Domestic Export Warehouses (DEWs) are special warehouses where goods are kept and prepared for exportation. DEWs were recently initiated by the Nigerian Export Promotion Council (NEPC) as a warehousing system located in specific areas as one-stop shops for processing goods for international consumption. These warehouses are critical for Nigeria because of its trade imperatives to the economy.
As I have reiterated, we cannot underestimate the importance of trade to an economy. Reports like this have confirmed that smooth trade practices can lift 80 million Nigerians out of poverty by boosting job creation, increasing the domestic value-added to goods, and reducing the nominal price of common Nigerian goods. It therefore goes without saying that if the DEWs are seamlessly harmonized with Nigeria’s burgeoning trade processes, the country’s trade returns could skyrocket.
In July 2022, the Nigerian Export Promotion Council (NEPC) licensed four new Domestic Export Warehouses (DEWs) to fast-track the timely delivery of non-oil exports from Nigeria, and bolster Nigeria’s trade competitiveness. While presenting the approval letters of the DEW grant to the warehouse owners, the Executive Director of the NEPC, Dr. Ezra Yakusak, stated that implementing DEWs in Nigeria will significantly reduce the cost of doing business for Micro, Small, and Medium Enterprises (MSMEs) who are exporting goods out of Nigeria.
While the newly commissioned DEWs may improve pre-shipment activities in Nigeria, like labelling and packaging, the regulatory environment must improve if Nigeria’s trade climate will assume a favourable temperature
He added that in line with the Presidential order, the NEPC introduced the DEW “to serve as a one-stop transit facility/terminal where pre-shipment activities like packaging, labeling, aggregation, and pre-shipment inspection on non-oil exports” are carried out in preparation for transportation and eventual shipment to their respective export destinations. The NEPC reiterates that adequate investment in DEWs can allow Nigeria to make $200 billion from exports—a financial target set by the CBN.
Granted that the trade advantages offered by the establishment of DEWs across Nigeria are latent, some trade experts still believe that Nigeria’s current trade system is laced with many challenges that may hamper the full effects of the trade benefits that DEWs may offer.
While DEWs may standardize Nigerian products and allow them to meet international consumption requirements, pre-existing barriers to trade in Nigeria like harsh trade regulatory environment, slow automation of export processes, lack of exporter access to finance, high berthing and unloading costs, and many others may still hinder the efforts of the newly implemented DEWs.
This article will give reasons why DEWs alone are not enough to boost Nigerian trade while adducing points on the more things that need to be done to improve trade in Nigeria:
1. Improving Nigeria’s trade regulatory environment
The snail-paced automation of Nigeria’s export processes remains a veritable source of concern for trade in Nigeria. It appears that we will need more than DEWs to fill the void occasioned by this irregularity. While receiving a report from an ad hoc committee set up by the Presidential Enabling Business Environment Council (PEBEC), the Vice-President of Nigeria, Prof. Yemi Osinbajo, complained of Nigeria’s harsh regulatory environment, which leads to “over-regulatory processes” a slower certification of Nigerian goods. The Vice-President warned that the complex regulatory environment is leaving Nigerian exporters behind compared to their neighbouring counterparts in other African countries.
Now, while the newly commissioned DEWs may improve pre-shipment activities in Nigeria, like labelling and packaging, the regulatory environment must improve if Nigeria’s trade climate will assume a favourable temperature.
Some things that may be done to improve Nigeria’s trade regulatory environment include: fairer application of customs regulations, reducing the delays for product certification, reducing the length of multiple physical-cargo inspections by multiple pre-shipment inspection agencies, and reducing instances of overlapping documentation requirements, amongst many other regulatory processes.
Implementing straightforward regulatory processes will undoubtedly play a crucial role in strengthening Nigeria’s trade posture when blended with the newly launched DEW system.
2. Reducing Nigeria’s high berthing and unloading costs
Port costs remain a veritable source of trade barriers in Nigeria, one that the knock-on advantages of DEWs may only partially decimate. Deloitte, a prominent financial services firm in Nigeria, has estimated that over ₦6.5 million is needed to clear and transport a 20-foot container laden with cargo worth about $100,000.
The consignee of the goods will pay approximately 82.5% of the clearing fees to the Nigerian Customs Service (NCS) in the mold of Import Duty, Comprehensive Import Supervision Scheme (CISS) fee, ECOWAS Trade Liberalisation Scheme (ETLS) fee, Port Development Surcharge and Value-Added Tax (VAT). Other charges to be paid by a consignee include freight charges for shipping and container deposit fees, amongst many others.
Indeed, high berthing and unloading costs remain significant challenges to trade in Nigeria. While the price of ship berthing in Nigeria has reduced by about 86.7% from $150,000 to $20,000 per vessel, more can still be done to improve the process. We can solve the three major issues of demurrage, detention, and per diem associated with ship berthing in Nigeria through holistic action between terminal operators, shipping companies, and key regulatory agencies like the Nigerian Customs Service (NCS). Intermittent concessions can be given to cargo owners in Nigeria to reduce the excessive ship berthing costs.
The Nigeria Customs Service must also intensify efforts at complying with relevant international protocols like the International Convention on the Simplification and Harmonization of Customs Procedures (also known as The Revised Kyoto Convention). Duly following the protocol’s provisions, will formalize Nigeria’s port processes, reduce the high ship berthing and unloading costs, and place Nigeria’s water-cargo procedures in line with international best practices.
Read also: Challenges of Domestic Export Warehouse system identified
3. Improving exporter access to finance
Finance remains a fundamental trade issue in Nigeria, and until Nigerian exporters are well liquidated to facilitate export businesses, initiatives like the DEWs may cannot reach their full potential.
The NEPC-sponsored Export Expansion Grant (EEG) is a laudable financing initiative for Nigeria’s burgeoning export sector. The initiative was capitalized with ₦375 billion to support the 285 Nigerian exporters. It is advised that banking efforts like the EEG should be consolidated so that Nigerian exporters can stand in competitive stead with other African exporters. This way, we can fully harness the domestic export warehouses.
The newly promoted DEWs are a right step in the right direction for promoting export trade in Nigeria, but we must see them as something other than a standalone effort because there are other tangential efforts needed to be advanced if trade will take its rightful place as a stable income earner for the nation. I strongly believe that the above solutions will improve trade and galvanize domestic export warehouses (DEWs) to make Nigeria’s trade sector more robust, sustainable, and wholesome.