Over the weekend, our Founder and Publisher, Ugochukwu Obi-Chukwu shared a rather hilarious but sad experience he once had some time ago when he decided to dabble into trade (the import-export type) with some of his friends. Apparently, Mr Obi-Chukwu and friends thought foreign trade is merely a matter of come up with the business idea and the money to begin. They didn’t know that there is so much more to it. So, they learnt the hard way.
The men would later learn some very important business lessons, as Obi-Chukwu shared in his Twitter thread. According to him, one of the important lessons is that, “trade is not for white-collar folks”. He also learnt, among other things, that it is highly important to have a deep understanding of a business before dabbling into it.
As always, we have carefully curated the Twitter thread for your reading (and learning) pleasure. We believe there is so much anyone can learn from this experience. Let our Publisher’s mistake serve as your guide as you go about your investments.
What is the worst investment decision you ever made?
I’ll start with how I lost over N3m investing in one stupid diaper business. ??♂️??♂️
— Ugodre (@ugodre) October 13, 2019
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“Sometime in 2014, I was in the states with some friends so we got talking about diversifying into trade.
I mostly invest in equities and securities but they felt it was time to venture into trade. So they mooted this diaper business.
The dude, who brought up the idea, said all we had to do was go to Costco, order cartons of diapers at near cost price and then ship to Naija.
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I asked about custom duties and all and he said that wasn’t a problem either.
Basically, you import cars with the diapers and then pay duty for the cars and not the diapers. That way you sell the car to cover for duty cost and then make sweet margin on the diapers.
It felt sweet.
So, we called up another friend who had capital and another who had contacts we could sell to. The guy, who brought to the idea, whom I will call EM, said he had done it before, so he knew the ropes.
So, we pulled close to $50k.
We also had clear responsibilities for everyone. Mine was to handle the bookkeeping. EM was to arrange clearing of the diapers. CN was to arrange off-takers and also to move it from Costco to EZ house. EZ was to store the diapers in his house ahead of shipping.
So, I flew back into Naija feeling like an Igbo trader. At least, I can proudly say I rep my heritage.
I didn’t want to tell madam about the deal cos you know women. They have a way of sniffing trouble. I wanted this to be on my CV sha.
Well… I should have known better.
A few weeks later, diapers arrived, and I waited excitedly to make some cash. I already planned what to do with the profit sef.
I quickly arranged storage for the diapers (another responsibility of mine).
Soon, trouble started.
You see, we must respect importers and the hassles they go through to sell to us goods we love to buy.
After budgeting about N859k to clear the car (goods), the story changed. I started hearing terms I never heard in my life before.
Terminal charges, ex-factory, shipping company waiver, examination report, DIU, gate PR. I’m like “what in the world is this??”
EM said it was straight forward, so why all this wahala? From N850k, I was told to give additional N300k and then N500k and then N450k. Demurrage cost piled.
From being told we only had to pay duty for cars, agent now claimed they opened the container and saw diapers and other items so we must pay.
Anyway, we ended up paying up but yet, we couldn’t clear the goods. EM called me, instructing me to head to the port and sort things out.
I said me, Dre, leave work begin go to port? Who send me this kain investment bikonu? We had a shouting match over the phone. EZ weighted in and insisted we had to sort this out as “investors” with the same goal. I still refused and insisted I wasn’t going to the port.
At some point, the arguments intensified over the phone, that’s when madam now overheard. I tried to hide it from her but she found out.
She laughed her heart out and was like ‘Ugo! You, trader? I would never have approved this, and you know it.’
Eventually, our wives got involved and settled our infighting. They basically helped us understand money don loss and that we should just take it like “adults” and move on.
But we still had to clear the goods as quickly as possible.
Eventually, we got a friend to help. He went and discovered the agent basically used our money to bury his dad. We were back to square one.
To cut a long story short, we ended up paying up to 4 times the original duty cost. By then, our profits were wiped out.
We thought anyway, lessons learnt let’s just get our money and bounce. For where? CN who said he had dealers ended up with zilch. No buyers. EM’s contact sensed desperation & priced the diapers at lower cost.
Apparently, we didn’t pay attention to diaper sizes that moved sales.
We just imported diapers without doing any proper market research. EM who we thought had done this before apparently didn’t know either. This was just another set of wahala. I had to offload the diapers as the storage I paid for was expiring.
Finally, EZ and I had to get buyers. That’s how I started carrying diapers in my truck and going from supermarket to supermarket to sell.
At the end of the day we barely recovered 80% of capital. In fact, some diapers are still in EZ’s house in the US.
The second batch we thought we will import to Nigeria as per Igbo traders.
We learned a lot of lessons on that transaction. You never understand how rotten this country is until you have things to do with clearing agents.
Trade is not for white-collar folks.
To make money as an “importer-exporter” you need to be able to roll up your sleeves and go dirty. Plenty headwinds.
Custom officials, clearing agents, trailer drivers, policemen, purchasers, security, bad roads etc.
Our friendship remains intact and when we get together often, we remember the transaction and laugh our sorrows away.
EM pushed for another round claiming we had learned our lessons and will win big next time. EZ and I wanted none of it.”