How to Start Exportation Business in Nigeria: Your Roadmap to Global Trade

In this article, “How to Start Exportation Business in Nigeria” we will unfold everything you need to know before starting an exportation business in nigeria.

Exportation business in Nigeria refers to the process of selling goods and services produced in Nigeria to customers or businesses located in foreign countries.

By foreign countries, this includes neighboring African countries such as Niger, Ghana, Togo, and the others.

In case you are not aware, Nigeria is blessed with a diverse range of products that can be exported, including oil and gas (which is our major export commodity), agricultural products, solid minerals, manufactured goods, and services.

Getting involved in the exportation business in Nigeria is a lucrative business opportunity, especially for businesses and entrepreneurs looking to tap into the international markets or as the economics do say; the global market.

Here are the requirements or steps to become an exporter in Nigeria:

1. Business Registration and Legal Compliance:

You’ll need to register your export business with the appropriate government agency.

In Nigeria, you can register a business name with the Corporate Affairs Commission (CAC).

This registration gives your business a legal identity and allows you to operate under a unique name.

While registering a business name is suitable for small and medium-sized enterprises, larger export businesses may opt for full incorporation as a limited liability company (LLC).

This LLC offers legal protections against personal assets and can enhance your business’s credibility in the international market.

Other legal compliance includes:

a). Obtaining Necessary Permits: Depending on the nature of your export business and the products you intend to export, you may need specific permits or licenses.

For example, agricultural exports do require permits from the Federal Ministry of Agriculture & Food Security (FMAFS) as they are responsible for agriculture and food safety.

Research and identify the permits relevant to your business and ensure you obtain them.

b). Complying with Tax Regulations: This includes registering for tax identification numbers (TIN), filing regular tax returns, and paying taxes on your income and profits. Non-compliance with tax regulations will lead to legal issues and financial penalties.

c). Consider Registering with Export Promotion Agencies: Export promotion agencies, such as the Nigerian Export Promotion Council (NEPC), are government bodies designed to support and promote Nigerian exports.

While registration with NEPC is not mandatory, it does offer several advantages to your export business. They are:

• Access to Resources: NEPC provides information, resources, and market intelligence to help you explore international markets and identify export opportunities.
• Export Training: They offer export-focused training programs to enhance your knowledge of international trade practices and regulations.
• Incentives: NEPC also provides financial incentives, grants, or subsidies to qualified exporters to help offset export-related costs.
• Networking: Membership also gives you an opportunity to connect with other exporters and industry players, facilitating networking and collaboration.

In addition, Consulting with legal and tax professionals with expertise in international trade will also be beneficial to ensure full compliance with all relevant laws and regulations.

2. Evaluate and Determine Your Exportable Products:

As a potential exporter, you have to sit and analyze (market research) which products you are going to be exporting to the international market.

You may already be involved in a business that you believe has export potential, or perhaps you’re considering launching an export business as an intermediary(middleman) who procures goods from manufacturers or farmers and sells them in the global marketplace. Whichever method you choose to venture into the exportation business they are profitable.

When determining which products to export, consider the following factors:

• 1. Market Demand: Research international markets to identify products with strong demand. Look for trends and niche opportunities that align with your chosen products.
• 2. Competitive Advantage: Assess your ability to produce or source the selected products competitively in terms of quality and cost.
• 3. Regulations and Standards: Be aware of import regulations, quality standards, and certification requirements in your target markets. Ensure your products meet these standards.
• 4. Logistics and Transportation: Consider the ease of transportation for your chosen products, including shipping costs, storage, and handling requirements.
• 5. Market Entry Strategy: Develop a comprehensive market entry strategy that includes pricing, distribution, marketing, and sales channels.
• 6. Sustainability and Ethical Considerations: Evaluate whether your chosen products align with sustainability and ethical sourcing practices, which can be important in today’s global markets.

The bottom line is to start with a product that aligns with your resources and expertise, and as you gain experience and market insights, you can expand your export portfolio.

3. Ensure to meet Quality Control and Standards:

Quality control involves a set of processes and practices that aim to ensure that your products consistently meet predefined quality standards.

This includes factors like appearance, performance, safety, and reliability.

Maintaining product quality and adhering to international standards is essential to building a positive reputation in foreign markets and meeting import regulations.

The Nigerian Export Promotion Council (NEPC), can help you in your research to find out each country’s quality standards.

4. Export Documentation:

Export Documentation invoves the paperwork and certificates that are required when exporting goods from one country to another.

These documents serve several crucial purposes, including facilitating the smooth movement of goods through customs, ensuring compliance with international regulations, and providing information to both the exporting and importing parties.

Here is a list of export documents that you must have before you can start exporting your goods from Nigeria:

• Export Permits License
• Quality Control Certificates
• Insurance Certificates
• Certificates of Origin: An official document that identifies the origin of the goods being exported.
• Commercial Invoice: The document lists out the products being exported, their quantities, prices, and terms of sale.
• Packing List: It provides detailed information about the packaging of the goods, including the type and quantity of packaging materials used, dimensions and weight of packages, and a list of items contained in each package.
• Bill of Lading or Airway Bill: This transport documents are used for sea and air shipments, respectively. They serve as evidence of the contract of carriage between the exporter and the shipping company.
• Customs Declaration Forms: Also known as customs clearance documents or entry forms; are required by customs authorities in both the exporting and importing countries.

Other Documents: Depending on the nature of your products and the requirements of your target market, you may need additional documentation, such as phytosanitary certificates for agricultural products, certificates of analysis for chemicals, or certificates of conformity for electronics.

It is of utmost importance to ensure that all your export documents are accurate and up-to-date to avoid customs delays, potential legal issues, and complications in international trade.

Working with experienced customs brokers, freight forwarders, or export specialists will help you navigate the complex requirements associated with export documentation and ensure that your shipments comply with international regulations.

5. Logistics and Transportation:

This encompasses various tasks that include choosing the right transportation methods, managing the flow of goods, and ensuring smooth customs clearance for your exported goods (both at takeoff point and arrival point).

The right thing to do first when it comes to the logistics and transportation aspect of your export business, is to determine the most suitable transportation methods for your products based on two factors such as:

• Nature of Goods: Such as size, weight, perishability, and fragility. Some goods are better suited for air transportation (fast but costly), while others may be more economical to ship by sea or land.
• Destination: The distance to your target market (country) will determine if the best transportation modes will be sea, air, or land routes.

When it comes to logistics and transportation in the exportation business, here are the key factors you must have to be familiar with:

• 1. Routing and Scheduling: Plan the most efficient routes and schedules for your shipments. Consider factors like transit times, shipping costs, and potential delays.
• 2. Packaging and Labeling: Ensure that your goods are packaged securely to prevent damage.
• 3. Shipping Companies: Identify and establish relationships with reputable shipping companies that can handle the physical movement of your goods via ocean carriers, airlines, or/and trucking transportation.
• 4. Freight Forwarders: They act as intermediaries between exporters and transportation providers. They help to coordinate logistics, handle documentation, and provide valuable expertise in navigating complex shipping and customs processes.
• 5. Customs Agents and Brokers: They assist with the necessary documentation and facilitate customs clearance processes, helping ensure that your products comply with import regulations and are legally admitted into the destination country.
• 6. Incoterms: Incoterms stands for International Commercial Terms. These terms specify the responsibilities of the buyer and seller regarding transportation, risk, and costs.

Logistics and transportation in the exportation business is not complete without having your goods covered by insurance.

6. Financing and Payment Methods:

This includes how you’ll fund your export activities and how you’ll receive payment from international customers.

There are 3 categorical ways to finance your export business, they are:

1. Export Credit Facilities: These include export credit agencies or export-import banks that provide loans, guarantees, or insurance to help mitigate risks associated with exporting. Export credit facilities can provide working capital for production, packaging, and other export-related expenses.

2. Government Export Incentives: The Nigerian government offers incentives to encourage businesses to engage in export activities. These incentives include grants, subsidies, and tax benefits for exporters.

3. Private Financing: Consider traditional sources of financing, such as commercial banks or private investors, to secure capital for your export business. Some banks offer trade finance services tailored to exporters’ needs.

When you are done with the financing part of your export business, you also want to finalize payment methods for international customers.

In the exportation business, here are payment methods to use for international customers:

1. Letters of Credit (LC): Letters of credit are a widely used method of payment in international trade. A letter of credit is a financial instrument issued by a bank on behalf of the buyer, guaranteeing that the seller will receive payment upon fulfilling specified conditions, such as providing proof of shipment or delivery. This method reduces the risk for both the buyer and the seller.

2. Wire Transfers: Wire transfers involve the direct transfer of funds from the buyer’s bank account to the seller’s bank account. It’s a straightforward and secure method of payment commonly used in international transactions. However, it may not offer the same level of buyer protection as letters of credit.

3. Online Payment Platforms: Online payment platforms like PayPal, Stripe, and others facilitate cross-border transactions. They are convenient for smaller transactions or e-commerce sales. However, they may not be suitable for larger and more complex export deals due to potential limitations on transaction size and currency conversion fees.

4. Open Account Terms: In some cases, exporters may establish open account terms with trusted international customers. Under these terms, the goods are shipped, and the payment is due at a later agreed-upon date. While this method can simplify transactions, it carries a higher level of risk for the exporter, as there is no immediate payment guarantee.

5. Documentary Collections: Documentary collections are similar to letters of credit, but more precise in terms. It involves the exchange of financial and shipping documents through banks. The exporter submits shipping documents to their bank, which forwards them to the buyer’s bank, with a request for payment. The buyer receives the documents and makes payment, after which the shipping documents are released.

The choice of payment method with international customers in the exportation business is dependent on factors such as; the level of trust you have with your customers, the complexity of the transaction, the risk tolerance of both parties, and the legal and regulatory requirements of the countries involved.

And in other to protect against the risk of non-payment by international customers “which is likely to occur”, it is legally advised to secure an Export Credit Insurance Policy”.

7. Compliance with Import Regulations:

Just as you can’t be ignorant of your export regulations in Nigeria before starting your exportation business, you must not be ignorant of the import regulations of your target market country.

Just as export regulations are established to protect the Nigerian economy as a whole, so are Import regulations established by government authorities to protect their consumers, the environment, public health, and national security.

Complying with these regulations is a legal requirement, and failure to do so will result in fines, product recalls, or even legal action that can affect your reputation greatly even in other countries.

To ensure compliance with import regulations of your target market country, consider the following steps:

• Research the specific import regulations and requirements of your target markets.
• Consult with customs experts, trade associations, or legal advisors to stay informed about changing regulations.
• Conduct product testing and certification, if necessary.
• Ensure accurate and complete documentation, including certificates of origin, product specifications, and labeling information.
• Maintain records of all compliance-related documents and processes.
• Monitor regulatory updates and adapt your export operations accordingly.

By prioritizing compliance with import regulations, you can minimize risks, build trust with customers and authorities, and position your export business for long-term success in the international markets.

8. Risk Management:

This aspect of exportation business involves identifying, assessing, and mitigating potential risks and challenges that can impact the success and sustainability of your international trade operations.

Here is how you can manage the risk involved in exporting your goods to other countries:

• Risk Identification: Start by identifying the specific risks associated with your export business. These normally include; Currency risks, political risks, market risks, and, operational risks.
• Risk Assessment: Once you’ve identified potential risks, assess their potential impact on your business. Consider the likelihood of each risk occurring and the severity of its consequences on your exportation business.
• Risk Mitigation Strategies: After assessing these potential risk, develop strategies to mitigate or manage each identified risk. These strategies should include: Hedging currency risk, diversification (i.e. selling to different countries or selling various products), market research, Insurance, and legal and regulatory compliance.
• Contingency Planning: Prepare contingency plans for scenarios in which identified risks materialize. This contigent plan will enable you to respond quickly and effectively to unexpected challenges.
• Regular Review: Regularly review and update your risk management strategy to account for changing market conditions and new risks that may emerge.
• Expert Advice: Consider seeking advice from risk management professionals, legal experts, financial advisors, and industry peers who have experience in international trade and risk mitigation.

The benefits of paying attention to risk management are; It minimizes uncertainty, protects investments, helps maintain business continuity, and it enhances decision-making process especially in market entry, product selection, and pricing.

What Goods are Profitable to Export from Nigeria?

Here are the top 12 most profitable goods to export from Nigeria:

1. Crude Oil and Petroleum Products: Nigeria’s major export is crude oil and petroleum products, including gasoline, diesel, and liquefied natural gas (LNG). Crude oil exports have traditionally been a significant source of revenue for the country.

2. Agricultural Products: Nigeria has a wealth of agricultural products that are in demand internationally. Profitable agricultural exports include:

• Cocoa beans
• Palm oil and palm kernel oil
• Rubber
• Cashew nuts
• Sesame seeds
• Shea butter
• Ginger
• Hibiscus (zobo) flowers
• Cassava products (starch, chips, flour)
• Pineapple and other fruits

3. Solid Minerals: Nigeria is rich in solid minerals, and most of them are profitable for export, including:

• Limestone
• Tin ore
• Coal
• Lead ore
• Zinc ore
• Columbite
• Tantalite

4. Manufactured Goods: Certain manufactured goods, particularly those with unique designs or features (in the skill industry), can find export markets. These may include textiles, leather products, ceramics, and processed foods.

5. Natural Gas and LNG: In addition to crude oil, Nigeria exports natural gas and LNG to international markets, which are profitable given the global demand for clean energy sources.

6. Art and Craft Products: Handcrafted items such as traditional textiles, wood carvings, pottery, and beadwork are profitable in the international markets, especially for those looking for unique, culturally rich products.

7. Information Technology (IT) and Software Services: Nigeria has a growing IT sector, and there is potential to export IT services, software development, and related tech products.

8. Services: Services such as consulting, education, and healthcare are exportable to other countries, especially in Africa, where there is a demand for these services.

9. Processed Foods: Nigerian cuisine and snacks are gaining popularity abroad. Products like packaged spices, sauces, and beverages can find markets among the Nigerian diaspora and beyond.

10. Healthcare and Pharmaceuticals: Nigeria exports pharmaceutical products, herbal medicines, and healthcare services to neighboring African countries and beyond.

11. Construction Materials: Building materials like cement, roofing materials, and tiles all have export potential, especially to countries with growing construction industries.

12. Renewable Energy Products: With increasing interest in renewable energy, products like solar panels and related components are exported.

Challenges to Exportation Business in Nigeria

Here are some common challenges associated with starting an exportation business in Nigeria:

1. Export Regulations and Compliance: Navigating export regulations and ensuring compliance with international trade laws can be complex. Understanding and adhering to the rules and documentation requirements of both the exporting and importing countries is crucial.
2. Customs and Tariffs: Dealing with customs procedures, tariffs, and duties can be challenging. Exporters need to be well-versed in the regulations of both the home country and the destination country to avoid delays and additional costs.
3. Quality Standards and Certification: Meeting the quality standards and certification requirements of the destination country can be demanding. Different markets may have varying standards for products, and ensuring compliance is essential to avoid rejection of goods at the port of entry.
4. Currency Fluctuations: Currency exchange rate fluctuations impact the profitability of export transactions. Managing currency risks and planning for potential exchange rate changes are important considerations for exporters.
5. Payment Risks: Dealing with international transactions introduces payment risks, such as late payments, defaults, or issues related to currency conversion. Exporters need to implement secure payment methods and consider credit insurance to mitigate risks.
6. Logistics and Transportation: Managing the logistics of transporting goods from the point of origin to the destination can be challenging. Delays, damages, or disruptions in the supply chain affect the timely delivery of products.
7. Market Research and Targeting: Identifying and entering new markets requires thorough market research. Understanding the demand, preferences, and competition in the target market is essential for a successful export business.
8. Infrastructure Challenges: Infrastructure limitations, including poor transportation networks and unreliable utilities, can pose challenges for exporters. These issues impact the efficiency of transporting goods and the overall logistics process.
9. Access to Finance: Securing financing for export activities, including pre-shipment and post-shipment financing, can be challenging. Exporters face difficulties in obtaining credit or financing to support their international trade activities.
10. Political and Economic Instability: Political uncertainties and economic instability in either the home country or the destination country can pose risks to the export business. Changes in government policies, trade agreements, or economic conditions impact export operations.
11. Language and Cultural Barriers: Communicating effectively across different languages and cultures is crucial. Misunderstandings or misinterpretations can lead to issues in negotiations, contracts, or overall business relationships.
12. Product Adaptation: Adapting products to meet the specific requirements and preferences of the target market can be challenging. Some products may need modifications to comply with local regulations or to suit cultural preferences.

Despite these challenges, many Nigerian businesses successfully engage in export activities. So, don’t let these challenges stop you from partaking in this lucrative international trade business.

KEY RESOURCES:

• How to Start a Business in Nigeria in 9 Easy Steps
• How to Get a Loan to Start a Business in 11 Steps
• The Complete Guide: How much does it Cost to Start a Business?
• How to Register a Business Name in Nigeria in 7 Easy Steps
• How to Write a Business Plan

READ ALSO:

• 16 Lucrative Staple Food Business Ideas in Nigeria
• How to Start a Mini Importation Business in Nigeria (EASY GUIDE)
• How to Start a Successful Transportation Business in Nigeria

Conclusion on Starting an Exportation Business

Starting an exportation business in Nigeria requires dedication, persistence, and a commitment to quality.

Seek guidance from export promotion agencies and industry associations, and consider partnering with experienced professionals or mentors in the field.

Additionally, continuous learning, networking and building relationships with international contacts can be valuable for expanding your exportation business.

And the ability to provide excellent customer support service especially “after-sales” can easily build trust and positive relationships with international customers thereby keeping the business expansion stronger.

FAQs