This article was written specifically for the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. The original document can be downloaded here.
Nigeria is still, by a slim margin, the biggest economy in Africa, despite the economic woes of the past two years. A population of anything between 180 million to 200 million people makes its consumer market in particular of great interest to investors, manufacturers and exporters around the world. The country manufactures relatively few of the products it consumes and despite efforts to increase local industry, it remains largely import dependent.
However, despite the multitude of opportunities that Nigeria presents to exporters, getting a product into the market can be a challenging exercise.
Nigeria’s main port complex is in the commercial capital of Lagos, a city of an estimated 20 million people – a major market in itself – but also the shipping gateway for imports and exports for the whole nation.
The facility, comprising the Lagos Port Complex and Tin Can Island Port in the Apapa area of Lagos city, is one of the busiest in Africa. It is also by far the main portal for trade into and out of this large country, processing 97% of containers. The only other port of size, Onne, is focused on the oil and gas industry around Port Harcourt, and there are a few other, smaller, ports.
As a result, there is usually serious congestion at Lagos. The high volumes are just part of the problem. Other challenges include poor infrastructure, inadequate and often poorly functioning equipment, the demands of different agencies located there, onerous bureaucracy and general issues related to officialdom.
Clearance time in Lagos port is between seven and 14 days. Once clearance is complete, it takes, in a best-case scenario, 48 hours to get the product out of the port. However, this can take longer depending on other factors, as currently being experienced with the rebuilding of the access road to the port, and any problems in the manifest or other documents.
Having a competent cargo clearing and forwarding company is vital to navigate the process. Exporting to Nigeria requires detailed knowledge of requirements. A simple mistake in documentation or process can lead to cargo sitting in port for weeks or even months, with hefty demurrage charges.
It is important for an exporter to be on top of any changes in documentation and import requirements. Do not wait for the importer in Nigeria to alert you to what is needed; rather do your own homework.
An important requirement is knowing which government agencies are needed to register or certify imports to Nigeria. Key among them are the Standards Organisation of Nigeria (SON) and the National Agency for Food and Drug Administration and Control (NAFDAC).
NAFDAC registers all goods to be used on the body or ingested, including foodstuffs, pharmaceuticals, cosmetics, medical devices, veterinary products, herbal products and chemicals. It is, however, a bottleneck to doing business in Nigeria. The agency promises a 90-day turnaround, but it can take months, or even years, to get a product registered. It then needs regular updating. Onerous documentation is required and papers can go back and forth for months for corrections or clarifications. NAFDAC officials also have to do site inspections of applicants’ factories and this can also delay registration.
SON, which deals with most products that fall outside NAFDAC, has a product conformity scheme, SONCAP (or the Standards Organisation of Nigeria Conformity Assessment Programme), to ensure that imports meet minimum safety requirements. Unlike NAFDAC, SON has appointed several international companies to handle the certification of goods on the regulated products list on its behalf, such as Intertek, a global quality assurance company. This speeds up the process. Exporters would deal directly with Intertek and others for the whole process and not need to engage with SON directly, unlike NAFDAC.
Getting a SONCAP certificate is a mandatory requirement to import the items on Nigeria’s regulated products list. The process has two stages. In the first, the exporter must get a product certificate. There are three routes available: Route A – for infrequent traders or those without ISO accreditation; Route B – for frequent shippers who are ISO accredited; Route C – for frequent shippers who are ISO accredited manufacturers.
The second stage is obtaining a SONCAP certificate for the shipment of regulated products. This is mandatory for each and every shipment. For Route A, all relevant products must have a certificate for each shipment. For the other two Routes, registration of regulated products is for one year. But each shipment will still require a SONCAP certificate. This must correlate with the Form M (a mandatory documentation process) and a bill of lading. All these documents allow Nigerian customs to clear the cargo.
It is important to clarify who will pay the costs of SONCAP certification – the exporter, importer, end user, etc. And again, knowing the requirements is vital.
Intertek says there are examples of exporters only finding out once their cargo is on the sea that they require SONCAP certification before departure. This has resulted in delays, penalties and goods being returned. Similarly, be aware of trade restrictions, otherwise the whole container, not just the banned imports, will be sent back.
An alert sent to the buyers in Nigeria once the shipment is on its way, helps them to prepare for arrival. All documentation needs to be scanned to the Nigerian importer/agent to begin the assessment process whereby import duties and taxes are calculated. This will facilitate timeous clearance and ensure the correct manifestation of cargo. Documentation required includes: commercial invoice, packing list, SONCAP certificate and bill of lading (with the Form M number reflecting).
Heloise Kruger of South African-based Get Go Clearing and Forwarding says there is a tendency to think that the rules will be lax and standards will not be enforced properly in Nigeria. It is quite the opposite. Requirements for products are strictly enforced. Labelling of containers must also conform to the rules or this can cause delays. Be aware that new regulations in Lagos port state that all containers now need their own pallets.
Local rules and regulations
Nigeria has a restrictive trade policy, which includes an import prohibition on about 30 items and a restricted list of 41 items for which foreign currency may not be sourced from the formal banking system. The former was introduced in 2003 and the latter in 2015 in response to the country’s forex crisis.
The intention of both is to stimulate local production, but the environment remains difficult for manufacturing, particularly as the country produces just 4,000 MW to 7,000 MW of power despite a current demand of over 16,000 MW.
The agencies and regulators of Nigeria’s 36 states also have their rules and regulations and falling foul of these can present problems and even fines.
MARKET RESEARCH AND FLEXIBILITY
Many factors can play a role in determining what products might be popular, how they will be received and how they should be branded and marketed. A deep understanding of different market segments based on geography, religion, age, global exposure of potential customers, preferences for local or imported goods and other criteria is required. It cannot be assumed that a best-selling product in another country will do well in Nigeria.
Detailed market research is necessary. It not only requires facts and figures drawn up by consultants, but walking in local markets and talking to traders and consumers.
Companies need to be open-minded about tinkering with or changing their model or product to adjust to the market or counter competition. Lucky Star, an iconic canned fish brand in South Africa best known for its popular tinned pilchards product, is entering the Nigerian market with a different tinned fish product after discovering it had stiff competition from local brands.
Be aware of how local conditions can affect your product. The South African Boatbuilders Export Council, for example, says key issues for boats exported from South Africa to Nigeria are the poor quality of fuel, which quickly erodes motors, and waste in the water, particularly plastic, which can clog up pumps.
It emphasised the need to support exports of these big ticket items in terms of maintenance contracts and parts supply – both capabilities that are not readily present in the market.
LOCAL BUSINESS PARTNERS
Finding the right local company to represent them or distribute their products is generally one of the biggest issues for exporters. Partners often seem right on paper, but may have different investment objectives, ways of operating or simply don’t add value.
There is no easy way to find the right partner. Many business chambers exist in Nigeria and can assist. Networking events are useful ways to meet potential partners or to vet prospective companies in informal conversations. Your clients or suppliers may be another avenue.
Make sure your partners have the same business objectives as you do and as much to lose when things go wrong. Check their claims about the market by doing your own research and confirm their capability matches their promises.
When entering into partnerships, make sure your brand is registered to prevent a local player simply adopting it, thus preventing you from entering the market with your own brand. Similarly, be careful of giving your local distributor too much power over your brand and operations upfront.
Nigeria is emerging out of recession and its fortunes are starting to turn around as the government’s efforts to improve the economy, bear fruit. For all its challenges, Nigeria is a key market for anyone interested in Africa. The size of its population, the resilience and dynamism of the people and huge market gaps are all drawcards. It cannot be ignored by any serious globally-oriented company.
Dianna Games is Executive Director of the South Africa-Nigeria Chamber of Commerce. Jaco Maritz is founder of Maritz Africa Intelligence.