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June Business Update

5 Dangerous Threats Facing Nigerian Importers Leading to Loss of Millions of Naira Yearly

Much as importation is indispensable to Nigerian businesses, so is the need to pay a special attention to these five key threats that has been destroying chains of businesses:
 
  • The rise of incompetent clearing agents.
  • Insufficient credit facilities by service providers.
  • Inconsistent government policies and regulations.
  • Outsourcing procurement needs to incompetent agents.
  • Inadequate knowledge on importation business.
 

1. THE RISE OF INCOMPETENT CLEARING AGENTS

From our observation, the use of unlicensed clearing agent is one of the biggest threats to any successful importation business, making companies lose millions without knowing it. Our survey shows that several companies have come to accept a dwindling clearing service characterised with an abysmal time frame of 2 to 3 weeks as the standard delivery time frame. These unlicensed agents cut corners in performing their duty that typically leads to these delivery time frames as Nigerian Customs have become a lot more efficient than before. Our graph shows that no extra undue cost is incurred by companies using reliable agents that ensure delivery in Fig. 1 in a maximum of 5 days. 
Using a 2-week delivery time frame, the table shows the amount a typical company is losing on an annual basis, which reliable outfits like Shoptomydoor can prevent.
 
 
 

CONTAINERS SHIPPED PER YEAR

COMPANY’S LOSS AFTER 5 DAYS AT THE PORTS

20

N2,244,000

100

N11,220,000

500

N56,100,000

1000

N112,200,000

Table 1: Two Weeks Delivery Loss

Now, apart from huge amounts you may be losing on delayed delivery, other reasons to ensure you employ licensed agents are:
  • The drop in revenue accruing to the Federal Government which has led to greater enforcement mechanism, now put in place by the Nigerian Customs Service and any company found to have short paid on duties for a given period of time could find themselves a few months down the line being told to account for these with unexpected heavy penalties. Irrespective of the agent, the company is ultimately liable for all duties.
  • The mandate to hold relevant bonds with the Federal Government to ensure they are accountable for their actions. This is a measure that is in place to ensure their customers are not defrauded in their handling of their duties, and this is a protection you cannot get when dealing with unlicensed agents.
 

 

 

2. INSUFFICIENT CREDIT FACILITIES BY SERVICE PROVIDERS

Working with logistics and clearing agents with inadequate financial capabilities may be costing you heavily as well. Inability of agents to meet certain immediate financial needs during the clearing process lead a lot of them to temporarily abandon containers and then come up with stories on why there is a delay. Apart from the clearing angle, losses are also experienced by relying on local shipping companies without a base in the countries of import. Since such entities work on partnership basis, they are compelled to mark-up warehousing and delivery prices presented to them by their international partners. Shoptomydoor's presence in the USA, UK and China with the volume been moved ensures that your delivery and warehousing costs are minimal, leading to an overall saving in total logistics cost.
 

3. INCONSISTENT GOVERNMENT POLICIES AND REGULATIONS

Inconsistency in government policies and regulations has left the Nigerian importer at a great disadvantage in many cases. These regulation flops in most cases have limited importers ability to expand their business not only within, but also outside the shores of the country. Some of these regulations such as unannounced increase in tariff can have serious consequences on most companies.  While the average company cannot do much about this, being aware of the projected changes been considered can help in being more prepared for these sudden policy changes.
One approach Shoptomydoor Business has used however is to send out our free monthly newsletter that tells all our clients the key changes happening in the industry that may have an impact on their business. Since we deal regularly and directly with most top customs officials and other government bodies we are in the right position to provide up to date information as it breaks. 
Be sure to subscribe to receiving our monthly publication. Go to www.shoptomydoor.com/businessupdate.
 
 

4. OUTSOURCE YOUR PROCUREMENT NEEDS

Keeping a procurement department may be costing your company too much and it may be time to rely on an external source to meet your procurement needs. In selecting a procurement provider be sure to select a company with both a local and an international base, and at least with locations in the US and China, the countries where most products are sourced. Having a company with these qualities can save you more than buying direct as they will be able to source from companies locally at the best possible quality and prices.  
 

5. INADEQUATE KNOWLEDGE ON IMPORTATION BUSINESS

Another daunting risk most businesses unknowingly face is not having adequate knowledge on importation business and yet involving services of importers who aren't well qualified or trained to handle their logistics.
With the growing awareness of e-commerce which has necessitated that one has to dig deep into the pool information available on the net in order to come up with the best services in procurement and logistics for ones business in order to reduce the running costs of business and increase the longevity of the business cycle.
One thing is sure for any business without the right expertise – extreme damage and then it becomes impossible to meet the estimated ROI or target. What happens in the long is a total liquidation of such a business/organization. A total eradication if possible or by passing middle-men saves a lot more that can be reinvested. One of such is a direct procurement, which will ultimately lead to a reduction in heavy capital base and increase in profit.