Discussion brief for the Export Strategy-Maker

Export Development in the Digital Economy

by Olufemi Boyede
MD/CEO, Koinonia ventures limited
(Not edited by ITC)

When I received the invitation to participate in this brainstorming session and to present a position of developing economies in general and Nigeria in particular, I telephoned home to discuss the topic with a very close friend and business associate of many years, who is himself involved in large scale importation and supply of chemicals for reputable companies in Nigeria. His first question was "what is e-commerce?" The import of this seemingly innocuous question might be missed totally unless we remind ourselves that the person asking the question is supposed to be one of the most "versatile international businessmen" in Nigeria. His question summarises exactly what the actual situation in Nigeria today is, vis-à-vis the topic of our discussion: E-commerce.

We are all no doubt aware that Nigeria ranks today amongst the world’s six largest producers of crude oil, a position she has maintained over the past three decades. What may sound strange to most of us, however, is the fact that as a result of an erroneous assumption of the inexhaustibility of the oil resources, sufficient attention is not being given to the development of an alternative sector of the economy. The efforts being currently propagated towards diversification of the economy, appear too feeble to generate an immediately tangible result. Since the discovery of crude oil in the late 1960’s/early 1970’s, it has contributed more than 95% of the nation’s economic base.

We may also be aware that sometime in the late 1950’s and early 1960’s, Nigeria ranked amongst the world’s leading producers/exporters of cocoa, groundnuts and cotton. Rubber was also added later. Again, because of the discovery of oil, all these commodities have been relegated to the background, to the effect that today, collectively, they contribute less than 3% of the nation’s foreign exchange earnings.

While other countries of the world, including those classified as "developing economies" like Nigeria have come to recognise the indispensability of non-oil exports to the development of a healthy national economic base, Nigeria is, unfortunately, still far from evolving an export culture.

It should not be surprising therefore that a majority of Nigerian businesses do not even know the import of export planning and development, not to talk of more recent strategic issues like e-commerce as a tool for export development.

This paper will therefore, adopt the style of an assumed illiterate in matters of e-commerce, because that is the actual position of most of Nigeria’s (and Africa’s) international trade right now. It is only a complete understanding of the current position of internet and internet services vis-à-vis availability, affordability and accessibility in the African trade environment that will enable a fair and objective assessment and enumeration of strategies and measures that are needed to "initiate the Nigerian (and African trader) into this new "cult" of

e-commerce. The following statements of current realities also summarise the constraints limiting the development of e-capacities in Nigeria. They include:

i. Inadequacy/Lack of awareness: This is aptly described in the introduction and is probably the most limiting factor. Most businesses in Nigeria today are not aware of the existence and usefulness of e-commerce. A few of the multinationals, such as Cadbury Nigeria Plc. who had an early understanding of the importance of being on the world wide web have invested huge funds in information technology and the internet and are regularly up-dating their infrastructure and improving their e-competence. It is however doubtful if up to ten thousand businesses in the whole country, have imbibed this understanding.

ii. Absence of an Export Culture: Since the country itself is not actually devoted to the promotion of non-oil exports, majority of the nation’s goods find their way into the international markets via grossly unorthodox routes. Employment of "state-of-the-art" tools of trade promotion such as e-commerce has therefore not been given the due attention and seriousness.

iii. Limited Access to the right Tools: Less than 10% of businesses in Nigeria today have access to a computer of their own. Even less than this figure own their own telephones. In Nigeria today, telephone is still viewed as a luxury, a status symbol rather than as a "tool" for functional efficiency. Conservatively, the telephone/population ratio would still be in the region of 1:146. (Population = 110, 000,000: Total available telephone lines = 750,000). How then can a business engage in successful e-commerce when it does not own its own PC and telephone?

iv. Infrastructural Deficiency: This is another limiting factor. It takes about thirty seconds to get connected between countries in Europe and the rest of the world. It takes several minutes of fruitless trials to get a call through to Nigeria from Europe at first dial, about thirty minutes from America and much longer from Asia, the Far East and other countries of the world. Within Nigeria itself, it could take hours on end to get through from one city to the other. The telephone lines are so grossly inadequate and the few available are speedily "swooped up" by the "nouveau-riche", most of whom have no operational need for them. For them, a telephone is a status symbol. The situation is worse in intra-African trade as it takes unimaginably long hours for a telephone call to go through from one African country to the other.

E: commerce would naturally comprise of electronic trade in tangible and intangible commodities. For a trader to succeed in exporting his tangible commodities he has to be able to get the goods to the port at the right time, to meet importer’s timing demands. The transport system in Nigeria is still too chaotic to guarantee a J-I-T delivery. No matter how genuine the reason is, once an exporter has failed twice or thrice, to meet his buyer’s expectations, he loses the confidence and patronage of such a customer.

Power supply is another major impediment to efficient commercial activities in Nigeria. Most manufacturing companies have, in fact, had to invest large capitals on the purchase of power generating plants, pushing up their production costs. The smaller businesses have no choice than to rely on the National Electric Power Authority, whose power supply is, to say the least, epileptic. The infrequency and fluctuating power outputs have also destroyed a lot of sensitive and costly equipment (with no compensation from the power agency). Successful e-business would certainly not tolerate such inefficiency and unreliability. The issue of infrastructural deficiency can certainly not be over-emphasised, as other amenities such as water, good roads, safety and reliability of air travels, smooth and trouble-free operation at the sea ports, etc. contribute in no small way, to the successful development of e-commerce capacities at the national level.

v. International trade, in the first instance is essentially a trust-based business. It would not be surprising to most participants here today, to learn that most of the doubt cast on business dealings with Nigeria and Nigerians today, is occasioned by the activities of a few fraudsters, Nigerians and non-Nigerians, who have perfected the art of intercepting calls and cloning other people’s telecommunication lines especially those of companies identified to be active in international business. The same set of con persons are already on the web, surfing the net for their next victims. Such activities will not only constitute a distinct disincentive to prospective e-commerce trading partners, it is bound to discourage prospective Nigerian users and participants in the trade.

vi. E-commerce is all about customer satisfaction first time. Numerous studies of on-line customer behaviour point to customer satisfaction as the most important feature in e-commerce. It could also constitute its major fissure, the weak spot where smaller businesses can easily win back the loyal customers they have lost to web trading. Poorly treated customers will so easily write off the corporation and this will spread faster than wild fire. Ability to comply with customer expectations will therefore be another principal and serious limiting factor. The development of this ability however depends principally on the efficiency of available infrastructure.

vii Conventional resistance to change would, of necessity, constitute another limiting factor. Small and medium scale enterprises in Nigeria, like all over the world, would prefer to hold on tenaciously to their assiduously built reputations and hard-earned customers. They are not adventurous and would rather maintain a customer portfolio they have so painstakingly built. They would prefer to remain small and take small, slow and careful steps, judging and weighing carefully, the implications of their every step. Big time internet players would not take such pains. When small businesses consider such pertinent questions as: shall we set up servers or co-locate; what is the best type of security software?; what type of customer management interface is required; what is the initial capital involvement etc., they are likely to put off the decision to delve into e-commerce until a later date.

viii Closely related to the above is the exorbitant cost of doing business in Nigeria. With lending rates as high as thirty-five to forty per cent (35%-40%) per annum, few small businesses are likely to decide to borrow in order to set up the required competence to engage in e-commerce.

Another reason to resist change is the proximity of the small enterprise to its existing clientele. Most small entrepreneurs in Nigeria today rely on a few intermediaries (self-styled export merchants) to get their products onto the international markets. They are satisfied with selling their outputs and getting ready cash. Why, then would such a company desire to move to the World Wide Web when all its customers are within shouting distance and can be easily reached through the local radio or newspaper.

The foregoing problems are certainly not insurmountable. Despite the current discouraging state of the web business in Nigeria, there is certainly a big advantage to the local business industry as well as the government as a whole, in developing e-capacities and competences. With more than five thousand exportable products covering all sectors and an ever growing list of exportable services, Nigeria certainly deserves to participate in and benefit from the daily growing world of e-commerce.

One BBC advert relates that "ten years ago there were less than fifty sites on the World Wide Web, today there are more than ten million." It is not certain if out of these ten million sites Nigeria, and indeed the whole of Africa, can account for ten thousand. The following recommendations seek to outline the inputs required of both the Public and Private sectors of the Nigerian economy towards the creation of the right environment and subsequently, the development and exploitation of e-competencies and capacities, respectively.

1. The most obvious responsibility of the public sector (Government at the centre) is the provision of the most fundamental amenities and infrastructure that would not only increase present production capacities but help on-going and new businesses to improve their efficiency and reliability. The roads must be repaired and constantly maintained, telephone operation, especially the GSM must be smoothened and guaranteed, power supply must improve, etc. E-commerce without the necessary infrastructure would be similar to having a nuclear war head without an appropriate delivery system.

2. Government must also accept the indispensability of non-oil export development in the efforts to revitalise the Nigerian economy. This acceptance will lead to the evolvement of an export culture; along with which will come naturally strategies for export development.

E-commerce is not an end in itself. It is only one of the tools in the successful development of natural economic progress. A virile export development strategy and policy will certainly highlight e-commerce as an efficient tool and strategy.

3. Due to the absence of an export policy, international trade in Nigeria today is largely unco-ordinated. Even though there is a legislation to the effect that all exporting companies must register with the Nigerian Export Promotion Council, it is doubtful if half of the "exporters" of Nigerian products today are known to this body. Most Nigerian products, for various reasons, find their way on the international markets through unorthodox channels (smuggling). Government would certainly need to evolve new strategies geared towards a central co-ordination of international trade, including exports from and imports into Nigeria. This step is bound to facilitate all other measures that would be taken for the introduction and establishment of a digital trading culture in Nigeria. We are suggesting here an enforced exporters/importers census/registration. This strategy should however not be allowed to degenerate into the usual bureaucratic monster that would stifle rather than positively assist the growth of e-commerce.

4. E-commerce education and awareness campaign will need to be embarked upon, principally supported by government, in the preliminary stages. Small and medium scale enterprises should be the major targets of such educational campaigns. The programmes should be as elemental as they are numerous and sustained, to derive the right results.

5. Provision of functional necessary infrastructure. Where the government owned telecommunications outfit, Nigerian Telecommunications (NITEL) has proved grossly incompetent to cope with current telecommunications requirements (even with e-commerce yet to attain a large scale), the obvious indication is that this sector needs to be immediately deregulated. The intended privatisation of NITEL should be pursued and concluded without further delay. Current attempts to protect NITEL’s monopoly should be discontinued. New participants should be encouraged. Should NITEL be interested in proving its worth and relevance, necessary funds should be released to procure up-to-date equipment.

Personnel policy should change in favour of hands-on, multi-skilled staff willing to face the challenges of a daily changing environment.

6. Aligned with the above is the need to bring down the cost and reduce the difficulties still inherent in the procurement of a telephone service facility. In neighbouring countries like Ghana and the Republic of Benin, possession of a telephone line and even a mobile unit is no longer a status symbol. Deregulation of the telecommunication sector will certainly help a great deal in this direction.

7. Within the internal working of NITEL itself, the loop-hole that permits doing of lines and interception of messages must be plugged. If the international community is not assured of comfort and confidence when dealing with Nigeria, it would be and up-hill task levering the confidence required to trade with the country on the web.

The US president had on Friday, June 30, signed into law, digitally the e-bill. The bill provides that no contract, signature or record should be denied legally binding status just because it is in electronic form. The above development demonstrates, like nothing else, the level of confidence already attained in e-commerce. Nigeria must be able to assure the e-community of an equal level of confidence and confidentiality if she must participate in and benefit from the trade.

7. Reduction in the cost of doing business in Nigeria will certainly boost the participation on smaller businesses in e-commerce. A starting point will be some form of soft loan granted or guaranteed by government to qualified small businesses wishing to procure the necessary equipment and facilities. It would not be unreasonable to also suggest the legislation of lending rates to a maximum of 20% per annum, down from the present highs.

1. The first action the Private Sector needs to take is to accept the usefulness and inevitability of e-commerce. It is part and parcel of today’s business. Accepting this fact will help the private sector to purge itself of the fear of the e-commerce "bug". In order to be truly competent, the small enterprise must convince itself that it is a strategy worth venturing into. Inevitably, the day is going to come when every small business that wants to continue to exist will have to enter the battle field of the internet. Even today, the web is already exerting an impact on every business that is transacted worldwide.

2. The Nigerian banking sector also has a major role to play in the development of e-competence. They represent the payment medium and are probably the most important link between the buyer and the seller. The fact on ground however is that they are grossly unprepared for e-commerce. They must be ready to acquire the necessary technology and sophistication in a cash and carry economy like Nigeria. They would need to rise up to the challenge of dealing with high level fraudulent practices in the industry. It is no secret that even in the developed countries, one of the most intractable problems right now is the menace of hawkers. The banking sector would certainly have to address this problem in their journey to e-commerce Eldora do. This is the only way they can muster and sustain the level of confidence needed for the e-commerce revolution.

3. The small and medium scale enterprises intending to go "digital" must plan. It must recognise that e-commerce is not a trial and error thing. You must either be fully ready and go for it with zeal and enthusiasm or wait until you are. Any failure might lead to a folding up of the entire business. Budgets have to be carefully established, all objectives of going into the business properly defined, logistic supports necessary for the efficient running put in place etc. They must employ the right staff, with proper and regular training, identify and be prepared to adopt new technology and software etc.

4. Where the small firm finds it difficult to go into it alone at the onset, a workable strategy would be to form e-business alliances. This will enable a number of associating enterprises to utilise a common manager and a uniform high performance software and hardware. By associating and coming together, guided by their traditional conservative leanings, with some well-planned investment in necessary technology they can more easily ward off the threats constituted by the more powerful e-commerce firms interested in their customers.

5. Developing e-competence also has to do with getting the right results on the first trial out. Before launching its site therefore, the small and medium enterprise is encouraged to test, test and test again. It is also pertinent to advise that once developed, the e-business must be given a "human" face. Customers would still prefer a "live" person to deal with their endless needs. Appointing a manager and creating a customer services unit is a wise option. If the firm cannot afford a live person twenty-four hours a day, at least it should let people know what days and hours of the week their customers can talk to a customer service representative. A company that includes all of these in its planning process will certainly record a successful first outing and is bound to be encouraged to develop even greater competencies. For the small and medium scale enterprise in the developing economy, this is even more important as many questions will need to be answered in the setting up of a solid foundation for the nascent relationship.

6. The Private Sector must see itself as a close collaborator of the Public Sector in the establishment of an e-culture. Complete co-operation with and participation in all e-commerce programmes initiated by the public sector in the commencement stages is certainly desirous.

Like in every novel business concept of the late 1990’s and the new Millennium, e-commerce is a form that is probably more advanced in the developed world right now. The developed countries must be careful not to allow the less developed and developing economies to see it as a tool for new economic imperialism and commercial enslavement. With the whole world turned into a global village, it is important to stress village values where an elder brother would not "lord" his "seniority" over the younger ones but rather use it as a reason to train them.

Accordingly, it behooves the developed and already e-competent economies to evolve and design education campaigns and awareness programmes that would help the developing economies to take the decision to "digitalise" their trade. Those already engaged in electronic trade could be assisted with further training and technical support. The ITC/WTO would be doing right in designing and sponsoring such programmes in the forms of seminars and workshops for the Nigerian business communities. Financing the take-off equipment, setting up cyber cafés, etc will certainly increase access to the World Wide Web and generate higher interest in e-business.

Willing international organisations would be advised to work closely with the relevant agencies of government and identified associates in the private sector, towards ensuring a co-ordinated and hitch-free implementation at least, in the introductory stages.

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Posted 11 August 2000