Let us talk exports this week; this will be a long article, but it’s an article written as a reference for you should you ever want to go into exporting.
What is exporting?
Exporting is selling and earning in a foreign currency. Exporting engages in foreign currency transactions by selling local goods and services to buyers. This means if you sell services such as proof-reading manuscripts on a site like Fiver, and you are paid in a currency other than your local currency, you are exporting.
Why is exporting important?
When you export, you earn in foreign currency, diversifying your earning sources and providing a perfect hedge against local currency inflation in your local currency. If you already engage in buying and selling locally, exporting should be a natural progression because of the benefits of diversification and hedging it provides.
How can I export?
Exporting is a business that involves lots of rules, guidelines, and requirements across two or more borders. For instance, if you export Cocoa to the Netherlands from Nigeria, you must satisfy the Nigerian export and Dutch Import requirements. Exporting thus implies a higher level of organization and record-keeping on yours. It also involves a lot of reading and understanding of rules and regulations.
I will give a step-by-step guild on how you can export from Nigeria. First, I must give a special thanks to the Nigeran Export Promotion Council (NEPC) for creating a one-stop portal to guide potential exporters from Nigeria. https://nepc.gov.ng/get-started/export-guide/
Step1. Internal Assessment & Finance: What will be your role?
Before you invest a kobo into any business, invest your time understanding everything you can about that target product and market. This is called the internal assessment phase because you are determining if you can be an active or passive exporter. This article assumes you will be an active exporter, meaning involved in the day to day activities of the export business.
What will be your role?
The first question under the internal assessment phase is, do you have the time to run an export business? This cannot be a part-time job, and if it is, you should be a passive partner and fund an exporter. Table Below is a value chain of exports
Diagram 1: Export Value Chain
Where do you have the capacity in the entire value chain, and where do you have to hire? Do you have the funds to invest without paying interest? This is important. Do you have contacts in the sourcing of the export product? Are you creating your content? What about logistics? Who will do this? Will you outsource this function? Do you have a domiciliary account? Do you have a registered company? Website?
These are critical questions and considerations. Imagine you want to export yams, but have no warehouse? Or you store in a space with the rats. Imagine you want to export Gold. Do you have the capital to buy, to store securely gold? Or imagine you contact an importer in Turkey to supply Cashew nuts, and they cannot find you online. These are questions and things you must check off.
Only after your internal assessment can you progress to the sourcing stage, which will involve research about the product.
Step 2. Sourcing
At this stage, you have determined you can effectively get into the export market, and now you have understood the need you want to operate in.
What product should I export? This will be driven by demand for that product globally. It is far easier to export a product with a proven market like Cashew or Cocoa than to seek to create a brand-new market for a local product. Therefore, the most crucial decision is your choice of the export commodity.
There are many ways to find out which products to export. For instance, this link from International TradeCenter @ITCNews What to export details the export potential for a specific country for a particular product. For example, diagram 2 it shows here that Nigeria has an untapped export potential of $2.2b. you can also find which products have that high potential and attractive target market.
Diagram 2: Nigeria export potential
Products with highest export potential in Nigeria
Table 3 below shows which products have a larger share of the export market and what percentage of exports of that product have been filled. E.g., Cocoa has the highest greatest export potential from Nigeria. Still, Cashew nuts have the highest potential in terms of additional exports.
Do you want to export a proven product with near capacity in terms of export potential, or do you want a product that still has enormous export potential?
Diagram 3: Nigerian Export Potential
Where should I export to?
Again, the export potential map from International Trade Center in Diagram 4, gives us analytical data to guide us. Vietnam and China offer the highest potential for exports in value terms from the data. This is calculated by looking at potential and actual exports. It is not saying Vietnam wants more Nigerian exports per se but that Nigerian exports to Vietnam have sufficient space to export. It also gives you a figure as well. For instance, it estimates that Vietnam can receive additional exports worth $371.4m
Diagram 4: Export Potential Map From Nigeria
What is the product’s availability locally, and what will be my role? Take palm oil, it has a good market if you decide to export, but local supply is insufficient to meet local demand. You may struggle if you got a confirmed order to supply Palm Oil.
If you do all three, you can determine
- What product to export
- To what nation
What specifications and quantities will importers need?
The Nigerian Export Promotion Council has product-specific profiles for the main exports out of Nigeria, including Cocoa, Cashews, Ginger, Sesame, Soybeans and Groundnuts, Product Profiles. This profile will include the main area where that product can be sourced, the estimated production, and the required quality standards. The specifications for packaging and the importing countries. This is especially important, especially the quality specifications.
Below in diagram 5 is the screenshot of the product profile for Cocoa. Here you can get the product HS Code, and the quality standards
Diagram 5: Cocoa Product Profile
Very impressive and educative……. Bravo to the author
Amazing guide, easy to understand and very informative. Thank you so much for all the content, advice, and helpful links. Looking forward to Part 2!