and departure time, increased port charges if container weight is lower or higher than declared value, demurrage in the event that the container remains in the custody of the exporter for longer than allowed, charges for damaged container, shipping to an inland container depot, sudden ban on the export of goods already stuffed in a container, paying sea freight in USD despite fast-rising inflation in origin country, elongated time in withdrawing foreign inflow at a reasonable price, not making it clear on who is to cover destination charges and so on.

Shipping timelines are always given by the shipping line but they are hardly followed in reality because even if cargoes are loaded, one is usually not sure if the ship will sail on the same day. This increases the vessel arrival time thereby making the goods stay more than the shipping timelines given and if customers of consignees have been given a date, it might be extended.

Many factors could cause a shipping container to remain in the port for a long period of time like a cancelled contract, miscellaneous delays on the agent’s part, customs seizure, and much more. These delays increase the amount of demurrage paid at the port. If a consignee’s container remains at the origin or destination port for longer than the stipulated time, the consignee starts to incur daily demurrage costs and as such, his/her expenses grows.

In the instance of picking a container to use, exporters need to ensure that the containers are in good shape, otherwise, they will be required to pay and that can cost thousands of dollars that they did not bargain for initially.

Shipping to an inland container depot at the destination port costs the exporters more than when they ship to seaports. This is because they will have to pay for the destination inland transportation charge of the container to the stipulated depot. This usually increases the agent’s expenses and can lead to bad investment for him.

The sudden ban on the export of goods already stuffed in a container is also a big problem because money has been used to purchase the items and the ban has made the goods a waste. This happens a lot all over the world and can be devastating to exporters. Sometimes you could have an agreement with a buyer, spend so much money procuring the commodities, and when it is time to move them to the port for shipping, and local law is suddenly passed that bans the export of that commodity with immediate effect or the country you’re shipping it to passes a law banning the import of the commodity from your country.

The payment of sea freight fees in USD despite fast-rising inflation in origin country is also another problem. This is because most shipping lines prefer receiving freight payment in USD. The problem now is that most exporters fail to negotiate this factor at the beginning when they get a freight quote because they work with the belief that they would be able to pay the USD freight cost, only to sometimes get caught in a nasty currency inflation frenzy that makes paying the freight cost extremely difficult for them.

When there is elongated time in withdrawing foreign inflow at a reasonable price, it becomes a problem. This is because in Nigeria, there is a Central Bank policy that any export inflow into the country cannot be withdrawn from the bank account it was paid into, but can only either be used by the exporter if they have a valid import license to procure commodities from outside the country, be sold to an importer who has valid documents with the bank regarding import transactions or is sold by the exporter to the bank at the prevailing currency rate on the Import & Export window. The challenge is that at the black market rate of N540 to a dollar and the prevailing bank rate of N411 to a dollar, this becomes an unattractive prospect.

Infrastructural problems like inadequate rail and efficient roads to the point of export is also a problem to exportation in Nigeria. Even at the point of export, there is no consolidation centres providing refrigerators for perishable cargoes. Another issue is that of packaging. Products should be packaged to withstand the temperature and other vagaries at sea. Also, to compete favourably with its counterparts, products should be packaged well.

In order to put an end to these challenges, agents should ensure they make their clients understand that the moment the goods are inside the port, timelines of vessel arrival and departure times lies entirely in the hands of Customs officials and the shipping line, after using standardized digital scales to weigh the goods, the scales at the port’s loading terminals should also be used to reweigh the goods again so that the terminal would recognise the agent used their own scales and would less likely charge them if it is over the declared weight, cargoes should only be moved to the port when it is certain the consignment will be shipped, while insurance policy should be taken to ensure that the policy covers the goods and the container.

Also, export credit insurance should be obtained to protect agents from all political, payment, and currency risks. Government should also provide better infrastructures to safeguard the export trade in the country for greater investment and development.

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