How high import tariff and forex rule stifle business activities at ports

Port business in Nigeria has been badly hit by some ill-conceived trade policies including the hike in the import duties of vehicles and rice as well as the introduction of a fish quota system by the administration of former President Goodluck Jonathan, industry stakeholders say.

According to them, the Central Bank of Nigeria (CBN) also restricted 41 items from accessing foreign exchange from the official window, and all these resulted to low volume and huge loss of revenue by government and terminal operators as the policies made the country unattractive to investors.

Early in the year, the National Bureau of Statistics (NBS) announced that the country recorded a decline of N793.5 billion in the first quarter merchandise trade to close at N2.72 trillion from N3.51trillion in the fourth quarter of 2015. The bureau attributed the decline to a sharp drop in both import and export trade.

According to the Nigerian Ports Authority (NPA), 341 vessels entered Nigeria in September 2016, the lowest in nine months and a fall from 400 recorded in August 2016. Cargo throughput also dropped from 6.3 million metric tonnes in January this year to 5.6 million in September, which is also the lowest in the year.

It also showed that a total of 3,347 ocean-going vessels have called Nigeria this year with about 100,152,274 metric tons of goods. The breakdown showed that the Lagos Port Complex Apapa received 318 vessels in the third quarter as against 301 in the second quarter. Tin Can Island Ports received 406 vessels in third quarter, against 368 in the last quarter; Rivers Ports, 80 ships against 84 in the previous quarter; Onne received 152 vessels against 163; Calabar Port, 51 against 52; while Delta Port received 132 against 109.

Experts blamed the low volume and huge loss of revenue by government and terminal operators on the anti-trade policies of the Federal Government. These policies have also made the country unattractive to investors.

Lucky Amiwero national president, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), blamed high import duty on vehicles in 2014/2015 from 10 percent to 35 percent with an additional surcharge of 35 percent, bringing the total tariff to 70 percent and has affected volume of vehicles coming at the port, leading to massive revenue and job loss.

According to him, this has caused the diversion of vessels carrying vehicles to the ports of neighbouring West African, thereby boosting operations in those ports – especially the Port of Cotonou – at the expense of Nigerian ports. The development has also negatively affected the operations of dockworkers, licensed Customs agents, freight forwarders, truckers and others.

He said that the reduction of activities by 70 percent in the operation of terminal operators who pay the Federal Government based on cargo, through earnings and shipping companies, has drastically affected their activities.

At present, Nigerian ports have lost about 80 percent of their vehicles. It has promoted smuggling and estimated that no fewer than 5,000 jobs and about N30 billion is lost annually to the policy.

Break bulk terminals are now struggling to pay their bills, falling short of not meeting their financial obligations to the Nigerian Ports Authority (NPA). For instance, the hike in import duty on rice, the restriction imposed on the importation of fish and cement are all taking a huge toll on the income of the break bulk terminals as their revenue has dipped by over 60 percent. The restriction of 41 items from the CBN foreign exchange window has also taken a heavy toll on port operations.

“There is need to review policy restricting 41 selected items from accessing foreign exchange, as about 16 of the total items in the list, serve as critical raw materials for intermediate goods produced in Nigeria, especially as the country lacks the capacity for optimal production,” confirmed Vincent Nwani, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI).

LCCI and the Manufacturers Association of Nigeria (MAN) said the policy is hurting the manufacturing sector and has led to the closure of many companies and relocation of others from Nigeria to Ghana and other neighbouring countries.

“We have seen that some of the trade policies are skewed and they are favouring more foreigners than Nigerians. We want the opposite to be the case and in doing that, we will change some of the policies that have not helped local empowerment,” said Hope Uzodinma, chairman, Senate Committee on Customs and Excise at a stakeholders parley in Lagos recently.

Patrick Osita Chukwu, President of the Save Nigeria Freight Forwarders Association of Nigeria (SNFFIEC), believes the only way to bring cargo back to Nigerian ports is by reducing the Customs duty payable on imported vehicles and rice, and by lifting the foreign exchange restrictions imposed by the apex bank.

“If you reduce tariff, it will create a big incentive for importers. No importer wants to burn his fingers. A lot of them are moving to Cotonou now but if you reduce the tariff by half, they will all come back because the reduction will help them defray the heavy expenses they incur when they import here,” he said.

Reducing Nigeria’s Customs duties on select import items to the level charged by other countries in the West and Central African sub-region will not only help in reducing smuggling through the land borders, it will also return the era of boom at our seaports and boost government revenue through the Nigeria Customs Service (NCS).

Uzoamaka Anagor-Ewuzie