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Maximising Potential of African Market Under AfCFTA 40 Senegal

Maximising Potential of African Market Under AfCFTA 38 Nigeria

Maximising Potential of African Market Under AfCFTA 36 Namibia

Maximising Potential of African Market Under AfCFTA 34 Morocco

Maximising Potential of African Market Under AfCFTA 33 Mauritius

Maximising Potential of African Market Under AfCFTA 29 Madagascar

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Maximising Potential of African Market Under AfCFTA 20 Gabon

Maximising Potential of African Market Under AfCFTA 19 Ethiopia

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Suspension of Export Receipt: Nigerian Exporters To Lose $360million

The Nigerian exporters are set to loose the sum of $360 million in the next two weeks as a result of the suspension of export receipts at the Lagos port. The management of the Nigerian Port Authority (NPA) on Monday March 22, 2021 announced the suspension of the receipt of goods bound for export out of the country for 14days. This means that between Monday, March 22, 2021 and Sunday April 4, 2021, any export transaction due for shipment within this period will not be allowed to enter the port. However, “this suspension does not affect export refrigerated cargo and trucks whose operators have secured call-up tickets as of March 19.” This is a sign of a deeper problem and the issue is the wrong disposition towards exportation of goods. 

 

This singular action of the NPA is going to cost non-oil exporters of Nigeria an estimated sum of about $360 million and this figure is based on the weekly value of shipments of non-oil products from Nigeria which was estimated to be $180 million per week in the year 2019 (this estimate is base on NBS data). We have spoken a lot about the need for diversification of this economy, but this has only been in words and not in deeds. In as much as NPA in its wisdom thinks that this suspension of exportation is what needs to be done at this time, it appears to be that the decisions were not fully thought through because they could have offered some palliatives to reduce the negative impacts of this decision on the exporters and the economy at large. Some examples of such palliative have been suggested in the latter part of this article. 

 

Let me start by stating that this decision has a very far reaching implications for the already maligned, discouraged, loss making and uncompetitive exporters in Nigeria. The negative implications of this decision include additional interest cost on the overall cost of the transactions to the exporter because of the delay caused by this suspension. In addition to this, the exporter already have an agreement on the latest shipment date with the buyer and this is agreed upon based on the anticipated delayed at the port. This suspension will be extending the latest date of shipment which constitute a breach of contract that can make the buyer to cancel the contract. The late shipment caused by this suspension will also lead to discrepancies in the document presented under letter of credit transactions and this will either cause delay in payment or total rejection of the goods.

 

Currently, some trucks carrying products in export containers are on their way to the Lagos ports from different parts of the country. The implication of this two weeks suspension of export receipts is that those trucks and shipping line are going to charge the export demurrage and detention fees respectively. This is a delay that is not the fault of the exporter but he has to pay a daily fee to these service providers for the next two weeks. The implication of this delay is also that the goods in the container might begin to deteriorate because of the heat of the sun on the stationary containers. In addition to this, goods coming into lagos might need to be warehoused for these two weeks and afterward loaded on another truck for onward movement to the port upon expiration of the two weeks. This will come to the exporters again at an additional cost. All these extra costs created by delay, discrepancies, demurrage, detention fees and deterioration of the goods will eventually lead to loses that will put the non-oil exporters into debt. 

 

It is important to state that the challenges of an average exporter in Nigeria. The Nigerian non-oil exporters are already struggling to be profitable due to the unfavourable exchange rate regime of the Central Bank of Nigeria (CBN); they are already not competitive because of the huge infrastructural deficit; they are already under priced because of the tarnished brand of the country in the international market; they are already having an unnecessarily long cash conversion cycle because of the various delays on the road and at the port. In addition to all these challenges that confront the exporters, the NPA has further complicate it and made worse by the two weeks suspension of export transactions imposed by the agency.

 

So what could have been done differently by the management of the NPA in order to ameliorate the challenges of exporters while the two week suspension last? The NPA should have given some weeks notice ahead on the effective date of this two weeks suspension of export receipt. This is to enable exporters inform their buyers, renegotiate the latest shipment date, amend their contract to reflect the new dates, amend the latest shipment date and expiry date on the letter of credit, put a hold on their shipments to the Lagos port from different parts of the country in order to avoid demurrage. In addition to this and in the short term, the NPA can work with different barge companies in Lagos to devote their barges to pickup export containers from their terminals and move them to the port within this period so at least some export transactions can still be done while the suspension last. In the long term, this is a wake up call to the NPA to do all that is possible to make the eastern ports to work optimally and become attractive for shipping lines as destination port in Nigeria. This will make more vessels to call these ports and hence make more exporters to also consider using them as the loading port for their export transactions.

 

Finally, I will like to say that it is time to begin to walk the talk as far as export is concerned in Nigeria. In doing this, the various Ministries, Department and Agencies (MDAs) of government that are directly or indirectly working with exporters will need to give all the necessary supports that are required to make non-oil export volume to grow in the country. The MDAs also needs to have a stakeholder engagement with the exporters ahead of this kind of announcement in order to be able to get enough suggestions on how best to go about the suspension (if it is necessary) with minimal collateral damage. 

 

For the love of Nigeria, Africa and Mankind.

Bamidele Ayemibo (bayemibo@3timpex.com)

Lead Consultant at 3T Impex Trade Academy

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Diaspora Remittance Policy: Why CBN Should Reconsider Its Export Proceeds Policy

At a time when the Central Bank of Nigerian (CBN) is in desperate need of uninterrupted and growing inflow of foreign exchange in order to shore up the Nigerian foreign reserve, it is sad to note that the apex bank is implementing a policy that is directly undermining its effort to increase inflow of foreign exchange into the economy. On November 30, 2020, the CBN Governor, Mr. Godwin Emefiele, spoke to journalist at a press conference in Abuja during which he announced that with effect from December 4, 2020, the beneficiaries of remittances to Nigerian from abroad will now have an unhindered access to diaspora remittances. 

This means that the foreign exchange inflow of diaspora remittances can now be accessed by the beneficiaries and this makes it possible for them to sell to whoever they desire at a price that is acceptable to them. This policy will therefore allow for unfettered access to foreign exchange from the Diaspora and other money transfer remittances and this is believed to support improved remittance of foreign exchange inflows into the country through official channels. This policy has been lauded by many experts in the country because it is believed that if the foreign exchange market is flooded with foreign currency inflow from Nigerian in diaspora, it will consequently leads to the appreciation of Naira and the likelihood of convergence of the exchange rates. 

The CBN Governor said that the current yearly diaspora remittances into the country is about $24 billion and this policy could help in improving the balance of payment position, reduce dependence on external borrowing and mitigate the impact of COVID-19 on forex inflows into the country. On the other hand, the CBN policy on non-oil export proceeds has the potential to significantly reduce the already low (which is less than $5 billion and just about 10-15% of total export) non-oil export proceeds in the country. At a time when the CBN should be doing everything possible to encourage non-oil export, it seems as if the CBN is trying to shore up the foreign reserve on one hand and at the same time destroying its plan to increase foreign exchange inflow on the other hand. It is very important for the CBN to know that it is sending a wrong signal to exporting community that the federal government is not concerned about their plight and does not care whether they are at a loss or profitable and I don’t think this was the intention of the CBN in making this policy. It is also important to note that the benefits that CBN highlighted to be derived from this new policy on diaspora remittances can also be enjoyed from export proceeds if thesame policy is applied.

According to the CBN, this new policy on diaspora remittances helps to improve remittances inflow and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances helps to improve balance of payment position and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances helps to reduce the dependence on external borrowing and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances discourage the diversion of inflows meant for Nigeria and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will aid the effectiveness of foreign exchange management framework and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will reduce the rate of foreign exchange and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will deepen the foreign exchange market and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will improve foreign exchange liquidity in the country and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will create more transparency in the administration of foreign exchange transactions and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will guarantee that recipients of remittances will receive a market-reflective exchange rate for their inflow and so also is export proceeds inflow if encouraged with similar policy. 

I have also heard some people say that, this is the regulation that must be followed and I say what is the usefulness of a regulation that is hindering the progress of businesses in the country. This regulation will most likely end up encouraging sharp practices because some exporters might begin to use this diaspora remittances to bring in the export proceeds and that means the CBN will still not have achieved the objectives of getting exporters to repatriate the proceeds. The question that I think the CBN should be asking is why are the exporters not repatriating the funds through the expected account and rather than saying that the proceeds are not repatriated. It is important to state that the fact that exporters cannot access the export proceeds in the export domiciliary account and sell it to whoever they so desire at an agreed price is the reason why many of them have refused to use this account. I will like to state clearly that most exporters particularly those trading in commodities will be at a loss if they sell their export proceeds at the controlled price in the I & E window because the raw materials they exported are sourced from farmers and miners who have benchmark their local prices using the exchange rates in the parallel market. 

Finally, I will like to therefore recommend that, if the CBN wants the exporters to repatriate export proceeds through the export domiciliary account then the exporters should be allowed to access it in line with the unfettered access policy that was in existence before it was stopped in 2016 when the CBN redefined the concept of unfettered access. If the CBN in his wisdom thinks this policy is best for the economy then it should ensure that a convergence of the exchange rate is achieved in order to reduce the cost of procurement of commodities in the local markets which will consequently leads to profitable exportation of commodities. After the CBN must have done this, then it has every reason to then enforce this policy if any exporter is still found wanting. 

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

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Maximising Potential of African Market Under AfCFTA 4 Benin

This is the 4th in the series of seminars on how to maximise the potential of the export markets in Africa under AfCFTA.
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