Thursday, November 16, 2017

Wanted In Nigerian Banks: Certified Trade Professionals- Part 1

Banking is a very noble institution that take funds from people, places projects where it is excess supply and channel into people places and projects where funds are in short supply, thereby making the dreams of different people from various places handling different projects come to fruition. In carrying out this core function, one of the skill that is extremely critical for the bank's survival is risk management. A Bank that fails to develop the staff in the various units that manage its risk is sitting on the keg of gun powder, which will explode sooner or later. As a matter of fact, most Banks that has gone into the archives of history and no longer exist in our world today commence their decline into oblivion because of their recklessness in risk management.

In this article, my focus is going to be on Risks that are associated with international trade transactions. Trading generally in the local market has its inherent risks but when it comes to trading across borders, a layer of risk is added to the existing risk of local trading and this requires skills in relevant trade finance instruments to mitigate. Some of the common trade finance instruments being used in Nigeria and other parts of the world include Letter of Credit (LC), Bill for Collection (BC), Demand Guarantee (Guarantee) and Standby Letter of Credit (SBLC). Out of these instruments, the most prevalent ones in Nigeria are Letter of Credit and Bill for Collection. From these two instruments, only Letter of Credit is suitable for financing trade without the support of another trade instruments.

However, the recent global trade finance report of the International Chamber of Commerce (ICC) has revealed that the usage of Letter of Credit has been declining since after the global recession that plagued the last 2-3years of the last decade. The usage of this instrument went up a bit between 2012 and 2013, but it has been on a consistent decline since then. The usage was measured using the MT700 messages (The message type on SWIFT that is used for the issuance of Letter of Credit) sent out to different banks in the world via SWIFT (Society for World Wide Interbank Financial Telecommunications). There was a decline of 2.50% in 2014, a further decline of 3.76% in 2015 and finally a decline of 2.81% to an 8 year low in 2016. In all, the Letter of Credit usage has decreased by over 4.3 million from almost 48 million in 2013 to about 43.5 million in 2016. This has been attributed to a number of factors and the predominant of this is the delay in payment and clearing of the goods which results from the over 70% prevalent rate of documents discrepancies in Letter of Credit transactions all over the world.

This stunning statistics should drives a typical trade professionals anywhere in the world to begin to ask the questions, how then do we secure trade transactions in the world if the usage of Letter of Credit is decreasing at this rate? The answer to this question is Standby Letter of Credit and Demand Guarantees. The usage of these two trade finance instruments has been on the increase in the same period of decline in the usage Letter of Credit. This is because they can be easily combined with other payment methods like Open Account and Bill for Collection, which thus eliminate the delay of discrepancies that is often experienced in Letter of Credit transactions.

All these changes should therefore make a forward-looking trade professional and Bankers that structure trade finance to begin to position themselves for this new trend by acquisition relevant skill through various certifications. The case in Nigeria is however different despite the fact that a number of trade instruments (like Letter of Credit, Standby Letter of Credit and Demand Guarantees) are issued regularly, few Bankers in Nigeria understand these instruments and very few are certified trade finance professionals. As a matter of fact, the level of incompetence of Bankers in handling these instruments always very obvious whenever I request for it in any of our trade transactions. This actually results from them being ignorant of the rules like International Standby Practice (ISP98) and Uniform Rules for Demand Guarantee (URDG758).

There are two major global trade finance certification programmes that can help Bankers to sharpen their skills in the usage of these instruments. These include Certified Documentary Credit Specialist (CDCS) and Certified Specialist in Demand Guarantee (CSDG). Both of them aid better understanding of Standby Letter of Credit while the latter boost the skills of Trade Specialist in Demand Guarantee. However, it is very risky to note that despite the volume of the trade instruments being issued daily in the country and increase in the  usage of SBLC and Guarantee in particular, Nigeria only has 58 certified trade professional in LC and SBLC and just 11 certified trade professionals for Demand Guarantee. It is particularly more risky among the Tier 1 Banks who handles most of these transactions and have just 16 certified trade professionals. One of this top banks who used to have about five currently do not have any certified trade specialist in Letter of Credit probably because their bosses are not certified and thus feel threatened. This makes them to be taken out of the unit and deploy them to other departments like marketing and sales units.

To be contd next week

Bamidele Ayemibo
bayemibo@3timpex.com

Export Digest Newsletter - How AFED Initiative Will Change the face of Exportation in Nigeria

Dear Readers,

Please find below Nigeria's Foremost trade Newsletter - Export Digest
In This Week's Edition of Export Digest Newsletter - How AFED Initiative Will Change the face of Exportation in Nigeria.

To read the full details of this edition of Export DigestClick Here
To read the full details of this edition of Export DigestClick Here

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Thursday, November 9, 2017

The Real Sector of The Nigerian Economy is Under Covert Threat.  


It is no more news that Nigeria is an Import dependent country. This is mainly due to the low level of development in the economy. When it comes to examining the risk of importation to a country, we seem to only focus on the impact on foreign reserve and the nature of the items being imported and not so much is being said on where we are importing the goods from. In my opinion, I think the Real sector Nigerian economy is seriously susceptible to a major risk called concentration risk because of the over dependence on China as the major source of our items of importation into Nigeria.



The economist will tell us that the economy of any nation comprises four interrelated sectors, operating to ensure that resources are best utilised in the production of goods and services to maximise the welfare of its citizenry. The sectors are the financial, fiscal/government, external and real. While all four sectors have important roles in the welfare of the citizenry, the role of the real sector is particularly significant and strategic. It is the sector responsible for the production and distribution of goods and services (from a combination of factor resources), necessary to meet the consumption demand of an economy. It drives economic growth and development, and provides an indication on the living standard of the citizens of an economy and the effectiveness of governments macroeconomic policies. Furthermore, it facilitates the creation of economic linkages with other sectors and helps in capacity building, employment and income generation. In view of this, a discussion of the real sector is topical as it is the pillar upon which the governments objective of inclusive growth and poverty alleviation hinges, since it contributes the most to employment generation and growth. However, the real sector of the Nigerian economy is under threat and no one seem to be observing the trend and bring it to the front burner and hence nothing is being done about it. The wise man see evil afar off and do something to avert it but fool will wait until it he feels the impact before doing something about it.



Looking at the data of Import from China since 2013 to 2016, you will observe that the volume of importation from China has consistently been on the increase. As a matter of fact, the volume of importation from China alone is more than double that from the United State of America (USA) which happened to be the next to China on the list of top Import origin of Nigeria. For example, in 2013, about 22% of the total import volume into Nigeria was from China, while that of USA is 11%. This volume of importation from China increased to 26% in 2014 while the USA retained the second position with a volume amounting to about 11%. In 2015 the total import volume from China into the Nigerian market jump to a whopping 35%, while that of the USA dropped to about 8%



In 2015 in particular, Nigeria imported goods worth $39.5Billion and from different parts of the world. Out of this, about $13.6Billion worth of goods were imported from China and this accounts for about 35% of the total import into the country. What is of interest to me in this particular year is the fact that a good chunk of the products inputs at different levels and stages to the manufacturers and processors in the country. For example, out of this $13.6Billion, about $2.37Billion was used for the importation of machines and spare parts, $1.18Billion was used to import metallic and minerals which are raw materials in industries, about $748Million was used to import raw materials for the plastics and rubber industries while about $577Million was spent for the importation of other raw materials that are chemicals.



A number of people might argue that, the reason why many people are flocking to China to purchase what they need for their factory is because if of the competitive prices. To the extent that this is true, however, I think the government has the responsibility to look beyond profitability and focus on the impact of this concentration risk on the economy. If this trend continues unchecked and China experience any form of political issues, (which is already gathering momentum based on the proposed sanction from the USA on China to stop its trade with North Korea) that has an adverse effect on its economy, then all the factories that solely depend on China might be in for a very hard time.



The implication of over reliance of the manufacturing sector of the Nigerian economy on a single country is far reaching. An adverse situation in the politics and economics of China might mean a decline in the importation of raw materials and spare parts. This might consequently leads to the reduction in product output and thus leading to a decline in income and profitability of such organisation. The result of all these is retrenchment of workers and increased unemployment in the country. A government that is forward thinking will not wait until things get out of hand but rather put processes and system in place to mitigate this before it becomes too late.



Some of the things the government can do is to first commence sensitisation among the players in the concerned sector of economy to let them know the implication of what they are doing to their business and the economy in general. In addition to this, the government can use some of the tools at his disposal to discourage over reliance on China and encourage the purchase of similar products from other parts of the world. Some of the government tools that can be very effective to get this done is Tariff, Tax holidays, VAT exemption, Import Origin Quota etc.



It is my firm belief that if these tools are dynamically and strategically deployed, then we can effectively avert the likely doom that could bedevil the Real Sector of the Nigerian economy very soon. However, if we continue on the current path of unabated increase in the dependence of the critical sector of our economy on importation from China (or any other country), then we may be in for a very hard time if this risk crystallises.

Bamidele Ayemibo
bayemibo@3timpex.com

Tuesday, November 7, 2017

Export Digest Newsletter - How AFED Initiative Can Help The Exportation of Nigeria Products To Europe

Dear Readers,

Please find below Nigeria's Foremost trade Newsletter - Export Digest
 
In This Week's Edition of Export Digest Newsletter - AFED: 3T Impex holds Inaugural Meeting With AFED Initiative Stakeholders

To read the full details of this edition of Export Digest, Click Here
To read the full details of this edition of Export Digest, Click Here

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Thinking of Financing or Investing in Export Business? Then Grab a Copy of A-Z Of Export Business Financing

Tuesday, October 31, 2017

These Necessary Government Reform Will Make You Venture Into Processed Agro Export

The Nigerian government has finally decided to diversify the economy indeed and in truth with the Agriculture and Solid Minerals sectors taking the front seat. However, the focus of most operators in the sector are mainly the crop production and animal husbandry. So many other operators are not interested in what I will like to call the Agricultural sector enabler or demand driver which is value addition.

According to the publication of Agricultural and Applied Economic Association, Value added Agriculture is a portfolio of agricultural practices that enable farmers to align with consumer preferences for agricultural or food products with form, space, time, identity and quality characteristics that are not present in the conventionally-produced raw Agricultural commodities.

It appears that it is common sense that one should be know that value added Agricultural products will generate more revenue and at such should be of interest to anyone in this sector. However, many have decided to look away from this and just simply focus of the product and sales of the raw commodities. This disposition to value addition has been attributed to various reasons like capital, competence, machinery etc but in my opinion, I think chief among the reasons for this is the issue of mindset.

The Federal Government of Nigeria has for many years programmed Nigerians to think only in terms of commodities when it comes to export trade business. This has been consistently demonstrated by the export of crude oil by the government. This has continued for more than 3 decades and hence all the government programmes, infrastructure development, incentives, capacity building have been geared towards the development of the oil and gas sector. All these have created a mindset that made people to think less of Agriculture talk less of value added Agric business when they are thinking of investing in any business. To correct this anomalies, I will recommend that the government set a short term and medium term goals. The focus of this article will be on the short term goals, while the medium term will be considered in another article sometimes in the future.

The short term goal should include the establishment of Agro processing centres across the country in order to enable the Small and Medium Scale Enterprises (SMEs) to have a point to take off their business in order to build their capital and ultimately set up their own processing factories. It is interesting to note that the federal government has started this in some parts of the country. It will be great to not just extend this all the states in the federation, but also ensure that this kind of facility is present in all the senatorial districts of each state of the federation. This model validate the fact that, an Agro processor do not really need to have all the funds to set up a factory before he can own his own brand.

Another way of replicating this model is Contract Production. This involves a process whereby, an intending Agro processor (client) partners with a processing factory (factory) that currently produces or has the capacity to produce his dreamed product via a joint venture agreement. The client produces his packaging materials and deliver them with his raw materials to the factory. The factory then processes the product, put it in the package received and deliver it to the client for onward distribution to the market.  

To the extent that most of the Agro processor are processing various food items for mankind, it becomes highly imperative for those products to be of very high quality that is fit for human consumption. Therefore there is need for regulation. However, A situation where the Agro processors and other entrepreneur sees the regulator as an impediment to the progress of their business is not good for the country. I will strongly recommend that the National Agency for Food and Drug Control (NAFDAC) carry out a thorough assessment of its processes, do some internal cleansing and carry the following reforms. The Agency should make public a timeline for the registration of any product with the agency. The phone number to call when there is unnecessary delay should be made available to the public. The procedure for escalating any issue to the Director General should also be made known to the public. In addition to these, besides the checklists on its website, the exact fees payable to the agency for various degrees of products and registration should also be made known to the public.

All these information should be made available to the public via its website, conspicuous display in all the NAFDAC offices across the country. It will be good for NAFDAC to identify a very patriotic staff who will be able to inspire others and champion this initiative and reforms in all its offices across the country. Considering the fact that Nigerian Agro products is going no where in the export market if the populace cannot trust NAFDAC to do their job patriotically. I will also strongly recommend that the presidency directly supervise the activities of this agency in order to ensure strict adherence to all  its directives.

Having taking care of the production and regulation, the next thing I think the federal government should do in order to attract more investors into this sector is to give some tax relief. This is mainly due to the fact that the level of infrastructural deficit in the country is going to make the business to be highly unprofitable. A typical Agro processor in Nigeria will need to tackle the issue of power generation, water supply, cope with high cost of transportation and protracted transit time and all these contribute significantly to the high cost of production and thus, making the products pricing to be non-competitive both in the local and export market. All these are the basis for recommending that the Federal government should consider giving some tax exemptions to the Agro processors until the business finally stabilise.

The last recommendation is the issue of Promotion. This, in my opinion is more critical than the ones stated above, and without it all other recommendations will be an effort in futility. The neglect of this has been the bane of all the programmes and initiatives of the government. Typically in Nigeria, when the government starts a new programme, it is either not promoted at all after the launch or they will simply do few insertions on newspaper, radio or television for a few days and that will be all. The federal government needs to take a cue from the serious minded businesses who will promote their products or services for several months or even years because they realise the AIDA theory in human psychology. This model says that an individual will usually go through four phases (Awareness, Interest, Desire and Action) in response to any promotional efforts. This theory says that the initial promotion only created Awareness and generate Interest with continuous promotional efforts. As the promotion continues, this makes them to begin to Desire the product or service and further promotion eventually makes them to take Action. What the government usually do is to stop after creating awareness and this only allow few people to benefit from its programmes and hence the minimal impact and eventual failure of the various government initiatives.

In conclusion, if we want to create jobs, if we want to reduce post-harvest losses, if we want increase demand for Agro produce, if we want to grow the agricultural sector, if we want an inclusive growth in the Nigerian economy, then we must aggressively pursue value addition to most (if not all) of our Agricultural products.

Bamidele Ayemibo
bayemibo@3timpex.com

Monday, October 30, 2017

3T Impex in Partnership with Signet UK for African Export Development (AFED) Initiative

Good day,

Please find below Nigeria's Foremost trade Newsletter - Export Digest
 
In This Week's Edition of Export Digest Newsletter - 3T Impex in Partnership with Signet UK for African Export Development (AFED) Initiative

To read the full details of this edition of Export DigestClick Here
To read the full details of this edition of Export DigestClick Here

3T Impex Mobile App  ............ Learning Trade The Smart Way 

Click Here To Download the App From Google Play Store

Thinking of Financing or Investing in Export Business?.....Then Grab a Copy of A-Z Of Export Business Financing

Friday, October 27, 2017

3T Impex In Partnership with Signet UK for African Export Development (AFED) Initiative


As part of her numerous efforts to grow the exportation of value added products from Nigeria, 3T Impex is has gone into partnership with collaborate with Signet Corporation Limited in the UK to launch an African Export Development Initiative (AFED) during her weekly . This programme is geared towards working with Small and Medium Scale Enterprises (SMEs) to facilitate the exportation of their various products in the UK and EU markets. 

Some of the features and befits of this initiative include aggregated export service, shared cost of shipment, export market development for SME’s, and low risk entry into export market. Other benefits include ready buyers in the UK and EU market, free product packaging advisory service, short export business cycle 90 days form shipment date) to mention but few.

This initiative is designed to protect exporters from the pitfalls associated with export business and help to get their products into the export market while also learning in the process.

To be part of this initiative, please call 08091244449 or send an email to tradeacademy@3timpex.com.
(Excerpt from www.tradeinfong.com)