Ibidapo Lawal is the MD/CEO of Neveah Limited, a commodity export firm. In this interview, he shares some of the challenges bedevilling the commodity export sector, government’s efforts and Neveah’s laudable strides since its nine years of existence. As an expert in the field, what would you say is the current state of the commodity and exchange sector in Nigeria?
I would say that it’s still developing. There’s a lot of room for growth in this sector; there are very few players. It is majorly dominated by expatriates at the moment, basically, should I say Indians and the Chinese, but gradually we’re seeing a lot of local players coming in and trying to do their best.
What products make Neveah’s export commodity list?
Basically, we export in two main categories – agricultural products and solid minerals. So, for agricultural products, we do ginger, hibiscus flower, orange peels, and cashew nuts, and then for the solid minerals which is our main line of business, we do Tin Concentrates, Columbites, Tantalite, Wolframite and then lead concentrates. Talking about agriculture, the previous administration promised to improve agriculture in the country and 8 years after, the country is facing one of its worst food crises.
What do you think can be done to improve this by the new administration?
I think the major thing is to address the insecurity concerns in the country because if you think about it, even when the farmers go to the farms, they are getting attacked and things like that. If there is high level of insecurity, nobody is going to invest in farming. As a company, we have thought of venturing into farming on a commercial scale so that we can export these products, but partners have advised that it’s not a good and profitable idea because it makes no business sense for us to go and take such risk and invest so much money in agriculture. You know, because of the high level of insecurity, there’s going to be food crisis. Until the government does something, to ensure that people can go to farms without any issues, the status quo will remain the same.
Considering the large size of the export sector and its potential, why are Nigerian youths not interested in investing in exportation?
The reason why a lot of youths are not interested, I’ll say number one is the knowledge gap because if you look at it, it is something you know that you can do. My first venture into exports was an article my friend showed me on Business Day, probably in 2007. You know, then there was an article where someone talked about exporting to Europe. It was charcoal exports at the time, and I read it. So that article helped me to understand the export business and I was able to work with a consultant that actually helped to put me through the dynamics. That was how we got our first export contract and actually able to export, because I was wondering, how would you buy goods from Nigeria and then send it abroad to London or maybe Germany and the person will pay you? I was wondering, would the container even get there? So many questions unanswered, right? So, the knowledge gap is the main issue. I think that there should be a level of awareness that there are also opportunities where people can actually earn money legitimately. And the Nigerian Export Promotion Council (NEPC) is doing that. If you go to the NEPC they can help with getting foreign buyers and advice on products to export.
I think the Lagos Business School also has a programmr in partnership with Fidelity Bank on exports. You pay a certain small amount to take the course at the Pan African Business School in Lagos. So, people can actually pay for this class, learn how it works and know some financing arrangements and get started.
Instead of the same efforts that they channel into doing things that are illegal, they can also apply towards things that are productive and can actually make a lot more.
What would you say is the current state of public private stakeholder partnership in the Nigeria’s export sector?
Today in this country, I strongly think the Nigerian government has done a lot to actually promote exports. And I’ll give you some examples. Just think about it, like there is a 200 rebate by the CBN. That rebate allows you as an exporter to earn anywhere from N35 to N65. Now they’ve added another category, we can earn from N15 to N65 for everything you export. It means after you’ve done your export, the government gives an incentive, and then they pay you about N15 to N65 for every dollar that you bring into the country. That’s an incentive. But for people that are importing, there is nothing like that. Is that correct? So, that means the government is trying to tell you; export and repatriate funds to the country, and when you’re able to do that, we pay the additional money. CBN paid N24 billion to exporters last quarter, just to encourage them. Also, we have the NEPC EEG (Export Expansion Grant) incentives. Every time you export, government looks at your annual volume and give you a certain percentage depending on the growth you recorded and all that. That’s also quite significant.
I just think the only thing is, probably, if exporters can have access to some structured trade financing where you don’t need to have collaterals to be able to access funding; where the commodity itself can be the collateral like you have in developed countries like Switzerland, where the banks like Credit Suisse UBS can actually do finance, and use commodities as collateral, it’d do a lot of good to the export sector. So, if we can have structured trade finance, we know then it should be a lot easier, but I think the government is currently doing a lot to promote exports in Nigeria.
As a young person doing exploits in the export industry, what are some of the challenges you’ve faced and how were you able to overcome them and come out strong?
I would say one of the first things while starting out was getting capital. Though you want to start a business, you need financing. What I was able to leverage on was basically family and friends initially. So, if you’re able to raise some money yourself, you can then say, “oh, my uncle, my brother, I have this contract, can we partner together and then do this?” That is after showing them some track records. So, that was actually how we were able to bootstrap, you know, and then did some exports. Later on, after we got some growth, we were able to look at alternative sources of funding that didn’t require collateral to access funds, talking about a commercial papers programme and that really helped. Also, the challenges we’ve had are things like logistics – port. Looking at Lagos Port at the time, it was congested.
We had a time whereby we exported peanuts to Indonesia, and the cargo got, maybe, 20 percent or 30 percent damaged because the containers were at Lagos Port for three months. We had to find an alternative port that worked. So, we decided to move from Lagos Port which was congested and we started using Onne Port.
What about things like insecurity? You know, during the END SARS protest, our warehouse in Plateau State almost got looted because of the riots. What we did at the time was to secure, but what we’ve also done to minimise the risk in case they overran the security and there was no backup, is to also ensure now that our warehouses are fully insured. Some of the other problems are in terms of quality. Before you see that you can buy goods in Nigeria and then there’s no quality check and you just think everything is okay, and then you send abroad and they say it’s not okay. What we’ve done is to invest in machines that we can actually use to check the quality before we export. So, that way, we know that what we’re exporting is what the buyer actually wants. Not when the container gets there, there’s a problem and then we have to return the cargo or we have to get a discount. Does that make sense? So, these are some of the problems we’ve had, but we’ve had to improvise along the way. As we’ve had challenges, we just have to figure out a way or something around and then just keep moving.
What does ‘commercial papers programme’ mean and how does it provide alternative sources of funding for short to mid-term objectives for organisations and businesses?
Well, basically, the programme upsize would help Neveah’s funding objectives, short-term working capital, basically to be able to buy more products, you know, and actually export. And that’s basically what the fund is for.
You got N20 billion upsize commercial papers. How do you intend to meet up with your repayment obligations within the 270-day period?
This is not our first. The first commercial papers programme we registered was in 2021. We had a N10 billion programme size. The first money we raised was about N2.72 billion. After that, we did another N2.103 billion and then after that, we raised another N3.56 billion and then we did another N3.99 billion. I think we later added like 2 billion.
In total, under that programme, we raised about N14.92 billion. We are a trading company; we buy goods and export. Our average turnaround time is about 60 days, and sometimes it can be 90 days, it depends on the transaction. So, if we raise money publicly, and then we take it for 180 days. That means in a 180-day period, you’ll be able to turn around the money twice for a 90-day turnaround. If it is a 60-day turnaround, we can turn around the money three times. if we have enough margin, we can cover the cost of financing, turn it around three times and make profit. When it is time for repayment, we pay back. So, having access to this programme upsize, that is the N20 billion, means we can borrow up to N20 billion. The export industry is huge. We’re nowhere near our full potential. Cocoa is roughly a $1 billion export, take cashew nuts, another $250 million export. I just mentioned two commodities. There are several commodities to export in Nigeria. So, the commodity business requires a lot of capital.
You need to have cash because you buy the goods; you don’t get paid for 60 days and you have to keep trading every day. So, you need a lot of cash to keep the business going.
What’s next for Neveah?
As a firm, our plan is to backward integrate. We don’t want to keep exporting raw products, meaning that now we’re trading Columbite, Tin and all that. As you can see, the incentives by the government to companies can add value to Nigeria. I was speaking to my head of agro this morning and he was like “oh, we need to add value.” So, that’s the future. We’re thinking of backward integrating. We have a recycling plant we’re building in Shagamu. It’s a 3000 per month aluminium recycling plant, and a 300 per month copper recycling plant. We have copper and aluminium recycling. That’s a massive project that we are putting up in Shagamu in Ogun State. From there, we can actually export products instead of just doing raw products.
So, that’s the future; to gradually move away from trading only raw materials to finished or semi-finished products. That’s our long-term goal and then gradually expand to other African countries. That’s the plan.
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