Omnibus Capital & Assurance

Nigerian Agro Commodities Trade Dynamics in Nigeria

Export Business Options In Nigeria
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The Non-oil export business is still at its very primitive stage in Nigeria with a very high potential for growth. Since the export market is all the countries around the world, the market is therefore inexhaustible (especially for Agricultural commodities and other consumables), therefore there space for everyone that will like to earn foreign exchange via the export business. If you are interested in the export business you can start as an Armchair Exporter, or enter the business as a Part-time Exporter and finally as a Fulltime Exporter. If you enter as an armchair exporter then you should grow to become a part-time exporter and finally as a full time exporter depending on your strategy.

Export Business Options In Nigeria: Armchair Exporter

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Armchair Exporter: these exporters depend on consulting firms, local buying agents and freight forwarders to carry out most of their export operations. This option is suitable for individuals that would like to start a business while still in a paid employment but do not have enough time to spare. The return on investment for this option could range from 10-25%. The exporter is only involved in Export Planning, Export Financing, Pre-Export Documentation and Post-Export- documentations.

Export Business Options In Nigeria: Part-Time Exporter

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Part-time Exporter: these exporters depend on consulting firms and freight forwarders to carry out some of their export operations. This option is suitable for individuals that would like to start a business while still in a paid employment and also have some time to spare. It’s also a viable option for existing businesses that want to divest. The return on investment for this option could range from 25-35%. The exporter is involved in Export Planning, Export Financing, Export Product Sourcing, Pre-Export Documentation, Haulage To The Warehouse, Haulage To The Port Of Loading, Post-Export- documentations.

Export Business Options In Nigeria: Full Time Exporter

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Full Time Exporter: these exporters only engage freight forwarders minimally for their port of loading operations. This option is suitable for those that are available 24hrs (retirees and those that just resigned or lost their jobs) and also existing businesses that will like to be fully involved in their export operations. The return on investment of this option could range from 30-45%. The exporter is involved in Export Planning , Export Financing, Export Contract sourcing, Export Product Sourcing, Pre-Export Documentation, Haulage To The Warehouse, Warehousing and Inspection, Freight Forwarding, Haulage To The Port Of Loading and Post-Export- documentations.


EXPORT PROCESS IN NIGERIA

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1. Read the content of this website entirely

2. Register a limited liability company through your lawyer
3. Obtain an Export License from the Nigerian Export Promotion Council
4. Prepare and Plan your export
5. Secure an Export Contract
6. Source for products and transporting them Lagos
7. Process NXP form and pay NESS fees through your Bank
8. Arrange for warehousing and Inspection
9. Engage a freight forwarder
10.Book a truck and container
11.Loading and sealing of container
12.Transportation and GIT insurance to port
13.Customs Inspection at the port
14.Delivery to the shipping line
15.Obtaining Transport Document from the shipping line
16.Obtaining Inspection report from Cobalt
17.Obtaining Customs documents
18.Forwarding documents to supplier (directly or via your bank)
19.Submission of Post Export Documentations to the bank
20.Payment of Export Proceeds

Payment Methods In International Trade

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INCOTERMS In International Trade.


Incoterms is International Commercial Terms designed by the International Chambers of Commerce to share the cost and risk involved in transporting goods from one country to the other between the importer and the exporter. The latest version is INCOTERMS 2000 and it contains 13 INCOTERMS. However, out of these 13 incoterms, only three are often being used in export business in Nigeria. These include;


FOB – Free On Board (named loading port): The classic maritime trade term, seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export.

CFR – Cost and Freight (named destination port): seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail
CIF – Cost, Insurance and Freight (named destination port): exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer.

Financing Model for Export Credit Agencies

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1 -Agreement between importer and exporter
2 -importer applies for LC
3 -Importer’s bank issue LC to exporter’s bank
4 -Exporter’s bank advices the LC to the exporter
5 -Exporter applies for export credit guarantee
6 -ECA sends export credit guarantee to exporter’s bank
7 -Exporter ship goods to importer
8 -Exporter forward documents to his bank
9 -Exporter’s bank discount the LC based on the export credit guarantee
10 -Exporter’s bank forwards document to the Importer’s bank
11 -Importer’s bank release document to Importer
12 -Importer pays his bank
13 -Importer’s bank pays the exporter’s bank

The Basic Features Of A Typical Export Contract

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The basic features of an export contract include the following;

1. Quality Specifications

2. Quantity
3. Packaging
4. Contract duration
5. Shipment date
6. Pricing
7. Incoterms
8. Origin of goods
9. Inspection agents
10.Port of loading and port of discharge
11.Shipping line
12.Payment terms
13.Payment methods
14.Documents
15.Dispute resolution

Export Prohibition List

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The following items are on the Export prohibition list in Nigeria
1. Maize
2. Timber (rough or sawn)
3. Raw hides and skin (including We Blue and all unfinished leather)
H.S.Codes 4101.2000.00 - 4108.9200.00
4. Scrap Metals
5. Unprocessed rubber latex and rubber lumps
6. Artifacts and Antiquities
7. Wildlife animals classified as endangered species and their products
e.g. Crocodile; Elephant, Lizard, Eagle, Monkey, Zebra, Lion etc.

Some Exportable Commodities In Nigeria And There Locations

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The Final Report of the Agribusiness Development Assistance to Nigeria (ADAN)in 2002, after evaluating Nigeria Commodities in terms of market, supply, profitability, barriers, geographic dispersion, environmental impact, employment generation and foreign exchange earnings, ranked the top ten Commodities produced in Nigeria from most to least interesting for export as follows;
1. Ginger
2. Gum Arabic
3. Sesame
4. Cashew
5. Leather/Skins
6. Marine Products (prawn farming)
7. Wood Products (Hardwood charcoal, plank etc.)
8. Horticulture
9. Floriculture
10. Medicinal Plants (Prunus Africana or Pygeum)

Payment Methods In International Trade

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1. Open Account: An open account transaction is a sale where the goods are shipped and delivered before payment is due, which is usually in 10 to 90 days. Obviously, this option is the most advantageous option to the importer in terms of cash flow and cost, but it is consequently the highest risk option for an exporter. Because of intense competition in export markets, foreign buyers often press exporters for open account terms since the extension of credit by the seller to the buyer is more common abroad.


2. Documentary Collections : A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank (importer’s bank), along with instructions for payment. Funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents. Document can either be delivered to the importer against payment at the sight (D/P) or against the acceptance of a Bill of Exchange (D/A) tenured for 30 to 180days or more.


3. Letters of Credit: Letters of credit (LCs) are one of the most secure instruments available to international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents.


4. Cash-in-Advance: With cash-in-advance payment terms, the exporter can avoid credit risk because payment is received before the ownership of the goods is transferred. Wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters.
The ABC Of Transporting Commodities In Nigeria

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1. Avoid booking for a road side truck, it is illegal and could be dangerous

2. Book your truck at the transporter’s office
3. Confirm the efficiency of the transport company and their drivers before
engaging them
4. Do a good in transit (GIT) insurance with a reputable insurance company
through a good broker
5. Endeavour to know the capacity of the trucks before loading it
6. Find a warehouse at the destination before the truck arrival to avoid truck
demurrage
7. Get the contact numbers of the company and the truck driver for proper
monitoring during the journey
8. Hired truck drivers’ attitude could be annoying, please be patient with
them
9. Inquire from other exporters the challenges they face with transport
companies so as to prepare your mind
10.Journey to the destination could be delayed, therefore do not be
unnecessary apprehensive

Pre-Export Documentations In Nigeria

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The following documents are required by Central Bank Of Nigeria (CBN) to be submitted by the exporter to any Commercial Bank before any legal export can take place. These documents are five in number and they include:

1.Completed original NXP form (This can be obtained from any commercial Bank in Nigeria)

2.Copy of a valid export license (This can be obtained from the Nigeria Export Promotion Council)
3.A Valid Proforma Invoice (The invoice must be on exporter's letterhead, dated and signed)
4.Completed original copy Cobalt Request For Information (RFI) form
5.Copy of the Certificate of incorporation (This can be obtained after registration of a company with Corporate Affairs Commission)


Post-Export Documentations (Exchange Control Documentations) In Nigeria

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Upon shipment of the goods, the following documents (called exchange control documents) are required by CBN to be submitted to the bank;

1.NXP form duly endorsed and stamped by the Nigeria Customs Service.
2.Receipt of payment for Nigeria Export Supervision Scheme (NESS) fees i.e naira equivalent of 0.5% of the FOB value of the shipment. This can be done in designated commercial Banks in Nigeria.
3.Single good declaration (SGD) form issued by the Nigeria Customs Service
4.Clean Certificate of Inspection (CCI) issued by Cobalt International Services Limited

Other documents include copies of :

1. Bill of lading
2. Invoice
3. Packing list





RULES FOR QUALITY CONTROL IN COMMODITY PROCUREMENT

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1. Know the quality specifications of the buyer before embarking on Commodity procurement.

2. Understand how to do a random check to confirm the quality specifications as stipulated by the buyer.
3. Pour out all the content of the randomly selected bags to draw your samples or rather take your samples from the middle or base of each bag.
4. If quality cannot be determined visually or by a simpler means, do a lab analysis on the sample drawn before payment.
5. Sort the Commodities and separate the bad ones in order to determine the right quantity before payment
6. Ensure that the hired trucks have a back cover to protect the Commodities in transit.
7. If the commodity is solid minerals avoid sands, overburden (unwanted stones) and any other impurities to ensure good quality.

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