Strongpreneur#Business Growth Strategies
May 11, 2019 353
Strongpreneur#Business Growth Strategies
May 11, 2019 353
In this post we are going to discuss the functions and activities of the Nigerian Export Promotion Council, export procedures, documentation, and incentive for exporters in Nigeria. Export trade is a thriving business in Nigeria, given the opportunities available in terms of the diversified product lines and the available demand for Nigerian goods abroad.
It is, therefore, necessary for Nigerian exporters to be very conversant with the procedures and documentation requirements for export trade, to enable them to enjoy the benefits of good business, which include an increase in earnings reliability, dependability, integrity, etc.
The export transaction is consummated only when the parties are satisfied. Exporters in Nigeria will be able to receive promptly for their export transactions if they carefully follow the current export proceeds region, procedures, and regulations.
Presently, the number of small firms engaging in export operations is growing steadily in Nigeria. Many such firms enter the export business because it is an opportunity to expand their sales and earn valuable foreign exchange. Every unit of a product exported generates more revenue for the firm than when it is sold in the domestic market. Firms that engage in export business benefit immensely from the several incentives made available by the Federal Government to encourage the export of non-oil products from Nigeria.
This is one of the strategies adopted by the government to reduce dependence on crude oil as the main source of foreign exchange earnings. The incentives help to export firms to reduce the cost and risk of export operations, enhance profitability and thereby make exporting attractive.
However, exporting demands much more effort from the exporting firm that is needed in domestic operations. It requires careful planning, familiarity with export procedure and documentation. The payment methods, which are significantly different from what obtains in domestic transactions, must be carefully considered. The terms of the agreement with the importer must be properly followed.
There are institutions such as the Nigerian Export Promotion Council (NEPC) whose primary goal is to provide assistance and incentives to exporters. Knowledge of the operations and objectives of such institutions help a great deal to minimize costly mistakes in the export business.
First thing foremost, before engaging in export operations at all, it is mandatory that any company wishing to embark on export business must be registered with the Nigerian Export Promotion Council as an exporter.
The company must also be incorporated, that is it must be a limited liability company or a cooperative society. To register as an exporter, a company must obtain “Form A” from any of the offices of the Nigerian Export Promotion Council after paying the prescribed fee.
After properly completing the form, copies of the following documents should be attached for onward transmission to the Council for processing:
In the cast of cooperative societies, evidence of registration with the relevant State Ministry will replace (i) above (Certificate of Incorporation).
The exporter must establish a banking relationship with an Authorized Dealer, which must be a bank in, Nigeria. The bank is expected to render customer-bank advisory services to the exporter on his export trade aspiration. The bank is also expected to guide the exporter about other pertinent issues like the opening of Letter of Credit (L/C) and the management of the payment for the export etc.
It is mandatory for exporters to open Domiciliary Account with a bank in Nigeria for the purpose of transacting export business. Export proceeds are required received on behalf of the exporters by banks through their domiciliary accounts.
The Nigerian Export Promotion Council was established to provide various forms of assistance to Nigerian exporters. By doing this, it is hoped that non-oil exports will expand and various benefits will accrue to the economy as a whole. The Nigerian Export Promotion Council was established by Decree No. 26 of 1976. The main function of the NEPC included the advancement of the course of export trade in Nigeria and advising the government on appropriate measures to be taken to facilitate export trade.
Subsequently, by Decree No 41 of 1988 NEPC was re-organized and vested with the following functions:
As seen above, the mission of the NEPC is dominated by the following overriding objectives:
The Council carries out the following core activities:
(a) Trade Information Services: The Council endeavors to satisfy the information needs of exporters in the following areas:
(b) Export Development Activities: The focus is to diversify the basket of exportable products from Nigeria. In doing so, the Council undertakes supply base studies to identify products for development for export. Other activities include:
(c) Human Resources Training and Development Activities
(d) Coordination and Cooperation with Multilateral Institutions
The Nigerian Export Promotion Council has its Headquarters at Abuja and Zonal Offices in Lagos, Port-Harcourt, Kano, Enugu Jos, Minna, Akure, Benin, and Yola.
There are various strategies for entering the export market. Each market, for example, Japan, Israel, ECOWAS has its own characteristics and features. Before venturing out, it is vital to obtain adequate information that would guide your action concerning the target market. A lot of information is available in Nigeria.
The sources of information are – embassies trace offices, international and national libraries, and private consultants. They will give you what is known as a country profile. In this profile, all the facts you need to know about the target market would be highlighted. At times, you may require to ask questions on some of the topics country profile. Commercial attaches, economic counselors and. Other officers in the source(s) consulted should answer these questions. It is also imperative to consult many sources outside the above-mentioned. In that case, NEPC, NACCIMA, Chamber of Commerce, etc., should be in a position to provide export advisory information that might prove very useful in locating and selecting the specific foreign market to be addressed. You must, however, note that without adequate information readily at your fingertips, there can never be a fruitful export operation.
The next most important decision an exporter must make is to carefully select the product that could be acceptable to the selected market and which can be supplied in good quantities and on a consistent basis.
In that way, the exporter must be prepared to meet sales contract terms/agreements between himself and the importer to the point that failure would not arise- In short, the exporter must always strive to live up to expectation.
It is essential to point out that one of the mistakes exporters usually make is to assume that they can export all the exportable items in Nigeria. If one can export everything it implies that the company automatically is “a jack of all trades, master of none.” The best way is to specialize or select one, two or three products at most that you can adequately handle.
There are three categories of products that can be chosen for export, namely:
Some markets are simple while others are complex in nature. Before venturing into a foreign market, it is extremely important that an exporter should carefully evaluate the market in terms of the climate, the population, competition, import-export regimes, infrastructures available i.e., shipping, rail, etc and a lot of others factors. An in-depth study of these must be done during market analyses/surveys, be it desk or field research.
The desk and field research helps the exporter to identify the needs of the market clearly. This will now pave the way for concrete strategy development. According to experience gathered in export promotion over the years, an exporter must never forget to rank the markets identified a view to limiting markets to a manageable number. In addition, this ranking would help to eliminate any unsuitable markets and to set marketing objectives for the chosen markets.
Since some exporters may not know the meaning of desk research, it is simply using the available sources in the office, library, etc in the exporter’s country to collect data. The aim of this is to save time and money during field research in the target market.
It is a very useful source of information as it could lead to an economic means of knowing the prospects and potentials of the market. The importance of desk research needs no stressing. It could help the exporter to determine the strengths and weaknesses of the importers and ability to sustain the exporter-importer relationship.
Field research is a formalized, systematic way of data collection in the target market for the purpose of making a decision
In carrying out this survey, the exporter must go to the field and physically obtain up-to-date information about the market. During this research, some important factors such as the size of the market, culture, consumption patterns, the socio-economic trends, an adaptation of the product, distribution factors, barriers and other standards/requirements of the market are taken into account.
There are many ways of conducting this survey. One way is to carry the products to the target market for testing-marketing. The result of the test would determine its acceptance or rejection. This method is particularly relevant if it is a manufactured product that either requires standardization or adaptation to suit the needs of the market. Another method is to use intermediaries namely Commercial Attaches in Embassies, appointed agents, friends, etc for a piece of on-the-spot information. It is necessary to emphasize that the survey will enable the exporter to understand his export marketing objectives and to take accurate decisions that might profit him.
However, field research is cost-intensive because the exporter will have to have enough money to pay his fares to the target market, send the samples by speed post or cargo airlifting, pay for accommodation (if necessary) and other running costs in the market.
After arriving at a decision based on the outcome of the surveys it is now time to implement the actual export-oriented strategy. In practice, the following steps are commonly adopted:
Selling cannot commence without an offer from the exporter to the importer, As much as possible, the offer should be explicit, clear and factual covering some important points of note that would be mentioned below.
The pertinent points that an importer would be looking for in the offer are:
When these are accepted then the importer will automatically forward a letter of acceptance to the exporter. It should always be noted that compliance with agreements entered into with the importer is the only basis of the transaction. The shipment must be the same specification as the samples provided.
It is pertinent at this point to advise any serious exporter not to wait or relent effort after commencing exportation. There should be constant communication either directly or through intermediaries to ascertain further possibilities, future needs and to maintain the relationship. You must be able to follow your product to the market and monitor its performance there.
Apart from following through, an exporter must understand that the aim of export is to earn hard currency. The exporter must inform the importers that confirmed the irrevocable letter of credit at sight is the accepted legal means of funds transfer in Nigeria.
In that case, the banks play a very important role in an export transaction in Nigeria. The banks will always advise on funds repatriation and all the nitty-gritty of financial implications.
The exporter is required to collect Form (NXP) from an Authorized Dealer of his choice, complete it and return it to the bank for necessary processing. The Form highlights salient details about the export transactions including the exporter’s name and address, consignee’s name and address, details of the consignment, product name, unit price, and FOB value. This is contained in sections 1-8 of the NXP Form.
The FOB value is the export proceeds, which the exporter is expected to repatriate. The form shows the record of the sequential operational procedures from the ginning of the transaction to its final settlement stage (i.e., repatriation of proceeds). The NXP Form is therefore very important in any export transaction:
For goods to be exported certain standards must be satisfied in order to protect the interest of the buyer as well as the integrity of the exporter. Until April 1999 Pre-shipment Inspection of exports was required under the Nigerian Export Supervision Scheme (NESS). The suspension of the scheme has posed a real challenge to public agencies that have the responsibilities of ensuring a standard for competitive trade at the international level.
Depending on the items to be exported, the following agencies are charged with the responsibilities of inspecting the goods and issuance of a certificate to deserving exporters before the goods leave the Nigerian shore.
The agencies include:
Non-commercial export, as the name indicates, involves physical movement or exportation of goods without foreign earnings. For goods under this category of export, Form NCX is completed by exporters or their agents and approved by the Central Bank of Nigeria (CBN). These types of goods include gifts and personal effects, trade samples and printed business matters, machinery and equipment for repair and return, return of machinery and equipment after the execution of contract and return of empty containers and re-exportation.
Supporting documents such as residence permit, packing lists, certificate of clearance, correspondence and consignee documents of importation, contract agreement, etc., must accompany the application for non-commercial export.
The export proceeds in the exporter’s “Domiciliary Account” belong to the exporter and should not be disposed of without his prior consent. Exporters are allowed foreign exchange chargeable to their domiciliary accounts for the following purposes:
Government’s strategy of promoting export business is not limited to mere guidelines but is equally predicated on a number of incentives for the realization of its overall economic development objectives. A lot of incentives have been developed over time to stimulate and encourage the diversification and production of goods for exports especially non-oil export.
The most frequently used, incentives are the Export Development Fund (EDF), the Duty Drawback Scheme, the Export Credit Guarantee and Insurance Scheme, the Export Expansion Grant and the Manufacture-In-Bond Scheme.
This Fund was set up by the Federal Government to give financial support to the exporting private sector. The support is to cover such expenses as:
To qualify for the fund, a company must meet the documentation requirement and be an exporter of the product of Nigerian origin. The Committee on EDF processes and approves the amount of assistance out of which 50% shall be paid on presentation of a Bond covering that amount by the company.
Then after submitting a detailed report on the utilization of the initial funds paid to the company, the committee then considers the payment of the balance (or otherwise) to the company and arrange for the discharge of the bond.
Under this scheme, a fund is set aside to refund import duty paid in the first instance on raw materials imported for the production of export products. An essential qualifying element for refund is the repatriation of exports proceeds. The scheme is administered by the Nigerian Export Promotion Council (NEPC). Currently, the Duty Drawback Scheme gives automatic refunds of 60% on initial screening by the Duty Drawback Committee and upon presentation of a Bond from a recognized bank. At the end of the processing of the claims, the balance will be paid, where applicable.
This grant is to provide cash inducement to exporters who have exported a minimum of N500,000 (Five Hundred Thousand Naira) worth of processed products. This will encourage Exporters to expand the quantity of their export and diversify export products and market coverage.
The scheme is also administered by the Nigerian Export Promotion Council (NEPC). Exporters of duly processed products are qualified to enjoy 20% grant on their total annual turnover once repatriation of export proceeds are confirmed by the CBN.
This is a scheme designed to encourage and stimulate the domestic production of exportable manufactured goods by allowing manufacturers to import duty-free, raw material inputs and other intermediate products. Such imports are required to be backed by a bond issued by a recognized financial institution.
The bond will be discharged once shipment and repatriation of export proceeds are duly certified to have been executed. Detailed guidelines for the operation of the scheme may be obtained by interested manufactures from the Federal Ministry of Finance.
However, the operation of the bond is closely monitored by the Standards Organization of Nigeria (SON), the Nigeria Customs Service and the Nigerian Export Promotion Council.
In order to make participation under the MIBS as painless as possible, the requirement for dedicating a separate production line and warehouse to the Scheme has been removed.
Rather, companies admitted into the Scheme will be allowed to maintain separate registers which will be regularly checked by the Nigeria Customs Service for transactions under the Scheme.
The 1999 fiscal year also saw the emergence of the new Manufacture-in-Bond Scheme. The Scheme consolidates all cash payments under the various incentives \ schemes into a Negotiable Duty Credit Certificate (NDCC). The NDCC is a certificate (in lieu of cash payment), which confers on the beneficiary/holder the right to settle part or whole of his custom dudes with same.
The NDDC is presently limited to the payment of import duty, but in future, it may cover other port charges as well. The certificate, which is negotiable, is limited to three transfers. The scheme is administered by the NEPC.
Exports business is no doubt a risky one, especially when proper channels are not followed. To minimize the risk and assist exporters, the Export Credit Guarantee and Insurance Scheme provide financial assistance to exporters and banks in bearing the risk in exports business and also in the provision of credits by authorized Dealers. The scheme is administered by the Nigerian Export-Import Bank (NEXIM).
Interest on a loan granted by a bank to a company is exempted from income tax with the following conditions:
This is an industrial estate established purposely to attract export-oriented industries. It is an island of facilities, incentives, and freedom. The estate is provided with infrastructural facilities – electricity, water, telecommunication facilities, waste treatment and disposal, security, warehouses, etc., to attract those who wish to process purely for export.
The major incentives available to firms located Export Processing Zone (EPZ) includes:
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