Dollarised tariffs, duties compound challenges oil sector

Amidst acute dollar scarcity, operators in the oil and gas sectors are calling on the government to review its policy to charge port duties, tariffs, and levies in foreign currency.

Nigeria’s regulatory and collection agencies such as the Nigerian Ports Authority, Nigerian Maritime Administration and Safety Agency (NIMASA), Department of Petroleum Resources (DPR) charges operators’ port duties, tariffs and levies in dollars.

As many of them are constrained by insufficient dollars from the Central Bank, the government agencies have mandated them to resort to the parallel market where rates have climbed above N490/$ thereby worsening the operating environment.

Rising from their Oil Traders Conference in Lagos, last year, downstream operators released a communiqué condemning the practice.

“Payment of charges in foreign currencies by indigenous operators to agencies like NIMASA, NPA, DPR and others should be stopped forthwith and the Naira prioritized as the means of exchange to maximize the value to ship owners and improve competitiveness at the ports.”

Restriction on local payment in foreign currency smacks of double standards. Godwin Emefiele, Central Bank governor at the end of the 2015 monetary policy Committee Meeting said it is illegal for landlords or schools proprietors to demand rents or fees in dollars.

“The official currency for doing business in Nigeria remains the Naira. Collecting rents or school fees in dollars in Nigeria is illegal. We like to advice those involved in these practices to desist from them, because CBN would very soon begin to go after them,” Emefiele warned.

Emeka Akabogu, maritime lawyer and chairman, OTL Africa Downstream, an association of downstream oil and gas operators, told BusinessDay that it has become such a serious problem at this time when the availability of foreign exchange is so limited.

“This disparity between rates proposed by government and rates which are available is wide. No one says don’t collect these levies, or duties, these are statutory dues payable but government agencies say you have to pay in foreign exchange and when it is not available they say you should pay at the open market rate if you are paying in Naira,” Akabogu said.

“The question is why we don’t have a rate which from the onset is denominated in naira terms? The situation will not arise at all if all rates payable are denominated in naira from the onset.”

Akabogu said the benefit of denominating rates in the local currency is that it helps operators make projections and plan.

Naira recorded its worst performance in history 2016 declining on average by 57.8 percent against the United States Dollar in the interbank and 84.2 per cent in the parallel in 2016.

It started the year at 199.5 to a dollar at the interbank segment and ended on December 30 at 315/$1. At the parallel market it began at 266/$1 and ended at 490/$1.

Adeoluwa Eweje, energy economist at the Centre for Petroleum, Energy Economics and Law says the action further puts pressure on the Naira as operators look for dollars in the parallel market and called for self-sufficiency in local production of petroleum products.

“Nigeria as a country should not even have any business importing petroleum products in the first place,” he said.

ISAAC ANYAOGU