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Lesson 1, Topic 1
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Charcoal

panafrican_traders August 11, 2020

HOW TO START A PROFITABLE CHARCOAL EXPORT BUSINESS

  1. How to Tap the Opportunity available in Charcoal Export
  2. Requirement for Starting Charcoal Export
  3. Step by step guide on how to obtain the necessary documents from CAC and NEPC
  4. FSecuring Charcoal Export contract
  5. Best quality control strategy in Charcoal export

Opportunity available for Charcoal Export

The top exporters of Wood Charcoal are Indonesia($249M), China ($119M), Poland ($97M), Ukraine($60.3M) and Nigeria ($50.6M). The top importers are Japan ($117M), Germany ($106M), South Korea($100M), the United States ($64.5M) and Saudi Arabia($56.8M).

The Charcoal industry is a multi billion dollar industry, and a money spinner for interested investors. The United Kingdom alone consumes more than 60,000 metric tons of charcoal annually, out of which about 70% comes from tropical Africa. Other countries around the world, equally consume charcoal in great quantities.

Market Opportunity available for Charcoal Export

It might surprise you to know that charcoal has quite a number of more important uses besides cooking and many outside of our shores will appreciate a chance to have it in abundance. More commonly, charcoal is appreciated in countries where they experience months of winter to heat their house. Due to the coldness of those places, they need charcoal in abundance to keep their homes perpetually warm so they do not freeze to death. If they can get an opportunity to get it in abundance, they would be most assuredly glad.

Also, charcoal is used as metallurgical fuel to melt or smelt metals such as irons, so it is a very important source of fuel to the blacksmith.

It is also important as a source of fuel for some industries, it is used to produce black powder used in making fireworks, it also serves as an effective filter because charcoal has the ability to absorb certain organic compounds from suspended in gases or liquid. These are a few uses of charcoal that is why it is regarded as important and in high demand. It cannot be emphasized how lucrative it is as a business.

However, like every business, you have to learn how it is done, so as not to run into trouble. Every business is a risk because, at your best, you cannot prevent some unforeseen circumstances but there are different ways of minimizing the risks to reduce the effects as much as possible.

The gradual global shift from the mass distribution of oil products has opened up opportunities in several other energy sectors. This trend has set a pace for the widespread demand of cheaper energy sources for households and communities. Since the cost of kerosene, diesel, and petrol still somewhat carry high market figures, African and several other individuals in the developing world seek cheaper alternatives. One lucrative source is charcoal, and this has given rise to a large charcoal export industry

Charcoal provides a low-cost method of cooking for local communities around the developing part of the world. Most of the locals living in these small communities cannot afford to use cooking gas, kerosene, or even electric cookers with the absence of electricity. And as a result, this Charcoal alternative represents more than 80% of the total energy used in preparing household meals in Africa.

How Is Charcoal Made, And In What Areas Of Nigeria?

Charcoal is largely made from tropical woods; although some variations like charcoal briquettes are made from coconut shells. During the production process, wood is burnt at really high temperatures in the absence of air. This production process is termed carbonization.

The production of charcoal is done in various communities and states around Nigeria. Some are Kaduna, Jos, Minna, Egbe, Jebba, Oyo, and several others. These areas are high production centers, but production can also be carried out in most other parts of the country.

How To Tap into The Charcoal Export Business In Nigeria?

The charcoal industry poses several opportunities to energy-savvy individuals. This large industry can be tapped from several fronts, but here are three (3) business opportunities in the charcoal industry:

Charcoal Production: Production of charcoal has been a delicate process, requires specific individuals who are skilled in the craft, and are willing to get their hands dirty. The production is a highly labour-intensive process. Trees have to be fell, chopped, and burnt at high temperatures. Since most exporters can’t get involved with this stressful process, they leave the whole work-flow to the charcoal producers, who in turn sell to them in large quantities but, at low prices.

Charcoal Export & Distribution: This is the most popular business opportunity exploited in the charcoal industry in Nigeria, and around the world. With tens of thousands of metric tons of charcoal exported yearly from Nigeria, the revenues generated makes the sector lucrative. Here, the sales could be done by local traders in the market, or by large players exporting the charcoal products outside the country.

Before charcoal can be exported, certain standards must be met. For example, the moisture content, the fix carbon, the ash contents, and several others need to be right, based on the buyer’s specifications. An inspection by the buyer’s agents or the buyer themselves, could lead to a rejection of the full shipment if they don’t meet the required standards.

The charcoal prepared for export must also be packaged to the buyer’s taste. They could be packaged in small sizes to enable local buyers purchase easily for their needs, or they could be packaged in bulk, weighing different sizes; anywhere from 5kg and above, and then placed in containers ready for shipment by a shipping company, and delivered to the buyer anywhere in the world.

Charcoal Appliances: Charcoal appliances could be charcoal stoves and other devices that make the charcoal production and usage process easier. You could manufacture charcoal stoves and sell them for about $8 or more for a stove. These energy-efficient stoves make charcoal usage easier for the locals who live in communities and base their cooking energy source mainly on charcoal.

How to Raise Funding for your Charcoal Export Business: No business can survive without funding. It is not even something that needs to be talked about. Capital is one of the factors of production. Luckily, considering there are different categories you can get into in the business, you have choices based on the capital at your disposal. If you think you cannot garner funds to be a full-fledged exporter, then you can simply settle for being a product sourcing expert. That does not need much capital to start, except that you have to hone your marketing skills. However, funding is necessary for the others. There are different ways of getting funding for your business: Personal funds; Help from family and friends Investors; Government grants through NEPC and other agencies; Loans.

Starting out in your distribution and export of charcoal products could cost you between 300,000 ($1000) t0 1,000,000 ($3334) Naira. With a signed order for shipment by a buyer, the supplier could approach the Nigeria’s Bank Of Industry (BOI) for a loan to easily fulfill the order. It’s a lot easier to get loans and grants in Nigeria when there’s an existing request or customer base for your charcoal products than when you’re just starting out and seeking random capital.

There are different ways you can be involved in the charcoal export business, depending on what interests you.

Seller or Exporter: You can be the one who is directly selling to a buyer(s) overseas.

Export Broker: There are many rich men who are looking for where and what to invest their money in or simply they have the finances but lack the time to go into the charcoal business. If you are one of such men, you can find a charcoal exporter, fund the business and share the profit with him or her. Also, as an exporter, you can also get these investors to help improve your business, especially if it is lacking financially and share the profit with them.

Product Sourcing Expert: To ease the stress, some buyers and sellers contract brokers to serve as middlemen for the trading. These middlemen would find buyers and sellers and act as an agent in the trade. It is sometimes difficult to find suppliers of quality charcoal and the job of the sourcing expert would be to find quality suppliers and connect them to the exporter or to find buyers overseas and connect them to the exporter. In this case, you get a commission from the sale.

However, to be successful in this aspect, you have to be a skilled marketer. If you know it is not something that comes naturally to you, you need not be discouraged; there are a number of training grounds where you can learn to be a good marketer.

Marketing skill is important because you have to sell yourself to the sellers and buyers so they can employ your services and let you source for them. It depends on what interests you of course. Now to the main business, what would you need to start your business as an exporter of charcoal?

Types Of Charcoal You Can Export

  • Hardwood Charcoal
  • Charcoal Briquettes
  • BBQ Charcoal
  • Shisha Charcoa

Get mentorship: Nobody can go wrong with a wise counsel. You know how people say experience is the best teacher? Well, that is true but even more accurate is that the experience does not have to be yours. It can be other people’s experience. If possible, in order not to make the mistakes that others before you have made, then find people who have gone ahead of you in the business to seek guidance. Some even offer training classes that you might want to consider.

Requirement for Starting Charcoal Export

To have a share in the lucrative business of charcoal export, every new exporter will need to have the following document:

  • Register Business ( Limited Liability LTD)
  • Valid Export License issued by the Nigerian Export Promotion Council (NEPC)
  • Domiciliary Account for receiving Payment
  • A strong online presence like having a website.

Register your business: This cannot be overemphasised. As a Nigerian, you most likely have an idea of the reputation fraudulent Nigerians have gotten for the country.

Therefore, an average foreigner would treat Nigerians with distrust. The last thing you want is to increase the distrust by showing up with an unregistered business. If you want to be taken seriously, you have to take yourself seriously, go to CAC (Corporate Affairs Commission), get a business name and register it.

Then you should also go to NEPC (Nigeria Export Promotion Council Certificate) to register as an exporter. Apart from the fact that it would add credibility to your business, every exporter in Nigeria would find it beneficial registering with them because they actually make your job easier by some of the help offered exporters in the country. And personally, registering your business makes you unconsciously feel a sense of responsibility and thus, seriousness to your business.

Step by step guide on how to obtain the necessary documents from CAC and NEPC

To obtain your export licences, you have to visit the website of the NEPC

Securing Charcoal Export contract

When it comes to finding International buyers of commodities like charcoal for export, many beginners find it a little difficult to find success.To make the process easy, i’m going to share a link to some of my videos where i explained how to use the right search term to make the process a lot faster.

Best quality control strategy in Charcoal export

Why is product quality so important, you may ask? It is important because if you make the mistake of supplying substandard products, you might not get a second chance to make a first impression on someone from another country.

While you know it is an honest mistake, they do not know that and frankly, the client would probably not be ready to listen to excuses. Now, you get why it is necessary to make sure you get the best product by having the right suppliers. This is not something you jump into; it is something you have to take your time to be sure about.

Get Suppliers: This is also as important to the buyers as registering your business. Believe it or not, the fact that the reputation of Nigeria is nothing to write home about is not tales by moonlight, it is true. So as a Nigerian, you are constantly laden with the responsibility of proving yourself to the foreigners before they can open their heart to you and not completely write you off as a fraudster.