Commodity export is a lucrative business but capital intensive. This goldmine is largely untapped in Nigeria because of the singular focus on oil and gas business.
Nigeria is blessed with abundant commodities, and lots of mineral and precious stones. Many of the commodities found in Nigeria attract favorable rates when processed for exportation.
Some of the leading commodities exported by commodity merchants are sesame seed, Shea nut (butter) and cashew nuts. Other commodities that are highly sort after include palm kernel, ginger, garlic, and yam flour.
Luckily, commodity export business is slowly gaining ground and making huge profit for the commodity traders. Other things exported to foreign country under strict packaging are yam flour, shell garlic, pineapples, and charcoal.
Although the business requires lots of funding the Federal, Government of Nigeria has put in place agricultural policies including agricultural credit, loans, and financing.
How to Start a Yam Flour Production Company
How to Start a Yam Flour Production Company
Benefits of exporting commodity
1 The exporter makes huge profit in foreign currency
2 They get government support
3 Low/medium start-up capitals
4 Commodities are abundant in Nigeria
5 Price of commodities at source are relatively cheap
6 Duty-free taxation
7 Access to subsidized agricultural loans via NEXIM Bank
8 Easy local product sourcing
Benefits of commodity trading
Commodity trade although capital intensive attracts huge profit margins mainly due to the foreign exchange. Profit on some of them range from a third of the total expenditure to as high as double total expenditure.
The benefits of trading commodities in Nigeria include moderate start-up capital and access to finance. You also get cheap and easy local product sourcing, access to government’s credit programs and duty free taxation.
Huge profit and short turn around period are some of the advantages trading in commodities.
Things to know about commodity trading
1 Planning is very important
2 Quality control is very important
3 Insurance is necessary
4 Find many local sources for the commodities
5 Get financial support
6 Learn the trade thoroughly before investing your hard earned cash
7 Learn how to secure export contracts
8 Consider the payment methods, loans and liabilities
9 Means of transportation and documentation is important
10 Remember that the risk factor is very real
How to start commodity export
The most important aspect of commodity export business is training. The exporter should know where to source commodities, pricing and packaging.
Before he can export any product, the exporter needs to have a comprehensive plan. In addition, the exporter should be familiar with procedures for exporting commodities.
Some commodities like hard wood charcoal costs almost a million naira to load a 40ft container. The exporter should develop a financial strategy on how to finance the export.
Other considerations include proper documentation for export, and payment methods. Things like insurance, local sourcing of product and quality control.
If the quality of the product falls short of expected standard, the exporter would lose money. Without adequate care and quality control, an exporter can become broke.
Some important destination points for Nigerian commodities are Belgium, Poland, and Germany, Another equally important trading outlet is the United States of America, especially Houston.
Building an import/export business
Planning for export
When planning for export a few parameters to consider are the cost and profit profile and initial cost of purchase. The transportation to the seaport and metric ton expected for each product.
Others are the documentation and agents fees, GIT insurance Ness fees, and local inspection/supervision fees. The exporter then sums up the total cost after all fees have been paid.
Commodities have a standardized selling price abroad and payment is usually made in the countries currency. Before you can export commodities, you need an export license, and a secured export contract from a reputable company.
After securing an export contract the exporter, execute the export contract to the letter. Quality control can make or break an export so you need to be extra careful.
Every commodity has a standard quality, packaging and international price, which makes commodity, export a very transparent and interesting business.
Secure export Contract
Access to loans
Recent development in Europe has given Nigerian commodity exporters some worry. Between December 2014 and February 2015, twenty-five commodities failed the strict laws guiding commodity export to European countries.
The commodities were seen to have contaminants like asbestos, insecticides, bug problems, low standard commodities, and poor packaging. Although a few passed the certification, most of the exports were destroyed and only a few were accepted buy European buyers.
Due to this unfortunate loss in revenue NAVDAC have decided to help Nigerian exporters test their commodities free so exporters can raise their standards to meet international requirements. This commendable intervention would help commodity exporters to ward against contamination, pest control, poor packaging, and have quality products.
Types of commodities and minerals exported
Listed bellow is some of the commodities exported to foreign countries.
1 Shell garlic
2 Yam flour
3 Palm kernels
5 Sesame seed
6 Shea butter
12 Coca bean
Commodity export is big business but requires meeting international standards. Once the right regulatory agents certify the commodities, pass international standards you are good to go.
Fortunes are made and loss in the commodity business so make sure you know what you are doing before trading in commodities.