How to Start an Import-Export Business in Nigeria: Complete Guide for Beginners

admin

By: Site Engineer, Staff

full bio

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.

Preliminary Activities to Carry Out

Registration

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:

  1. Certificate of Incorporation
  2. Memorandum, and Articles of Association

In the cast of cooperative societies, evidence of registration with the relevant State Ministry will replace (i) above (Certificate of Incorporation).

  1. The originals of these documents should be produced for sighting.
  2. A processing fee is required to be paid.
  3. The certificate of registration as an exporter is then issued. The certificate is valid for one year and is renewable annually.
  4. In the case of renewal, only Form C07 is to be attached with a renewal fee.

Exporters Bank

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.

Domiciliary Accounts

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

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:

  1. Collect and disseminate information on products available for export.
  2. Maintain adequate and effective representation in other countries.
  3. Provide directly or jointly with training institutions training for its staff and assist with the manpower development of the export community in Nigeria.
  4. Organize the participation of Nigeria in Trade Fairs and Exhibitions in other countries.
  5. Undertake studies of the economic conditions with special attention to the export sector with a view to advising the government on necessary policies and measures.
  6. Cooperate with other institutions on matters relating to export financing, export incentives, and specialized services to exporters.
  7. Establish specific trade promotion facilities in Nigeria and other countries including the establishment of permanent showrooms at important commercial centers in other countries.
  8. Engage in export promotion publicity.
  9. Provide services to trade delegations on matters relating to export.
  10. Perform such other functions as may be conducive to the achievement of government objectives.
  11. Promote the development and diversification of Nigeria export trade.
  12. Assist in promoting the development of export-oriented industries in Nigeria.
  13. Spearhead the creation of necessary export incentives.
  14. Actively promote the implementation of export policies and programmes of the Government.
  15. Coordinate and monitor export promotion activities in the country.
  16. Collect and disseminate to local manufacturers and exporters information on foreign markets.
  17. Provide technical assistance to local exporters in such areas as export procedure and documentation, transportation, financing, marketing techniques, quality control, export packaging, costing, and pricing, publicity and in other similar areas.

As seen above, the mission of the NEPC is dominated by the following overriding objectives:

  1. Spearhead the creation of appropriate export incentives, and
  2. To actively articulate and promote the implementation of export ponies and programmes of the Nigerian government.
  3. To promote the development of export-related industries in Nigeria.
  4. To promote the development and diversification of Nigeria’s export trade,

Activities of the Nigerian Export Promotion Council

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:

  1. Publication of information briefs on countries, degree of market structures and procedures for specific Nigerian products in target markets.
  2. Publication of product briefs, exporters directory export information digest serves export and other specific publications aimed at educating and enlightening exporters and potential exporters.
  3. Dissemination of both domestic and worldwide commodities prices.
  4. Publication and servicing of trade inquiries and opportunities from abroad.

(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:

  1. Assisting companies financially to undertake market research and other export-related activities.
  2. Assisting companies to undertake adequate publicity in the target market.
  3. Planning and organization of Nigeria’s participation in International Trade Fairs and Exhibitions.
  4. Advising manufacturers on the packaging, product design, and adaptation.
  5. Advising companies on quality standards.
  6. Advising exporters on appropriate strategies to adapt to penetrate target markets.
  7. Advising on pricing and costing for export.

(c) Human Resources Training and Development Activities

  1. It undertakes enterprise level training for the staff of organizations that request such training package.
  2. Council liaises with other training institutions (both locally and internationally) on training matters generally.
  3. The Council organizes general seminars/ workshops to enlighten exporters on new developments in the sector.
  4. Organizes export in order to discuss the latest development in the sector.

(d) Coordination and Cooperation with Multilateral Institutions

  1. The Council cooperates with the trade promotion organizations of other countries.
  2. The Council also liaises with multilateral trade organizations like ITC, CFTC, UNDP, CBI, IMPOD TPOC, World Bank, etc., for the purpose of maximizing the benefits accruable to exporters in Nigeria.
  3. Export promotion council offices in Nigeria

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.

Making Enquires for Export Opportunities

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.

Ways of Product Selection

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:

  • Unprocessed Items: Theses are commodities in raw form such as agricultural products i.e., cocoa beans, gum Arabic ginger, etc.
  • Semi-Processed Items: These are the kind of products that have received partial processing i.e. rubber, cocoa butter, liquor, powder, cake, etc.
  • Processed Items: This is the last category, which does not need further processing i.e. manufactured products.

Evaluation of the Market

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.

Basic Desk Research

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.

Primary (Field) Research

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.

Practical Export Implementation Strategy

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:

  • By Using Private Consultants: Sometimes private consultants might serve a veritable purpose by linking exporters to importers and ensuring that a fruitful result is achieved. They may be very effective but must be paid for services rendered.
  • By Organizing Seminars: At seminars, especially those overseas, the exporters might use the opportunity to solicit for buyers as well as advertise their products.
  • Trade Fairs and Exhibitions: During this exposition exporters have the chance of selling abroad, receive orders and making the most useful contacts spot. Participation in fairs may be self or government sponsored, as is the practice in NEPC organized overseas fairs.
  • By Direct Selling Mission: Exporters might decide to send their products to potential importers after having a good understanding with them. Sometimes, they may rent warehouses abroad for storage of the products then travel down to arrange for selling.
  • Using Trade Delegation: During trade delegation mission, exporters usually take advantage in canvassing for their products and this could prove very fruitful.
  • Using Marketing Services: Exporters might decide to advertise through Television, Journals, and Newspapers to get importers in their countries.
  • Use of Trade Promotion Offices: There are many trade promotion offices world that can help the exporter in marketing his products overseas. Such organizations are in Holland (CBI), Japan (JETRO), Korea (Kotra) and others in many countries. Even Nigeria has trade offices in Brussels, USA, London, Taiwan, etc. Their functions are to link exporters with foreign buyers as well as helping in every aspect of trade-related matters and problems.
  • Use of Commercial Attaches in Embassies: This serves to look for a market for exporters and send feedback or sometimes may act on behalf of the exporters in a sincere manner. Sometimes these Attaches conduct market surveys and keep for onward transmission to businessmen.
  • By Direct Personal Enquiries: In this case, the exporter contacts importers directly by phone e-mail fax telex and written correspondences.

Export Strategy and Distribution Channels

  1. Export Agents: These are the set of people or companies that specialize in representing exporters and helping them to sell abroad.
  2. Export Marketing Group: Small users, groups, societies, and association might come together and contribute money in order to sell abroad.
  3. Under Direct Export: The exporter sells directly to the importer without using middlemen. The exporter may buy from manufacturers, who do not have the skills or resources to engage in export business themselves and sell to importers. A manufacturer that has the capacity to do so may sell directly to importers abroad. The exporter assumes all the risks in the export operation.
  4. Under Indirect Export: The exporter sells to wholesalers or retailers who, in turn, sell to users or others. In Asia, for instance, most businesses buy the ship from developing countries and sell to wholesalers or retailers in the USA, Holland, Germany.

Making Export

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:

  1. Quality Certification
  2. Back-up Services
  3. Terms of Sales and Payments
  4. The Prices (FOB, CIF, C&F)
  5. Packaging i.e., design, color, style, label, etc.
  6. Delivery terms including shipping information, time, etc.
  7. Other factors

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.

Follow-up Activities and Financial Implications

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.

Completion of Nigerian Export Proceed (NXP) Form 

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:

  • Relevant certificate of quality as issued by the relevant government quality control agency.
  • Shipping document e.g. bill of exit, bill of lading, etc.
  • Certificate of insurance.
  • Proforma invoice.
  • A sales contract agreement, where applicable.
  • A sales contract agreement, where applicable.

Quality Control Procedure for Exports

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:

  1. Federal Produce Inspection Services (FPIS): This agency is a division within the Federal Ministry of Commerce charged with the responsibility of grading and sealing of export products for effective check in the quality control mechanism.
  2. Plant Quarantine Service Under the Federal Ministry of Agriculture: This agency ensures that plant parts such as seeds, vegetables and fruits exported free of diseases and therefore meet international standards.
  3. National Agency for Food and Drugs Administration and Control (NAFDAC): This agency controls and certifies drugs processed foods, cosmetics, and medical devices prior to exportation.

Non-commercial Exports

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.

Utilization of Export Proceeds

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:

  1. The exporter is also free to sell part or all of his export proceeds in his domiciliary account for Naira to any authorized dealer at the prevailing buying rate in the Inter-Bank Foreign Exchange Market (IFEM).
  2. The export proceeds in domiciliary accounts can also be used by the exporter for imports provided the proceeds have been fully repatriated in the first instance.
  3. Business Travel Allowance (BTA)
  4. Export-oriented business trips duly certified and approved by the bank where the domiciliary account is maintained.

Export Incentives

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.

Export Development Fund (EDF)

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:

  • Trade missions, overseas trade fairs, etc.
  • Advertising and publicity campaigns in foreign markets.
  • Export market research and studies, Product design/consultancy.

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.

Duty Drawback Scheme

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.

Export Expansion Grant (EEG)

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.

Manufacture-In-Bond-Scheme (MIBS)

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.

New Manufacture-In-Bond-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.

Export Credit Guarantee and Insurance Scheme

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).

Tax-Free Interests Earned From Loans to Export-Oriented Companies

Interest on a loan granted by a bank to a company is exempted from income tax with the following conditions:

  • That at least 50 percent of the manufactured goods must be exported and
  • That not less than 75 percent of the export proceeds are repatriated to Nigeria through government-approved channels.

Export Processing Zone (EPZ)

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:

  • Repatriation of capital, profits, and dividends is unrestricted.
  • Import of raw materials – duty-free.
  • Ownership – up to 100o/o foreign ownership.
  • Laws, rules, and regulations – firms in EPZ are exempted from all legislation pertaining to taxes, levies, duties, and foreign exchange.

 

Don’t forget to share this post!

share:
Whatsapp Share Icon