The future is port efficiency
Monday, 1 January 2018, did not only mark the celebration of New Year in Nigeria, it also presaged the effectiveness of the revised import and export guidelines issued by the Federal Government of Nigeria (FGN).
The most significant requirement is to palletize imported goods. All containerized goods, except those specifically exempted (as documented in FGN’’s Circular) are required to be stacked on pallets. Expectedly, this directive received criticism by traders who consider palletization an onerous obligation – as pallets occupy space, add extra weight and come with a fee. Traders already operating on tight margins may not be able to survive within the boundaries of the current business environment. One of the aims of this directive is to curb excessive leakage of tax duties on imports. The customs personnel would probably look at a cargo (not palletized) to get the most expensive item, if accurate and base the entire duty on it. And this to the tax man is a loss of revenue.
It’s pertinent to note that palletization is not a novel concept in global trade but seen as best practice – it enhances efficient supply chain operations, facilitating easy handling by forklifts which results in improved timeline to store, load and unload goods which have been stacked on pallets. From FGN’s standpoint, palletization would help accelerate operations at the ports, aiding the ease of doing business in Nigeria. Does the new directive reduce any cost of importation other than the ease of doing business? A question that has remained unanswered.
The Logistics Performance index on Nigeria for 2016 shows Nigeria is far behind its peers. Took a look at the two economic giants of Africa, the discrepancies are quite appalling. For example the number of agencies involved for imports in Nigeria is eight while that of South Africa is two, physical inspection 48.82% and 3.75 %, multiple inspection 12.98% and 2%, online documentation and submission 63.64% and 100% respectively.
This shows the bureaucratic processes which affects the ease of doing business at the ports.
Besides many bottlenecks encountered by importers and exporters, including the absence of access roads to the hinterland for the evacuation of agricultural products, which for now constitute the bulk of the non-oil exports, the conditions at the seaports, the gateway to the outside world, leave a lot to be desired. Of particular note is the neglect of all the main seaports, at Delta and Cross River States. Large vessels would not be able to berth at the port except small vessels, which are used to transport goods from the big vessels down to the ports which is quite counterproductive especially the Apapa and Tin Can Island, which are responsible for over 70 per cent of maritime trade in Nigeria.
Aside from fixing the roads, the government can tackle the transport problems around the ports by shifting emphasis to the rail system to ease the pressure on the roads. Doing so will get the heavy lorries off the road. In the United States, for instance, coal is the single biggest cargo and over 70 per cent of coal transport is done by rail. The government should also come up with plans for the other ports outside Lagos, as this will reduce pressure on the Lagos ports.
By extension, the congestion in Lagos ports mostly accounts for the devastation that the Apapa-Oshodi Expressway faces. It is therefore disturbing that the federal authorities have continued to undermine the strategic importance of the port, which is closer to the big commercial centres and cities in the eastern flank of Nigeria.
The Private Sector had bawled for the use of scanners of which the NPA needs to address. The use of scanners quickens the process bypassing manual inspection which could delay clearance of cargoes. Presently the cost of complying with customs regulations, mandatory inspections and related procedures is over five times higher in Nigeria than advanced economies. It is worth noting that the NCS is now required to coordinate joint physical inspection of cargo to reduce duplication of physical inspection by several government agencies as this creates avenue for illicit business and impacts the turnaround time for clearance of goods. An earlier report on The Guardian Paper, stated that the President of the National Council of Managing Directors of Customs Licensed Agents (NCMDCLA), Lucky Amiwero, said the extra cost would eat deep into the nation’s foreign reserve and discourage shipment into Nigerian ports. He alleged that the policy was introduced because of non-functional scanners. He urged the Nigeria Customs Service and the Federal Government to fix the equipment and stop frustrating businesses through physical inspection of cargoes.
But while the government continues to be dogmatic on the need for diversification of the economy, the stiff challenges exporters face in the course of attempting to get their goods to the outside world make achieving that goal a daunting task. Government’s lack of enthusiasm in streamlining the process of doing business in the country only confirms the belief in some quarters that it is only paying lip service to non-oil exports promotion.
The Economy
The economy is improving – oil price has increased which has helped the macro-economy of the State and its projected goal to attain a growth rate of 1.9% in 2018 according to IMF – in a way the purchasing power for few Nigerians would increase demand. What about future demand? Would a population projected to be 252,599,000 by 2030 be dependent on the Lagos Ports?
The Governments new policies to improve the ease of doing business is quite commendable but with a population of 180 million and counting on relying on one point of entry (Lagos) for its goods, is troubling. Lagos is the commercial hub of the nation with 90% of the containerised cargo going through the Lagos ports which puts a strain on its infrastructure and causes emigration from other states.
Nigerian ports should be the hub of business activities, as is the case in other countries, including some oil producing ones. The Khalifa Port in the United Arab Emirates is a good example of how a seaport can become a country’s investment and business hub. The port, operated by Abu Dhabi Ports Company, just signed a $300 million deal with some Chinese concern to turn it into a hub for manufacturing, logistics and trade, according to reports.
The deal signed in August last year, will see China creating a Free Trade Zone in Abu Dhabi as part of its Maritime Silk Road that will connect a network of Chinese-run ports and investment route from China to Europe. The port will attract investment from all parts of the world. Besides the $300 million going directly to Abu Dhabi, the Chinese investment will also serve as a catalyst for the growth of other projects within the area. Factories are expected to spring up to boost job creation and local supplies business. This is what managers of Nigerian ports should be targeting. I haven’t seen a clear plan on what the Government plans to do with other ports and having a master plan, a clear vision of port development is critical so that they don’t run themselves out of Business.
I commend the Governments tenacity on improving the ease of doing business in Nigeria. It’s no news that we have only one viable port whose infrastructure has been wildered by the strenuous activities ongoing at the ports. The aim of the policy is commendable but its timing its quite unsuitable due to the fact that Nigeria just came out a recession and the average Nigerians purchasing power is quite low and its growth rate compared to its peers is not encouraging. The government should look at the solution to that problem long term. We all know Federal Government can agree they don’t have the resources to run or maintain the upcoming upsurge on importation hence the need for the Private Sector.
It’s high time we open up the country as this would improve the economic state of the country- investment, Trade, employment etc