AFCFTA IMPLEMENTATION STRATEGIES: THE CAPACITY (PART 6/10)

This is the sixth in the series of Articles on AfCFTA implementation strategies, and this edition's focus will be on Capacity building. No matter what the government is doing to get Nigerians to benefit from the AfCFTA, if the capacity of the business people is developed to manage and grow the export business effectively, everything being done by the government would be of good use. The necessity of capacity building has been demonstrated by the fact that hundreds of new businesses get registered with the Nigerian Export Promotion Council (NEPC) to get the export certificates that make them eligible to export every year, but the number of exporters that ship goods out of Nigeria every year has remained below one thousand in the last ten years. The question is, why are the number of exporters and the volume of exports not growing despite the increase in the number of registered exporters?? It is due to the lack of capacity on the part of the exporters to successfully do the shipment.?

Research has shown that several FTAs around the world have failed to achieve their objectives in some of the member countries because of the deficiencies in the export business management skills among the business people, especially the SMEs. One of the pivotal goals of the AfCFTA is to create jobs among the member states. This will be achieved via the increased market demands which leads to an increased volume of production and consequently leads to the need for an increase in manpower. The impact of AfCFTA can only be felt by an average Nigerian on the street if the businesses are supported to develop the capacity to overcome the 5Ps of export business challenges and these include Products, Purchaser, Pricing, Paperwork and Payment.?

First of all, there is a need for capacity building in the area of products that can be exported to African countries and this should be based on what they currently import from other parts of the world. This should also include the quality specifications requirements of the different countries and what makes the products eligible for shipment within Africa under the AfCFTA. Our preliminary research at 3T Impex Consulting Limited revealed that there are currently about 90 products that Nigeria can export to other countries in Africa based on what these countries currently import from other parts or continents of the world.

The second area of capacity building for manufacturers is the skills to get purchasers. It is one thing to have buyers all over the African continent, it is another thing to be able to get the buyer to buy from you. Capacity-building areas concerning getting purchasers should include but not be limited to the following areas: international marketing, market entry strategies, product packaging, and contract negotiations. It is a general belief among many exporters that the main challenge of exportation is getting buyers and this assertion was based on the fact that more than 70% of the inquiries we get daily regarding exportation is on how to get buyers.

Even though a manufacturer has a good product with huge demand on the African continents and contacts of the buyers in different buyers in different countries, he might still be unable to get buyers if he does not know how to effectively and efficiently price the products to be exported. The product manufacturer needs to know about different pricing strategies, different pricing objectives, product costing and pricing, cost elements in a typical export project, Incoterms and how it affects cost, the logistics options and cost implications are also highly imperative.?

International trade is largely a business of logistics and documentation. The need for capacity building in the area of paperwork is very important because, if the documentation is faulty, it tends to make the transaction fail and lead to losses. Shipment of goods to destination can last for up to two months and the buyer might have to pay sometimes before seeing the goods, especially in a letter of credit transaction. The exporters need to know about pre-export documentation and post-export documentation.

Last but not least area that requires capacity building is the issue of payment. This involves sourcing from funds to pay local suppliers and getting payment from the buyer after shipment. The manufacturers and/or exporters will require capacity building in the areas of pre and post-export financing and payment methods like Letter of Credit, bill for collection, Open Account and Advance Payment. Because more than 80% of trade in the world is done on Open Accounts (Cash Against Document), which leaves the exporters exposed to the risk of either delayed payment or payment defaults, it is therefore necessary to train the exporters on measures to put in place to mitigate this risk.

Finally, I would like to state that inadequate capacity on the part of manufacturers is a major challenge that has bedevilled the implementation of FTAs in several developing countries around the world.? No matter the plans and strategies put in place by the government, if the actors are not equipped with the skill and competence to take advantage of the AfCFTA, then the anticipated benefits remain as a mirage and at the level of potential. I hope that the implementation committee of the government will adopt some of the recommendations that are been prescribed in this article to implement the AfCFTA and create the necessary jobs that will lift out of penury, the tens of millions of Nigeria that are currently living below the poverty line.

Look out for more in the series.

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