Required Report - Public Distribution s91

GAIN Report - NI5020 Page 16 of 17

Required Report - public distribution

Date: 9/30/2005

GAIN Report Number: NI5020

NI5020

Nigeria

Exporter Guide

Annual

2005

Approved by:

Ali A. Abdi, Agricultural Attache

U.S. Consulate, Lagos

Prepared by:

Uche Nzeka

Report Highlights:

Nigeria's food processing and agricultural sectors are showing some growth but high tariffs and non-tariff barriers on imports continue to limit opportunities. Demand for intermediate foods and ingredients (including concentrates and flavors) as well as HRI products, are rising. A huge market also exists for frozen fish, poultry/aquaculture feedstuffs/ingredients as well as mixed containers of grocery products that are legitimate for export to Nigeria.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Lagos [NI1]

[NI]

TABLE OF CONTENT

SECTION I. MARKET OVERVIEW 3

Advantages & Disadvantages 4

SECTION II. EXPORTER BUSINESS TIPS 5

SECTION III. MARKET SECTOR STRUCTURE AND TRENDS 8

Retail Food Sector: 8

Food Processing 10

Food Service (HRI) Sector 12

Seafood/Frozen Fish 13

Aquaculture: 14

SECTION IV: MARKET ENTRY STRATEGIES 14

SECTION V. BEST HIGH-VALUE PRODUCT PROSPECTS 15

HVP that are legitimate for export to Nigeria: 15

Product types offering the most sales potential in Nigeria: 15

High-Value Food Products attracting high tariffs: 15

Products Not Present in Significant Quantities But Have Good Sales Potential: 16

Products Banned for Exports to Nigeria: 16

SECTION IV. POST CONTACT AND FURTHER INFORMATION 16

APPENDIX I. KEY TRADE & DEMOGRAPHIC INFORMATION 17

SECTION I. MARKET OVERVIEW

q  Nigeria, with a population of more than 133 million, growing at three percent per annum, is the largest market in sub-Saharan Africa. It also provides a bonus market for the more than 30 million consumers residing in the neighboring West African countries. According to the Economist Intelligence Unit (Feb 2005), real GDP growth is estimated at 10.2% in 2003 and 4.5% in 2004. Inflation is forecast to go down slightly from 15% in 2004 to approximately 11% in 2005 and 2006. Petroleum exports accounts for about one third of GDP, 98 percent of total export earnings and close to 80 percent of federal government revenue. Agriculture is primarily subsistence but holds about a one third share of GDP. About 70 percent of Nigeria’s population is employed in agriculture. The agricultural sector has seen some growth over the last several years. However, it remains under-developed and basic bulk food products are still imported.

q  The GON’s high protective wall [import bans, high tariffs and more demanding regulations on imports of high value products (HVP)] has assisted Nigeria’s food processing activities to increase over the last few years. Foreign investment in the sector has also increased. Bulk commodities such as wheat and sugar hold the major value of inputs used in this sector. There is demand for imported beverage-based products (especially, fruit juice concentrate, pre-mixes & syrup), ice cream pre-mixes, spices, flavors, and nutrients/additives. The sector however, remains under-developed due mainly to poor infrastructure and inconsistent Government of Nigeria (GON) policies.

q  The GON restrictive policies have reduced legitimate imports and increased informal import practices such as cross-border smuggling and corrupt practices at Nigerian ports. Nigeria as a signatory to the Common ECOWAS Tariff (CET) agreement, which seeks to eliminate import bans and replace them with relatively lower tariffs, among member states of the economic union. HVP imports into Nigeria would increase if Nigeria adheres to implementing its CET agreement.

q  Nigeria’s changing demographics and lifestyles have continued to influence the continued growth of Nigeria’s food service (HRI) sector especially, hotels and fast food chains. The increasing local demand for fish, the global dwindling fish stock with the mounting GON campaign for increased local aquaculture activities, output from the aquaculture sector is expected to increase in the upcoming years. Demand for aquaculture feed products and ingredients is rising.

q  Domestic food products such as corn, sorghum, tubers, and seafood (fish) are the major traditional foodstuffs consumed by the majority of the population. Estimated agricultural products’ imports for 2003 are $2 billion and exports, $400 million. US agricultural exports to Nigeria increased to approximately $444 million (mainly wheat) in CY 2004, up from $322 million in CY2003. Asia and Brazil are the major suppliers of other bulk commodities such as rice, and sugar, respectively. The EU, Asia and South Africa are leading suppliers of processed and intermediate products to Nigeria. Nigeria will likely continue to import wheat, rice and high-value food products (HVP) with its increasing urbanization and as families demand more convenience foods.

q  Constraints to U.S. exports to Nigeria include--restrictive trade regime, competition from the EU and Asian countries, negative image of Nigerian businesses etc. U.S. exporters are however, advised to persevere in this market. As business relationships with Nigerian firms endure, the apprehension of doing business in this market will be overcome.

Advantages & Disadvantages

SECTION II. EXPORTER BUSINESS TIPS

q  Importer preferences are evident for HVP with the following characteristics:

·  Relatively small-sized products, prepared and packaged for affordable one-time use

·  Bulk, intermediate products and ingredients (especially, beverage bases and flavors) for local re-processing and packaging

·  Mixed-containers of high-value products and brands that are free for imports

·  Perishable food products processed and packaged for long shelf life without refrigeration

q  All processed foods must be registered with NAFDAC to be legally importable into Nigeria:

·  Application for registering regulated products is made by the manufacturer

·  Foreign manufacturers must appoint a duly registered Nigerian firm to represent them and handle their product registration with NAFDAC. This firm is a local importer-distributor desiring to solely distribute exporter’s products in Nigeria

·  Although an independent firm, NAFDAC considers the local importer to be acting as a representative of the foreign manufacturer

·  Not more than one firm can register a product. This is mostly for NAFDAC’s effective control and to enable it to easily contact a product applicant when necessary

·  Usually, it is the responsibility of the importer to defray the cost of product registration with NAFDAC but the manufacturer/exporter will need to provide the local firm with the documents required by NAFDAC to register the product

·  NAFDAC’s registration fee on imported HVPs varies with the exchange rate at the time of product registration but ranges between $5,500 and $6,000 per item.

q  NAFDAC’s adoption of global listing of supermarkets (GLS) food items has created another convenient and less expensive alternative for the Nigerian importer-distributors of HVP

·  The GLS allows importer-distributors to import mixed container loads of high-value food products

·  Items listed under GLS include all items regulated by NAFDAC, which are sold in supermarkets and other specialties required by hotels, fast food chains and international organizations

(See GAIN Report No: NI4015 for details)

q  The Nigerian Customs Service (NCS) is the GON agent for import duty collection

·  Import duties for HVPs run an average of 100 percent high

·  All HVP imports are assessed at 5 percent Value Added Tax (VAT)

·  The 5 percent VAT is on CIF value plus (+) import duty + port surcharge assessed at seven percent of import duty + one percent of import duty called Customs Service inspection charge

q  GON initiated a policy that subjects all imports into the country to a duplicate inspection since May 2001

·  A pre-shipment inspection (PSI) in the country of export by a GON-appointed PSI agent prior to shipment, and

·  A-100 percent destination inspection at Nigeria’s port of entry

·  PSI agent for imports shipped from the United States is Swede Control/Intertek--the shipper or exporter arranges for the PSI to be done

(See GAIN Report #: NI4015 for details)

q  The Federal Fisheries Unit of Nigeria’s Department of Agriculture (Federal Ministry of Agriculture and Natural Resources regulates frozen fish imports into Nigeria.

·  It issues import licence to firms applying to import after due certifications

·  Licenses are issued per import purchase and shipment

[See GAIN Report #: NI4012 (SECTION III) for details]

q  Nigeria’s high-tariff regime encourages many Nigerian importers to engage in informal business practices.

·  Importers (of especially high-value food commodities) reportedly, have continued to collude with PSI agents and local port officials in their customary product concealment and under-invoicing to either reduce or avoid duty payment--rules can be bent to move imports into Nigeria.

·  Allegedly, the Pre-Shipment Inspection agents in the U.S. are stricter than their counterparts in other countries

·  Nigerian HVP importers often ship their U.S. consignments to the EU countries where the consignments are re-inspected by the more flexible pre-shipment agents in those countries, re-documented and transshipped to Nigeria

·  Nigerians also, ship their consignments to ports in neighboring countries where they enter the Nigerian market by road through cross-border smuggling chain

·  Many Nigerian importing firms register companies in the neighboring West African countries specifically, for receiving and transiting their consignments to the Nigerian market

·  A large proportion of HVP exported to other West African countries are sold in the Nigerian market

·  Nigerian importers may purchase these items directly from overseas or they may purchase from importers of neighboring countries.

q  Following are documentations, procedural steps as well as the estimated durations procedures for all exports to Nigeria:

·  Importer contacts his local bank with import documents such as invoice/s, insurance certificate/s, etc, so the ‘Form M’ can be prepared. The bank needs the ‘Form M’ to apply for foreign exchange from Nigeria’s Central bank (CBN) to pay for the goods.

·  A Clean Report of Findings (CFR) number is assigned after the CBN approves the use of foreign exchange. (Average two days).

·  The local bank bids for the required foreign exchange. Often, banks do not obtain foreign exchange for the total invoice value from the CBN and will need to bid multiple times. Importer opens a Letter of Credit for the purchase. (Average two weeks)

·  Exporter contacts his shipper to arrange pre-shipment inspections (PSI) with GON’s agent (Intertek/Swede Control). The PSI agent issues Clean Report of Findings (CFR) and, Import Duty Report (IDR), which validate the commodity being shipped and, its valuation for import duty purposes.

·  Cargo is shipped (on average, transport time from the U.S. to Nigeria is three weeks).

·  The PSI agent sends both CFR and IDR to CBN and Nigeria Customs Service (NCS) as well as forwards copies of the IDR directly to the importer's local bank.

·  Importer initiates port clearances with the Nigerian Customs Service as well as inspections and clearances by NAFDAC, the Nigerian Drug Law Enforcement Agency and sometimes, the Standards Organization of Nigeria and other agencies stationed at Nigeria’s ports (on average two weeks).

Flowchart for Documentations, Procedural Steps & Estimated Durations

q  Opening letters of credit in Nigeria often is a timeconsuming and expensive endeavor

·  Many Nigerian importers arrange payment for their imported food items through Inter-bank wire transfers

·  The exporter simply ships the items to importer upon receipt of his bank transfer payments avoiding the rigors of Form M and PSI procedures

·  This import procedure (now classified as “non-IDR imports”) has become a high risk to the importer as GON recently expressed the postponement of its proposed single (destination only) inspection policies.

SECTION III. MARKET SECTOR STRUCTURE AND TRENDS

Retail Food Sector:

q  The retail food sector in Nigeria consists of supermarkets, convenience stores/small groceries, and traditional open-air markets--accounting for approximately one percent, 33 percent and 66 percent respectively, of total retail food sales as shown below:

Source: Industry

q  The major players for imported HVP merchandising in Nigeria are: