Post by Trade facilitator on Oct 5, 2015 11:03:25 GMT 1
Before August 2015, Johnsie Company Limited, located in Ikeja area of Lagos, had been in export business for six years. Johnsie’s primary business was to export packaged cakes and noodles to Botswana, Equatorial Guinea, Gambia and Zimbabwe, all in different parts of Africa.
The products had gained traction in these countries, making the company rake in millions in profits. As a testament to this, Johnsie declared a turnover of N3 billion ($15 million) and profit after tax of N1.7 billion ($5.35 million) just in 2014.
The company’s employees, which were only seven in 2009, had been quadrupled by January, 2015. In a bid to expand operations, the company decided to export to countries outside Africa. With few pieces of information from the internet, the company learnt that noodles were in high demand in the United States of America.
Preparations were made to launch into the new-found market. In July 2015, the company shipped some of its noodles to the US market.
“When we got to the borders of the US,” began John Ugbesie, managing director of the export firm, “our noodles were tested but the authorities said it contained trans fatty acid (an unhealthy substance made through the chemical process of hydrogenation of oils).”
“We were told that we breached certain stipulated standards. Our noodles worth N1 billion ($5 million) were destroyed by the food and drug administration body in the country,” lamented Ugbesie.
“For now, I do not think we can continue production at the factory because just few days ago, we exported our cakes to some countries in Europe, but they said we used wrong flour in making them. So they sent these cakes back to Nigeria. By the time the cakes arrived here, they were no more fit for consumption. When you factor in the logistics cost and the cost of the cakes, you will see why we have to suspend production for now,” explained the 42-year-old exporter.
Today, Johnsie Company Limited has joined the list of distressed firms in Africa’s largest economy. All but only four staff members have been retrenched.
The sad tale story of Johnsie Company Limited reflects the daily experiences of Nigerian exporters whose products are rejected at the borders of advanced economies, notably the European Union, the Americas and Asia, on the basis of compromise to or ignorance of globally accepted standards.
The European Union, in August, banned, till 2016, Nigerian beans from coming into its market. The European Food Safety Authority said the rejected beans were found to contain between 0.03mg per kilogramme to 4.6mg/kg of dichlorvos pesticide, despite that the acceptable maximum residue limit was 0.01mg/kg.
Other food items banned were sesame seeds and melon seeds. There were reports that the EU had, before the ban, issued 50 notifications to Nigerian exporters, saying that the pesticide used for the food items was harmful to human health. However, in the usual Nigerian manner, the notifications were dumped into the trash cans.
“When the international community sets standards or date for compliance, we do not have to dilly-dally, believing that our commodities will be accepted when we export them,” said Charles Malata, technical supervisor, the National Quality Infrastructure (NQI), a project supervised by the United Nations Industrial Development Organisation (UNIDO), at the media professionals workshop tagged ‘The Concept of Quality in Nigeria’ held last week in Minna, Niger State.
“For how long should we continue to allow our micro-, small- and medium-sized business to keep believing that their products will ever be accepted at the global market, irrespective of the standards set?” Malata asked.
“What many exporters do not seem to understand is that there is an increasing restriction in the international market and this will likely continue. If we are to participate in global trade, we cannot ignore standards and international arrangements,” he counselled.
Studies show food commodities that do not meet minimum standards can cause serious health problems, often resulting in death or incapacitation. Similarly, manufactured products that fall short of ‘the global minimum’ can cause death, loss of wealth and other forms of hazard to consumers. As an example, consider the exposure to fire disaster for consumers using sub-standard cables or electronic gadgets.
“A fire outbreak can wipe out a family or families, render many incapacitated and destroy property bought with life savings,” said Peter Emode, electrical engineer in Port Harcourt, Nigeria.
It is on this basis of such hazards that countries in the World Trade Organisation (WTO) agreed during the Uruguay Round of negotiations to institute Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and the Agreement on Technical Barrier to Trade (the TBT Agreement) to address issues of standards in international trade.
According to Ramandeep Kaur Chhina of the George Washington University (School of Business), who is also an e-course moderator for the United Nations Institute for Training and Research he United (UNITAR), the major objective of the agreement is to allow countries to maintain measures that ensure that food is safe for consumers. The agreement also has stipulated measures to prevent the spread of pests or diseases among animals and plants while at the same time restrict the use of unjustified measures for the purpose of trade protection. Chhina also explained that the TBT agreement attempts to extricate the trade-facilitating aspects of standards from their trade-distorting potential by obligating countries to ensure that technical regulations and product standards do not unnecessarily restrict international trade.
However, experience has shown that Nigerian exporters are either ignorant of the globally accepted standards or choose to ignore them, believing that they can manoeuvre the situation, said Ike Ibeabuchi, managing director, MD Services Limited, in a chat. This is also the case in many West African countries.
In fact, data show that 15 percent of commodities from Nigeria and other West African countries are rejected in the international market on back of low standards.
Tabitha Buba, monitoring and evaluation expert, National Quality Infrastructure (NQI), said that this situation could only stop when exporters became accountable, transparent, ethical, while respecting the rule of law, human rights, international norms of behaviour and stakeholder interests.
Bruno Doko, standardisation and quality promotion expert, NQI, said it would be important for exporters to pass compliance tests. Doko, however, said passing such tests required capacity building at various stages.
“To pass compliance, you need capacity building to train your people, to bring your equipment up to standards and to get your laboratories accredited,” he said.
He said that quality infrastructure involved five components, namely, standardisation, metrology, testing, certification and accreditation, adding that it was now more than ever mandatory to have a national quality promotion strategy that would assist a country to be globally competitive, develop competitive manufacturing capacity, provide conformity with requirements while connecting to the market.
Owing to this ugly situation, UNIDO is currently providing technical assistance for the National Quality Infrastructure (NQI) and the West African Quality Infrastructure (WAQI), funded by the European Union, GIZ and the UK Department for International Trade. The essence of this project is to raise the standards of Nigerian commodities in local, regional and international markets, while also protecting the consumers. The project is expected to last till 2017.
Without a national quality infrastructure that would create a coherent national standardisation, metrology, testing, certification and accreditation system that would ensure that exporters test their commodities before export, Nigeria’s vision of diversifying away from its monolithic structure through the non-oil export sector will be a pipe dream. The impact of an absence of such a system is that more export companies will continue go under, thereby worsening unemployment, promoting more importation of what can be produced locally, while depleting the foreign reserves further.
Stephen Cross, lead expert, NQI, said quality was not just a system but everyone involved in a system, stressing that if someone in the chain refused to do their job properly, there would likely be problems in the entire system.
Cross explained that conformity assessment bodies such as testing laboratories, inspection bodies, calibration laboratories and certification bodies, among others, often got international accreditations, but he cautioned that accreditation would not improve quality of goods and services, guarantee consumer safety and health or promote trade.
Source: businessdayonline.com/2015/10/nigerian-exporters-paying-heavy-price-for-compromising-standards/
The products had gained traction in these countries, making the company rake in millions in profits. As a testament to this, Johnsie declared a turnover of N3 billion ($15 million) and profit after tax of N1.7 billion ($5.35 million) just in 2014.
The company’s employees, which were only seven in 2009, had been quadrupled by January, 2015. In a bid to expand operations, the company decided to export to countries outside Africa. With few pieces of information from the internet, the company learnt that noodles were in high demand in the United States of America.
Preparations were made to launch into the new-found market. In July 2015, the company shipped some of its noodles to the US market.
“When we got to the borders of the US,” began John Ugbesie, managing director of the export firm, “our noodles were tested but the authorities said it contained trans fatty acid (an unhealthy substance made through the chemical process of hydrogenation of oils).”
“We were told that we breached certain stipulated standards. Our noodles worth N1 billion ($5 million) were destroyed by the food and drug administration body in the country,” lamented Ugbesie.
“For now, I do not think we can continue production at the factory because just few days ago, we exported our cakes to some countries in Europe, but they said we used wrong flour in making them. So they sent these cakes back to Nigeria. By the time the cakes arrived here, they were no more fit for consumption. When you factor in the logistics cost and the cost of the cakes, you will see why we have to suspend production for now,” explained the 42-year-old exporter.
Today, Johnsie Company Limited has joined the list of distressed firms in Africa’s largest economy. All but only four staff members have been retrenched.
The sad tale story of Johnsie Company Limited reflects the daily experiences of Nigerian exporters whose products are rejected at the borders of advanced economies, notably the European Union, the Americas and Asia, on the basis of compromise to or ignorance of globally accepted standards.
The European Union, in August, banned, till 2016, Nigerian beans from coming into its market. The European Food Safety Authority said the rejected beans were found to contain between 0.03mg per kilogramme to 4.6mg/kg of dichlorvos pesticide, despite that the acceptable maximum residue limit was 0.01mg/kg.
Other food items banned were sesame seeds and melon seeds. There were reports that the EU had, before the ban, issued 50 notifications to Nigerian exporters, saying that the pesticide used for the food items was harmful to human health. However, in the usual Nigerian manner, the notifications were dumped into the trash cans.
“When the international community sets standards or date for compliance, we do not have to dilly-dally, believing that our commodities will be accepted when we export them,” said Charles Malata, technical supervisor, the National Quality Infrastructure (NQI), a project supervised by the United Nations Industrial Development Organisation (UNIDO), at the media professionals workshop tagged ‘The Concept of Quality in Nigeria’ held last week in Minna, Niger State.
“For how long should we continue to allow our micro-, small- and medium-sized business to keep believing that their products will ever be accepted at the global market, irrespective of the standards set?” Malata asked.
“What many exporters do not seem to understand is that there is an increasing restriction in the international market and this will likely continue. If we are to participate in global trade, we cannot ignore standards and international arrangements,” he counselled.
Studies show food commodities that do not meet minimum standards can cause serious health problems, often resulting in death or incapacitation. Similarly, manufactured products that fall short of ‘the global minimum’ can cause death, loss of wealth and other forms of hazard to consumers. As an example, consider the exposure to fire disaster for consumers using sub-standard cables or electronic gadgets.
“A fire outbreak can wipe out a family or families, render many incapacitated and destroy property bought with life savings,” said Peter Emode, electrical engineer in Port Harcourt, Nigeria.
It is on this basis of such hazards that countries in the World Trade Organisation (WTO) agreed during the Uruguay Round of negotiations to institute Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and the Agreement on Technical Barrier to Trade (the TBT Agreement) to address issues of standards in international trade.
According to Ramandeep Kaur Chhina of the George Washington University (School of Business), who is also an e-course moderator for the United Nations Institute for Training and Research he United (UNITAR), the major objective of the agreement is to allow countries to maintain measures that ensure that food is safe for consumers. The agreement also has stipulated measures to prevent the spread of pests or diseases among animals and plants while at the same time restrict the use of unjustified measures for the purpose of trade protection. Chhina also explained that the TBT agreement attempts to extricate the trade-facilitating aspects of standards from their trade-distorting potential by obligating countries to ensure that technical regulations and product standards do not unnecessarily restrict international trade.
However, experience has shown that Nigerian exporters are either ignorant of the globally accepted standards or choose to ignore them, believing that they can manoeuvre the situation, said Ike Ibeabuchi, managing director, MD Services Limited, in a chat. This is also the case in many West African countries.
In fact, data show that 15 percent of commodities from Nigeria and other West African countries are rejected in the international market on back of low standards.
Tabitha Buba, monitoring and evaluation expert, National Quality Infrastructure (NQI), said that this situation could only stop when exporters became accountable, transparent, ethical, while respecting the rule of law, human rights, international norms of behaviour and stakeholder interests.
Bruno Doko, standardisation and quality promotion expert, NQI, said it would be important for exporters to pass compliance tests. Doko, however, said passing such tests required capacity building at various stages.
“To pass compliance, you need capacity building to train your people, to bring your equipment up to standards and to get your laboratories accredited,” he said.
He said that quality infrastructure involved five components, namely, standardisation, metrology, testing, certification and accreditation, adding that it was now more than ever mandatory to have a national quality promotion strategy that would assist a country to be globally competitive, develop competitive manufacturing capacity, provide conformity with requirements while connecting to the market.
Owing to this ugly situation, UNIDO is currently providing technical assistance for the National Quality Infrastructure (NQI) and the West African Quality Infrastructure (WAQI), funded by the European Union, GIZ and the UK Department for International Trade. The essence of this project is to raise the standards of Nigerian commodities in local, regional and international markets, while also protecting the consumers. The project is expected to last till 2017.
Without a national quality infrastructure that would create a coherent national standardisation, metrology, testing, certification and accreditation system that would ensure that exporters test their commodities before export, Nigeria’s vision of diversifying away from its monolithic structure through the non-oil export sector will be a pipe dream. The impact of an absence of such a system is that more export companies will continue go under, thereby worsening unemployment, promoting more importation of what can be produced locally, while depleting the foreign reserves further.
Stephen Cross, lead expert, NQI, said quality was not just a system but everyone involved in a system, stressing that if someone in the chain refused to do their job properly, there would likely be problems in the entire system.
Cross explained that conformity assessment bodies such as testing laboratories, inspection bodies, calibration laboratories and certification bodies, among others, often got international accreditations, but he cautioned that accreditation would not improve quality of goods and services, guarantee consumer safety and health or promote trade.
Source: businessdayonline.com/2015/10/nigerian-exporters-paying-heavy-price-for-compromising-standards/
