Thursday, August 22, 2019

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Nigerian States Are Billionaires in US Dollars-Part-69-Export Driven Youth Employment & Income Generation Potentials of Plateau State


AfCFTA Implementation Strategies-Part-6: The Capacity

This is the sixth in the series of Articles on AfCFTA implementation strategies and the focus of this edition will be on Capacity building. No matter what the government is doing to get Nigerians to benefits from the AfCFTA, if the capacity of the business people are not developed to effectively manage and grow the export business, everything being done by the government would be a waste. The necessity of capacity building has been demonstrated by the fact that hundreds of new businesses get registered with the Nigerian Export Promotion Council (NEPC) to get the export certificates that makes them eligible to export every year, but the number of exporters that ship goods out of Nigeria every year has remained below one thousand in the last ten years. The question is, why is the number exporters and the volume of export not growing despite the increase in the number of registered exporters?  It is due to the lack of capacity on the part of the exporters to successfully do the shipment. 

Research has shown that a number of FTAs around the world have failed to achieved its objectives in some of the member countries because of the deficiencies in the export business management skills among the business people, especially the SMEs. One of the pivotal goal of the AfCFTA is to create jobs among the member states. This will achieved via the increased market demands which leads to increased volume of production and consequently leading to the need for increase in manpower. The impact of AfCFTA can only be felt by an average Nigerian on the street if the businesses are supported to develop the capacity to overcome the 5Ps of export business challenges and these include Products, Purchaser, Pricing, Paperwork and Payment. 

First of all, there is need for capacity building in the area products that can be exported to African countries and this should be based on what they currently import from other parts of the world. This should also include the quality specifications requirements of the different countries and what makes the products eligible for shipment within Africa under the AfCFTA. Our preliminary research at 3T Impex Trade Academy revealed that there are currently about 90 products that Nigeria can export to other countries in the in Africa based on what these countries currently import from nations in other continents of the world. As a matter of fact, publishing the list of these eligible products with their market potentials and using the organised private sectors to reach the manufacturers of these products in order to be able to engage them and get them to attend sector specific capacity building will be a good strategy.

The second area of capacity building for the manufacturers is the development of skills required to get purchasers abroad. It is one thing to have buyers all over the African continents, it is another thing to be able to get the buyer to buy from you. Capacity building areas with respect to getting purchasers should include but not limited to the following areas: international marketing, market entry strategies, product packaging, contract negotiations. It is a general belief among many exporters that the main challenge of exportation is getting buyers and this assertion was based on the fact that more than 70% of the enquires we get daily at 3T Impex Trade Academy regarding exportation is on how to get buyers. The capacity building on purchasers should therefore be aimed at changing this impression through the acquisition of the right skills and competencies to overcome this challenge.

Even though a manufacturer has a good product with huge demand on the African continent and also have the contacts of the buyers in different countries, he might still be unable to get buyers if he does not know how to effectively and efficiently price the products to be exported. The product manufacturers needs to know about different pricing strategies, different pricing objectives, product costing and pricing, cost elements in a typical export project Incoterms and how it affects costing, the logistics options and their cost implications. It is also necessary for them to know how to get the tariff concession schedule in order to be able to know the products on the non-sensitive list, sensitive list and the exclusion list. All these areas of export costing and pricing are highly imperative in order to be able to appropriately price their products in the African export markets. 

International trade is largely a business of logistics and documentation. The need for capacity building in the area of paperwork is very important because, if the documentation is faulty, it has the tendency to make the transaction to fail and lead to losses. Shipment of goods to destination can last for up to two months and the buyer might have to pay sometimes before seeing the goods especially in a letter of credit transaction. The exporters need to know about pre-export documentation and post-export documentation. The post export documents are peculiar to products and markets in question. If the documentation presented by the exporters leads to a discrepancies, it will cause delay in clearing the goods and this will consequently leads to extra cost in demurrage payment by the buyer abroad. 

The last but definitely not the least area that requires capacity building is the issue of payment. This basically involves sourcing from funds to pay local suppliers and getting payment from the buyer after shipment. The manufacturers and/or exporters will require capacity building in the areas of pre and post export financing and payment methods like Letter of Credit, bill for collection, Open Account and Advance Payment. Considering the fact that more than 80% of trade in the world are done on Open Account (Cash Against Document), which leaves the exporters exposed to the risk of either delayed payment or non-payment, it is therefore necessary to train the exporters on measures to put in place in order to mitigate this risk.

Finally, I will like state that inadequate capacity on the part of manufacturers is a major challenge that have bedeviled the implementation of FTAs in several developing countries around the world.  No matter the plans and strategies put in place by the government, if the actors are not equipped with skill and competence to take advantage of the AfCFTA, then the anticipated benefits will remain a mirage and at the level of potentials. It is my hope that the implementation committee of the government will adopt some of the recommendations that are been prescribed in these series of articles in order to make the implementation of the AfCFTA create the necessary jobs that will lift out of penury, the tens of millions of Nigeria that are currently living below the poverty line

For the love of Nigeria, Africa and Mankind.
Bamidele Ayemibo (bayemibo@3timpex.com)
Lead Consultant at 3T Impex Trade Academy