With US-China Trade War, 20-30% Import From China is a Threat to Nigerian Economy

Transcription

1 INSIDE THIS ISSUE Export News: - 1, 2 & 3 Export Programme: Import Processes, LC & BC and More -3 The fact that a number of state governments are unable to pay salary in Nigeria for many months is no longer a news. What is amazing about this is the fact that these same states are located in different parts of the country that have huge mineral deposits which can be mined and processed for export. The state governments do not seem to understand where and how to generate huge revenue in this sector. They are busy arguing that the constitution should be amended to give them control so that the revenue like royalties from the sector can come to them. These royalties are just about 3-5% of the value of the products being mined which in my opinion is just a meagre amount when compared to what the state governments can benefit in terms of revenue from this sector. Some other states have started collecting fees (which is a few hundreds of thousands of Naira) from miners based on the minerals mined and shipped out of the state. All these are just shortcuts to revenue generation in this sector and these are nothing when compared to the potential revenues that states governments can derive from this sector. Since this article is primarily focused on exportation of solid minerals, I will like to highlight some of the minerals that are in high demand in the export markets and the states where they can be found in Nigeria ( I will like to also say that this list is really not exhaustive). These include: Lead & Zinc (Cross River, Ebonyi, FCT, Plateau, and Zamfara), Tin (Cross River, Kano, Kwara, Nassarawa and Plateau), Mica (Ekiti, Kogi, Kwara, Nassarawa, Ogun, Osun and Oyo), Manganese (Kenny, Zamfara and Katsina), Rutile (Plateau, Bauchi, Cross River and Kaduna), Wolframite (Baluchi, Kaduna, Kano, Niger, Nassarawa and Zamfara), Gemstones (Bauchi, Kaduna, Kwara, Nassarawa,Niger, Oyo and Plateau) Tantalite (Cross River, Ekiti, Kogi and Kwara), Columbite (Bauchi, Cross River, Kaduna, Niger, Nassarawa and Plateau), Lithium (Nassarawa, Niger Export Education: With US-China Trade War, 20-30% Import From China is a Threat to Nigerian Economy -4 Export Training Products: Importer s Companion and more -4 Export Miscellaneous: Commodity Prices, Infograph, and lots more -4&5 Top News FG Commences Refined Cassava Chips Exports Adesina confident Nigeria will sign free trade deal Nigerian Women Aim To Improve Export, International Business Network The aim of this article is to show the Nigerian state governments in practical terms, where the income is in this sector and how they can develop an enduring structure to perceptually generate revenue from this sector. The model to be proposed in this writeup is not just a theory but a practical model that we are already using and current working in the Nigerian business environment. This model is called the 3T Impex MRG Model for federal and state governments. The MRG Model is a Mineral Revenue Generation Model for governments and it involves five phases which include: Investigations, Identification, Incorporation, Implementation and Income. The Investigation phase of the MRG Model include searching for the various minerals in the states, confirm their exact locations, cadastral units and spreads, the estimated deposits and the proven deposits, uses of these minerals, what is required to process them into the secondary state, their market demands etc. Most of these preliminary information can be obtained from federal government ministry, departments and agencies in charge of solid minerals. Some of them can also be obtained from consultants in the industry. All these information are necessary before proceeding to the next phase. Upon conclusion of all the Investigations, then the state governments can begin the second phase of the MRG Model which is Identification. This involves using the information obtained during the search done at the investigation stage to narrow down the options of the minerals to explore and take an informed decision on which one to start with. The mineral being chosen at this stage should be the one that is not just available in large quantity in the state, but also have huge potential for export. This phase should also include identification of the owner of the mining site (if it has already been allocated), a local administrative partner and foreign technical partner that will work with the government on the project. Upon identification of the mineral to explore, export market with huge demand, credible local partner and competent foreign partner, The third and critical phase of MRG Model is the Incorporation. The government needs to register a special purpose vehicle which must be a limited liability company in which the government, mining site owner, local administrative partner and foreign technical partner are all shareholders. In this alliance, the mining site owner should be given a share of about 10-20% of the income generated by the company based on his investments in securing and possibly exploring the mining site. continued on next page FG Commences Refined Cassava Chips Export The federal government has commenced the exportation of cassava chips to Europe, precisely Germany, through the Pacific Ring West Africa (PRWA) company. The government, through the Executive Secretary, Nigerian Export Promotion Council (NEPC), Segun Awolowo, flagged-off the product in Abuja. Speaking to journalists, shortly after the sealing of the container to be exported at Idu Industrial layout, Awolowo said the cassava chips is very nice and very testy. According to him, I am proud of this backward integration, we have our cassava now being very useful and this is also helping our farmers as it is providing jobs. So we are not just exporting raw timbers cassava anymore, we are actually doing something with the cassava. He commended the initiative, adding that, you can see the packaging, standards are met, the factory is clean and everything is being done precisely. I am so happy

2 Page to flag off this first container going to Germany. The NEPC boss said: I hope we are able to scale up with the company and export more, adding that the council has been encouraging small and medium enterprises to boost their productivity for foreign markets. We work with small and medium scale industry, scale them up for export, advice and also get a market for them out there he stated. Also speaking, the Chief Executive Officer, PRWA, Thomas Hirsch, revealed that the export container marked the first time that 100 per cent Nigerian grown, processed and packaged cassava chips have been exported from Nigeria to Europe. He stressed that the move has, counter the trend of exporting raw materials with little value added and importing branded snacks. Hirsch, observed that, Value added products like cassavanovas will contribute to Nigeria's economy, job creation, and this entrance into European markets represents a transformative moment in global perceptive of the quality, taste and international appeal of Nigeria's products. PRWA have conducted consumer test around the world, with British, American, European and Asian consumers agreeing that they want to see Cassavanos in every shop across the globe, he said. Similarly, the Director, PRWA, Rabiu Shehu, It's not only foreigners who love the taste and distinctive African packaging though. Nigerians love the irresistible taste too. He revealed that, a lot of people tell they can't believe that these chips are made from cassava. They fall in love with the crunch, the taste and enjoy not having the greasinesss that you find in some other snacks. Cassava is rich in fibre and protein, so it really is the perfect snacks for Africans and everyone else. On her part, the Deputy Ambassador for Germany in Nigeria, Regine Hess said, I think the product does not have quality issues, it has meet all the standard, the German authority has confirmed that. She further explained that the chips taste very nice, adding that, though of course the consumers in Germany will decide whether they like it but the way it looks and as I see it, is gonna be a success in Germany. Excerpt: Thisday Adesina Confident Nigeria will Sign Free Trade Deal The President of the Africa Development Bank (AfDB), Dr Akinwumi Adesina, has expressed confidence that Nigeria and every other country on the continent will sign the Africa Free Trade agreement. Adesina who made this known while speaking in South Africa on Friday on the successes of the Africa Investment Forum said different countries have their processes, but everyone will come around. I think Nigeria is doing the right thing, actually consulting with its private sector, and having the dialogue that they need to have, and every country should have that kind of a dialogue, Adesina told CNBC Africa. He said, I am 100 percent convinced that every single African country is going to sign it. Countries have different processes of getting consensus and stuff like that; that's alright, but what matters for me is the end. Why do I think that is important? First and foremost is that if you take the continental free trade area of Africa, it is going to be the largest free trade zone in the world after since the WTO was created in the 1948 or something like that. You cannot ignore it; this free trade zone is going to increase the trade in Africa by about $30 billion per year. It is going to increase intra-africa trade from roughly about 14, 15 percent today to 53 percent, it is going to create massive amount of jobs for us, who doesn't want to grow? Forty-nine countries on the continent have signed unto the continental free trade agreement, including South Africa, and excluding Nigeria. The AfDB president said the Africa investment forum record $38.7 billion in deals, making 77 percent of all the foreign direct investment that Africa has gotten in $38.7 billion is roughly 77 percent of all the foreign direct investments that Africa got this yearf, it is almost 94 percent of all the FDI that Africa got last year we did that in three days. That tells me that Africa is ripe for investments, the critical issue is getting bankable projects, Adesina said. Excerpt: ShipsandPorts Nigerian Women Aim to Improve Export, International Business Network Nigerian women have been known to great business women and entrepreneurs. Most of them have excelled in their private endeavours to become CEOs of their businesses and have grown conglomerates. Some women who are into tailoring over time have built up brands and have their clothe lines through their personal initiatives. Others have learnt how to make shoes, bags, upholstery. Soap, detergent and some other basic house needs made from the comfort of their homes that can compete favorably with the ones produced by big companies. Women form a fulcrum in economic development not just in Nigeria but Africa at large. One of the major challenge Nigerian women have is how to sell their brands across nations or to other far away geo- political zones to attract more patronage and improve their businesses. After producing such quality goods, they are most times sold within the local communities to neighbors and friends which rarely bring economic value to the nation at large despite the fact that such products can compete favorably anywhere in the world. It is in this light that the Prime Unique Women Initiative (PUWI), which has over time empowered women entrepreneurs through their medium of cooperatives and created platforms for the economic empowerment for women and youths, have put together a Strategic Women Development for Sustainable National Growth and Security seminar in Dubai later in November..Addressing journalists in Abuja on the aim of the strategic women seminar scheduled to hold in Dubai, Convener of PUWI, Dr Folake Yobah, said one of the main purposes of the conference is to galvanise international funding for women entrepreneurs and create market access where Nigerian business women can have opportunity to showcase what they can do. Excerpt: Leadership continued from page 1 The local administrative partner should be a consultant in the industry and should be the one to supervise the site activities, manage the business, source for local labour force, and possibly source for the foreign technical partner and should therefore be allotted a share of about 5-10% of the income of the company. The foreign technical partner is the one that will provide the machinery, equipment, take care of the cost of maintaining and managing the equipment, get the buyers abroad and competent personnel that will do the actual mining activities and should therefore be given about 30-40% of the income generated by the company. The state governments should be responsible for providing the title to the land for mining, feeding and accommodation for the workers, road infrastructure to the mining site, development of the community where the mining activities take place, warehouse for products and equipment, security for the personnel and products from the mine and should therefore be given 40-45% of the income generated by the company. All these should be documented in a shareholder agreement and joint venture agreement to be signed by all the parties. The fourth phase of the MRG Model is the Implementation. This involves the actual business operations like building of infrastructure, warehouse and staff accommodation, arrival of the foreign partners, movement of personnel and equipment to site, provisions of security, signing of agreement with the community, mining activities, sorting, processing (if necessary), bagging, transport of the goods to the port and port logistics. The fifth and the last phase of the MRG Model is the Income. This include the signing of purchase agreement with the buyer, opening of the export proceed account, pre and post export documentations, quality inspection, shipment and payment of export proceeds from abroad. The revenue sharing formula proposed at the Incorporation phase is just a suggestion based on our experience but the adoption or adjustment are subject to the parties involved. At this point, I will like to paint a picture that compares the Income of the MRG Model to that which is expected from just royalty or fees charge per truck load. Take for example a mine that produced 10,000MT of lead ore of 60% purity over a period of 12 months. The goods were transported to the port from the mine using about 333 Truckloads because each of the trucks is having a capacity of 30MT each. e states (which is currently not the case), the state will only get about N87.5Million. However, with the 3T Impex MRG Model, the government together with other stakeholders in the joint venture will earn about N98Billion. The local market price is N350,000/MT while the

3 Page export price is $850/MT FOB Lagos. If the state charges a fee of N500,000 per truck (this price is much higher than what they currently charge), the state will only make an income of about N166Million from this mine. On the other hand, if the federal government charged a royalty of 5% (which is highest rate ) based on the local market price, it will only realise an income of about N175Million and if they shared this equally with ththis is based on the fact that the 10,000MT of lead ore were exported at the rate of $850/MT and using an exchange rate of N350 to 1$ the total income on this export transaction will come to about N98Billion. If the share of the state governments in this arrangement is 40% for example, this will mean that the amount that will accrue to the coffers of the state governments will come to about N19Billion. To make hundreds of millions from this arrangement, all the state needs to do is to scale up production to hundreds of thousand MT and then engage technical partner to process it to ingots. This is a lot of income being lost by the state because they are only focussing on a cheaper way of generating revenue instead of doing the hard work that will lead to an enduring income stream in this sector. Finally, I want to unequivocally say that any state government in Nigeria that will embrace this model and implement them in about 3 to 5 joint venture agreements will soon become financially independent of the federal government in Nigeria. I will like to therefore call on all the state governments in Nigeria, especially those that are located in states where exportable solid mineral are found in commercial to reach out to the consultants and other relevant stakeholders in the mining industry in order to make this a reality in their various states. Excerpt: Tradeinfo.ng. OTHER HEADLINES Ogun Customs intercepts 38,600 bags of rice, 386 vehicles in 10 months - shipsandports Customs boss says agency to begin electronic cargo tracking in Premium Times

4 Page 4. With US-China Trade War, 20-30% Import From China Is A Threat To Nigerian Economy Cont'd from previous issue Some of the things the government can do is to first commence sensitisation among the players in the concerned sector of economy to let them know the implication of what they are doing to their businesses and the economy in general. In addition to this, the government can use some of the tools at his disposal to discourage over reliance on China and encourage the purchase of similar products from other parts of the world. Some of the government tools that can be very effective to get this done is Tariff, Tax holidays, VAT exemption, Import Origin It is my firm belief that if these t o o l s a r e d y n a m i c a l l y a n d strategically deployed, then we can effectively avert the likely doom that could bedevil the Real Sector of the Nigerian economy very soon. However, if we continue on the current path of unabated increase in the dependence of the critical sector of our economy on importation from China (or any other country), then we may be in for a very hard time if these p e r c e i v e d r i s k s e v e n t u a l l y crystallised. Cont'd in next issue Export Training Products Export Miscellaneous: EXPORT ORDERS PRODUCT SPECIFICATION MINIMUM SHIPMENT Zinc Ore Purity 35% 60MT Per Month Lead Ore Purity 60% 60MT Per Month Lead Oxide Purity 30% 60MT Per Month Title: Importers s Companion Speaker: Bamidele Ayemibo Price: N 5, LOCAL ORDERS PRODUCT SPECIFICATION PAYMENT MONTHLY VOLUME Zinc Ore Purity 35% Bank Guarantee 120MT Per Month Lead Ore Purity 60% Bank Guarantee 121MT Per Month Lead Oxide Purity 30% Bank Guarantee 122MT Per Month COMMODITY PRICES (LONDON METAL EXCHANGE AND BLOOMBERG) COMMODITY Lead Zinc Cocoa Beans Copper Tin Alluminium Cotton PRICES USD 1, USD 2, USD 2,1200 USD 6, USD 19, USD 1,9250 USD UNIT OF MEASUREMENT Bushel Pounds Title: Exporter s Companion Author: Bamidele Ayemibo Price: N 5,000 EXPORT BUSINESS CLINIC TRAINING FEE N78,500 BENEFITS Free Export Licence Free subscription to join African Export Development Initiative (AFED) Guaranteed Contracts for Export (T&C Apply) Export Mentoring Program with 20% discount Free Export Book & Advisory Service. Days & Time Weekdays - 9am Date - April 17th & 18th, 2018 Weekend - 9am Date - March 8th & 15th, 2018 Venue: 3T Impex Trade Center Address: 11D Bola Shadipe Street O ffadelabu Street, Surulere, Lagos, Nigeria. CONTACT: tradeacademy@3timpex.com , ,

5 Page 5. Export Miscellaneous EXPORT NIGERIA CAMPAIGN Targets: FREE export seminar for religious organizations, clubs, cooperative associations, etc Objective: educate, enlighten, empower the public and create employment...raising legion of exporters