Background
Based on the wide-ranging feedback that I recently gathered on a systematic basis from my clients and the general reading audience on issues related to the above topic, and considering the positive impact that my write-ups will have on the rapid economic development of Nigeria in general and prospective investors in particular, beginning from January 1, 2022, I will advance to provide deeper insight into the following connected high points:
- Summary of the key Policy Guidelines and Incentives supporting exportation in Nigeria; and identified commodities that will most likely benefit from the export policies;
- How the recommended export commodities can be developed via value-addition, to make them exportable;
- The necessary procedures such as registration and documentation, which an entrepreneur must go through before starting an export business;
- Local and international regulatory quality and health standards that the raw commodities, particularly vegetable produce (such as pumpkin and bitter leaves), should meet;
- Legal Requirements for Packaging and Labeling;
- The relevant local markets for sourcing diverse raw produce for exportation to the international markets;
- Trade Links and Distribution Channels;
- Appropriate transportation modes for each commodity, and estimated costs for each consignment per given weight;
- Major international markets for specific commodities and the prevailing commodity prices in those markets;
Summary of the key Policy Guidelines supporting exportation in Nigeria; and identified commodities that will most likely benefit from the export policies
The NEPC Export Policy
The Nigerian Export Promotion Council (NEPC)is the agency of government that specifies, as a matter of policy, the products that should be exported and those that should not be exported. NEPC also provides guidelines on the export procedures and documentation.
As stipulated by NEPC, the products that can be exported from Nigeria are numerous and they are usually classified into the following five major categories:
- Agriculture Products: e.g. raw or processed Cocoa Beans, Palm Oil/ Kernel/ Groundnuts and other Vegetable Oil, Vegetables (pumpkin/ bitter leaf), Pepper (Dried), Cashew nuts, Gum Arabic, Sesame Seeds, Shea-nuts, Shea-Butter, Shrimps/ Crayfish, Charcoal, etc. Export Destination is mainly Europe
- Processed foods: e.g. Cassava products (particularly pellets, chips, and flour), Plantain Chips, Yam flour, Rice, Oil Seeds (Egusi/ Ogbono), etc. Destination: Europe, US, other African countries.
- Solid Minerals: e.g. Lead Ore, Zinc Ore, Iron Ore, Copper, Calcium, Carbonate, Kaolin, Talc, Barite, Bentonite, Tantalite, Tin, Marble, Gem Stones, etc. Export Destination: Europe and Asia. Note that Solid Minerals are under the exclusive legislative list, meaning that only the Federal Government reserves the exclusive right to export these products, just as in the case of petroleum.
- Manufactured Products e.g. Alcoholic beverages (Beer, Ethanol, and Wine), Malt/ Carbonated drinks, Cosmetics and Soaps, Detergents, Chemicals (insecticides, deodorants, body creams, plastics), Cocoa Cake/ Cocoa butter/ Chocolate, Electrical wires, Furniture items, Textile/ Clothing products, etc. Export Destination: Europe, US, and other African Countries.
- Handicrafts e.g. Talking Drums, Calabash Carvings, Wood Carvings, Beads, Pottery, Metals Carvings, Hand-woven textiles, Raffia products, etc. Export Destination: Europe and US.
The products prohibited from exportation are:
- Timber (Rough or Sawn);
- Raw hides and skin including wet blue and all unfinished leather;
- Maize;
- Scrap Metal;
- Unprocessed Rubber Latex and Rubber Lumps
- Artifacts and Antiquities
- Wildlife classified as endangered species and their products, e.g. Crocodiles, Elephants, Lizard, Eagle, Monkey, Zebra, Lion, to mention a few.
[It is instructive to note that this is a ‘no-go area’ for prospective exporters].
Other Influencing Policy Guidelines
The Import Prohibition Policy, the FOREX restriction policy, and the Local ContentExecutive Order also influence investment and export activities in Nigeria.
The Import Prohibition Policy
In 2013, the Central Bank of Nigeria (CBN) banned some items from importation into Nigeria through the invocation of theImport Prohibition Policy; and these items still remain prohibited up to the present day. By banning the items, the CBN is indirectly advising local producers to take up the challenge and produce them locally. The list of prohibited imports is as follows:
- Live or dead birds including frozen poultry, Pork, Beef, Bird’s eggs;
- Refined vegetable oils and fats (includes mayonnaise), but excluding refined linseed, castor, and olive oil. Crude vegetable oil is NOT banned from importation;
- Cane or beet sugar and chemically pure sucrose;
- Cocoa butter, powder, and cakes;
- Spaghetti/noodles;
- Fruit juice in retail packs;
- Waters, including mineral waters and aerated waters containing added sugar, sweetening matter, or flavored; ice snow; other non-alcoholic beverages; beer and stout (bottled, canned or otherwise packed) but excluding energy or health drinks;
- Bagged cement
- Pharmaceutical products;
- Mineral or chemical fertilizers containing two or three of the fertilizing elements nitrogen, phosphorus, and potassium (NPK 15-15-15), excluding organic fertilizer;
- Soaps and detergents in retail packs;
- Mosquito repellent coils;
- Rethreaded and used pneumatic tires but excluding used trucks tires for rethreading of sized 11.00 x 20 and above;
- Corrugated paper and paper boards, cartons, boxes and cases made from corrugated paper and paper boards, toilet paper, cleaning or facial tissue, excluding baby diapers and incontinent pads for adult use;
- Telephone re-charge cards and vouchers;
- Carpets and other textile floor coverings;
- All types of footwear, bags, and suitcases but excluding safety hoes used in oil industries, sports shoes, canvass shoes all complete knockdown (CKD) blanks and parts;
- Hollow glass bottles of a capacity exceeding 150mls (0.15 liters) of all kinds used for packaging of beverages by breweries and other beverage and drink companies;
- Used compressors and used fridges/freezers;
- Used motor vehicles above fifteen (15) years from the year of manufacture;
- Ballpoint pens and parts including refills (excluding tip);
- Tomato paste or concentrate packaged for retail sale;
The FOREX Restriction Policy
In 2015, the Central Bank of Nigeria marked out 41 items as ‘not valid for Foreign Exchange (FOREX)’. Though businessmen are at liberty to import these items, they would have to do so only by sourcing their FOREX from the parallel markets, which would translate to higher production costs and higher market prices. By denying these selected import-bound commodities from having access to the subsidized first-tier official exchange rate window, the government, through CBN,is indirectly restricting them from being imported; whilst at the same time again encouraging local manufacturers to step up and fill the supply gaps in both internal and external markets.
The 41 items include:
- Rice;
- Cement
- Margarine
- Palm kernel/Palm oil products/vegetable oils
- Meat and processed meat products
- Vegetables and processed vegetable products
- Poultry chicken, eggs, turkey
- Private airplanes/jets
- Indian incense
- Tinned fish in sauce (Geisha)/sardines
- Cold rolled steel sheets
- Galvanized steel sheets
- Roofing sheets
- Wheelbarrows
- Head pans
- Metal boxes and containers
- Enamelware
- Steel drums
- Steel pipes
- Wire rods (deformed and not deformed)
- Iron rods and reinforcing bard
- Wire mesh
- Steel nails
- Security and razor wine
- Wood particleboards and panels
- Wood Fibre Boards and Panels
- Plywood boards and panels
- Wooden doors
- Furniture
- Toothpicks
- Glass and Glassware
- Kitchen utensils
- Tableware
- Tiles-vitrified and ceramic
- Textiles
- Woven fabrics
- Clothes
- Plastic and rubber products, polypropylene granules, cellophane wrappers
- Soap and cosmetics
- Tomatoes/Tomatoes pastes
- Euro bond/Foreign currency Bond/share purchases
The Local Content Policy
In addition to the CBN-promulgated import substitution policies mentioned above, there is also the general local content policy aimed at increasing local production over imports through a range of subsidies, tariffs, quotas, and other barriers to trade. The policy directive was issued via an Executive Order in May 2017:‘that preference should thenceforth be granted to domestic manufacturers, contractors, and service providers in all government procurements’. The Order further clarified that at least 40% of expenditure for the procurement of items by Ministries, Agencies, and Departments shall be on locally manufactured goods, with emphasis on:
- Uniforms and Footwear; 2. Food and Beverages; 3. Furniture and Fittings; 4. Stationery; 5. Motor Vehicles; 6. Pharmaceuticals; 7. Construction Materials; 8.Information Technology;
Investors are therefore encouraged to focus attention on the local production of any of the above-designated items or groups of items.
The Border Closure Policy
A temporary measure aimed at discouraging importation and encouraging local food production and exportation was the closing of Nigeria’s borders. However, that policy was reversed because of the coming into force of the African Continental Free Trade Area (AfCFTA), which does not permit trade restrictions.
The External AfCFTA Policy
At the 13th extraordinary session of African Union Heads of State and Government held virtually on 5 December 2020, the African Union adopted the decision to commence Free Trade(trade without tariffs, quotas, and other barriers). Nigeria is planning to take advantage of the opportunities offered by the African Continental Free Trade Area (AfCFTA), in order to explore new markets for its non-oil commodity and service exports. In November 2020, the Federal Executive Council of Nigeria ratified the country’s membership of the AfCFTA, ahead of the implementation of the agreement which was initially scheduled to commence on January 1, 2021.
This further explains why the new Economic Development Plan of Nigeria, 2021-2025, is designed to align with the AfCFTA in order to set the stage for the envisioned economic diversification and export activity. By linking the agricultural sector to the industrial and other sectors of the economy, the Plan ambitiously projects the annual growth of exportable goods and services at an average of 8.1 percent and the GDP growth rate at 13.5 percent annually within the period. This development accordingly foresees a surplus Balance of Trade, given that the contribution of imports to GDP is projected to grow at only about 11.1 percent annually over the same period.
Incentives
Nigeria has a lot of existing policy incentives, notable among which are the 10 Percent tax concession for five years; implemented by the Nigerian Investment Promotion Commission, NIPC, in favor of industries that can export at least 60 percent of their products.
The Nigerian Export Promotion Council, NEPC, is currently administering two other export-support incentives, namely: the Export Development Fund and Export Expansion Grant. The Export Development Fund (EDF) Scheme provides financial assistance to export companies to enable them to cover their initial expenses incurred in export promotion activities. The Export Expansion Grant (EEG) is a post-shipment incentive designed to encourage Nigerian exporters to expand export volume, value and improve the global competitiveness of Nigerian products.
Conclusion
I hope that entrepreneurs within and outside Nigeria will start preparing now in order to take advantage of the amazing up-and-coming export opportunities in Nigeria.
Given that this topic will be featured in series, interested investors in search of credible information are hereby advised to stay connected to the next topic.
