Saturday, June 25, 2022

CBN RT200 FX: Resolving Quality Issues Of Nigerian Agro Products Exports

Nigeria is a country that has a very huge potential to generate foreign exchange from its numerous solid minerals and Agricultural products but this has been largely hindered by high level of mortality rate of the export business. One of the major reason for this high level of dropout of the business is the huge losses incurred from the export of low quality products. Most of the products that have quality issues are largely Agro commodities and solid minerals in the primary state. Many businesses have lost money due to exportation of low-quality products either due to total rejection of the goods leading to no payment or partial rejection of the goods leading to payment of only a small fraction of the expected export proceeds. 

 

The federal ministry of industry, trade and investment recently set up a committee to address this problem and this article is aimed at making some recommendations to this committee. I will strongly recommend to this committee that the focus should not just be on the supply side but also on the demand side. If the focus is only on getting the farmers to produce good quality products, this will be futile because no matter the effort being made on the supply side, if the demand side is still buying low quality products produced by the farmers then there will be no incentives for the farmers to embrace the good agricultural practices that will make the quality of their products to be ready for the export markets 

 

There are many reasons for the quality issues associated with commodities leaving Nigeria and hence the consequent rejection of the products at the destination market. Some of the reasons for the quality issues plaguing Nigerian commodity export include ignorance of the quality requirements among the exporters, ignorance of good agricultural practices among the farmers producing the commodities, lack of readiness for export business leading to lack of systems and structure in place to ensure strict adherence to expected quality standards, lack of quality inspection before procurement, wrong packaging of the goods in transit, lack of quality standards benchmark for any commodity that is leaving the country, lack of enforcement team to ensure that whatever is leaving the country as export conforms to the standard and the focus on the export of raw materials (which is more prone to quality issues) rather than value added product.

 

Ignorance is a major challenge that is causing many Nigerian businesses to export low quality products. Many businesses are only interested in the transactions and profit thereof and not the processes involved. This makes them to fund the export of products that they do not even understand the quality specifications let alone ensuring quality control before shipment. To solve this problem, I will recommend that the Nigerian Export Promotion Council (NEPC) commence an export orientation programme for the new company applying for the export certificate for the first time. This should be done in batches in the NEPC offices across the country every month. This will create an avenue to educate new exporters on the importance of quality specifications and the consequences of not adhering to these quality specifications. 

 

The ignorance factor leading to low quality products is not just only peculiar to the exporters, it is also an issue among the farmers producing these commodities. Most of the farmers in the country are very old people who are used to a particular way of cultivating their crops. As they say, old habits die hard. This has made it difficult for these farmers to change the way they go about their farming practices. Even when they have been taught, the additional cost of implementing good agricultural practices coupled with the fact that there are people ready to buy their substandard produce have made them to continue in their old ways. To solve this problem, the government should not just train the farmers but also incentivize them by giving them funds and inputs (where necessary) to reduce the cost of implementing the good agricultural practices. The government should also guarantee off takers by linking them up with exporters that will buy the farm produce upon harvest and other necessary processing like drying.

 

Another factor leading to the export of low quality commodities from Nigeria is the lack of readiness for the businesses for the export market. This is manifested through lack of structure (people) and systems (processes) in place to ensure strict adherence to expected quality standards. This means that even though the exporter is aware of the required quality specifications, he will keep buying and exporting substandard Agro commodities and this is because the business does not have what it takes to ensure strict adherence to these specifications. To solve this problem, there is need for capacity building for the exporters on how to build structure and systems that will guarantee quality control in commodity procurement. 

 

The fact that some exporters buy their Agro commodities blindly from the farm gate, local buying agents and commodity merchant without quality inspection prior to procurement is a another major reason for the export of substandard commodities. Sometimes, such goods arrive at the port and loaded into the container without quality inspection. Most of the time, the exporter gets to know that the goods are defective when the goods arrive at the port terminal or warehouse and the inspection agent carry out the pre-shipment inspection. At this time it is already too late to return the goods, the exporter then begins to look for other buyers who will accept the low quality but such goods are often rejected at the border of the destination country of the new buyer. To solve this problem, the government should support interested private sectors businesses to setup quality inspection companies in every local governments or senatorial districts where the exportable Agro commodities are produced in large volume. 

 

Another issue that leads to the shipment of low quality of goods being exported from Nigeria is the way the produce are handled after harvest and this is of referred to as post-harvest handling. The challenge of post-harvest handling is manifested in the environmental conditions that the produce are exposed to during processing (like drying, slicing, fermentation etc), wrong packaging and the ambience created for the goods while at the warehouse or in the container while in transit from the supplier’s warehouse to the port of loading or from the port of loading to destination port. To overcome this challenge, both the farmers and the exporters need capacity building in handling their Agro commodities (like the use of the right type of bags, container dressing, use of desiccant to absorb moisture in transit etc.) after harvesting in order to preserve the quality of the product till it arrives at the destination 

 

The focus of the country on the export of raw commodities (which are more prone to quality issues) rather than value added products will make the challenge of the export of substandard commodities to remain with us for a very long time. Apart from the fact that the export of substandard goods gives the country a bad name and image around the world, it also makes the country to earn very little amount of export proceeds from this export. To put an end to the exportation of low quality commodities from Nigeria, the government must be ready to put an end to the exportation raw commodities in their primary form. However before this is done, the government should create enabling environment and provide the necessary supports to aid the processing of the commodities into secondary or tertiary forms

 

Nigeria does not currently have a minimum quality specifications for any Agro products leaving the country and hence there is no enforcement at the port of exit. This means no matter how bad the quality of product is, it will be allowed to be shipped out of Nigeria because there no system put in place to stop such shipment. It is important to state that setting a minimum benchmark of quality specification for any item (particularly Agricultural produce) to be shipped from the country and putting a system in place to enforce it at the port of exit is one of the viable solutions to putting an end to the shipment of substandard commodities out of the country. As a matter of fact the stoppage of the shipment of substandard goods will make exporters to demand quality goods from their suppliers and this will make the suppliers to demand quality goods from the farmers. All these will consequently make the the farmers to begin to adhere to good agricultural practices in order not to loose their customers. To solve this problem, the government have to agree with the stakeholders in the sector, the minimum benchmark for quality of all exportable Agro commodities in the country. The enforcement should be done by a team that should include the Nigerian Export Promotion Council (NEPC), Nigeria Agricultural Quarantine Service (NAQS), Federal Produce Inspection Service (FPIS) and the Nigeria Custom Service (NCS).

 

This article has highlighted my recommendations to the committee already setup by the minister of trade industry and investment to provide solutions to the menace of rejection of Nigerian commodities in the export market. I strongly believe that If the solutions suggested in this write up can be given consideration with necessary modifications, it will make the solutions to be recommended  by the committee to be robust enough to finally put an end to the shipment of substandard Agro commodities from Nigeria.

 

For the love of Nigeria, Africa and Mankind  

Bamidele Ayemibo (bayemibo@3timpex.com)

Lead Consultant, 3T Impex Consulting    

Monday, June 20, 2022

Mastering The Democratic Republic of Congo Market Under AfCFTA

 

                       

To read the full content of the newsletter on Mastering The Democratic Republic of Congo Market Under AfCFTA, then Click this Link

Saturday, June 18, 2022

Biannual Non-Oil Export Summit: Feedback For CBN & Banker's Committee

The RT200 FX programme is an initiative of the Central Bank of Nigeria (CBN) and the goal is to generate a total sum of $200 billion in non-oil export proceeds within the next 3-5years. This programme has  5 pillars and one of them is the biannual non-oil export summit. In line with the implementation of the five pillars of the RT200 FX programme of the CBN, the bankers committee together with the management of CBN have organized the maiden edition of the biannual non-oil summit which held at EKO Hotel on June 16, 2022. 

 

This is a promise keep by the CBN Governor and this initiative is commendable and a step in the right direction. A number of issues were raised and recommendations made at this event. All the ideas shared at the event will definitely contribute to the growth of the sector and achievement of the target set if they are well implemented. However, a few observations were made regarding the event which are being highlighted in this article. If these suggestions are put into consideration at the next event, it will enrich the outcomes of the conference and thereby speeding up the race towards the set target of $200 billion.

 

The first observation is the fact that the programme was seen by participants as a type of monologue. This is because even though there were many participants at the event, the participants were not allowed to participate. After the presentation and discussion by the panelists, only the CBN Governor was allowed to make comment on each of the panel session. The fact that the views and opinion of many stakeholders were not heard, makes the discussions at the programme not to be robust enough to enable the policy makers to take an informed decision. This also makes the programme to be unable to gather enough ideas and wisdom available in the audience and these are seriously needed to solve the problems being encountered in the sector. 

 

The lack of participation of the participants in the discussion is not good for the CBN at all because it did not allow the CBN Governor to hear the pain points of the exporters who are the ones doing the shipments that will generate the export proceeds and therefore help in achieving this laudable initiative of the RT200 FX programme. It also prevented the CBN Governor from hearing first hand from the exporters the challenges that many of them are having with the deposit money banks. As a matter of fact some participants are of the opinion that, the programme was done to fulfil all righteousness and not because the apex bank was ready to solve the problem, since they were not allowed to speak at the event. However, this opinion is not correct because the CBN has started the disbursement under the rebate scheme which is a demonstration of the commitment of the CBN Governor to make the RT200 FX programme a success. This kind of insinuation could have been avoided if the participants were allowed to contribute at the event.

 

Another issue raised about the programme which I saw on an exporter’s WhatsApp platform few days after the event was about the presentations made by the Managing Directors of banks before each panel session. The participants said “I attended. But, I must say, it was more of CEOs of the Banks trying to justify themselves where export are concerned than the real thing.” Another participants in a conversation said, that “the bank MD’s presentation were used as an opportunity to make their own request to the CBN and get the CBN Governor to meet their needs because they are not interested in helping exporters to solve their problems”. He also went further to say that “ some of the request in those presentation could have been made at the bankers committee meeting rather at such event”. 

 

It was also observed that there was no serious discussion around SMEs participation in export business and this was seen in the export businesses that were represented in the panel (only the large corporates made it to the panel). With the number of SMEs operating in Nigeria, the race to the $200 billion will be a lot easier to achieve if they are given the necessary support to increase their current export volume. Also, there was no discussion about the need and how to grow the number of export businesses in the country. This is very important in order to reduce the average export volume that needs to be done by each exporters in order to achieve a total export proceeds volume of $40 billion per annum and $200 billion in 5 years. Another observation was that discussion on the exportation of processed solid minerals was conspicuously missing. If not for the panelists that spoke about recycling, the programme would have been completed without anything being said on metal export despite the huge potential of processed minerals generating export proceed for the economy. 

 

Finally, the good news about the summit is that it is going to be a biannual event, so there is room for improvement. Also, since the CBN is committed to making this vision a reality, it is expected that lessons learnt from this maiden edition is going to be put into consideration and necessary correction made ahead of the next event which is expected to hold later this year or early next year. Lastly, it is important to congratulate the CBN Governor and his management team plus the banker’s committee for successfully hosting the maiden edition of the biannual non-oil export summit which is a major pillar in the actualization of the RT200 FX programme.

 

For the love of Nigeria, Africa and Mankind 

Bamidele Ayemibo (bayemibo@3timpex.com)

Lead Consultant, 3T Impex Consulting