Maximising Revenue Generation from Shipping

19 Feb 2012

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Vessels in Apapa Port

Industry stakeholders are of the view that revenue from the shipping industry could triple with stricter measures enforced on the collection of import duties and other dues on petroleum products. Stakeholders also want government to set revenue targets for other government parastatals in the industry in order to maximise revenue generation from the shipping sector, Francis Ugwoke reports

The fuel subsidy protest, without doubt, resulted in huge economic losses, but it may have turned out to be a blessing in disguise after all. This is when taking into consideration the billions that were lost for the six days of the strike. Former president of the Nigerian Bar Association, and human rights activist, Olisa Agbakoba was the first to state that the government could generate as much as it has been spending in subsidising fuel from the shipping sector alone. Agbakoba was reported to have said that government could generate N1.4 trillion in addition to what is being realised currently in the shipping industry if revenue sources were well harnessed.  

Industry stakeholders who also spoke on improved revenue generation from shipping maintained that revenue generation from the industry could double, if not triple with the strict enforcement of statutory provisions on duties, with emphasis on zero tolerance for corruption, taxes, and revenue targets set for parastatals in the sector.
Money Spinners in Shipping

In the nation's shipping industry, sources of revenue generation for the federal government include import duties collected by the Nigeria Customs Service.  For the Nigeria Ports Authority, revenue sources include fees paid by the concessionaires handling terminal operations in the ports, shipping and harbour dues, as well as rent from its estates, among others.

With respect to the Nigerian Maritime Administration and Safety Agency, the organisation collects three per cent from all vessels coming to do business in the nation's territorial waters while the National Agency    for Food and Drug Administration Control and Standard Organisations of Nigeria also generate revenue from the ports through various levies imposed on importers. 

However, the fuel subsidy protest and the current probe by the National Assembly have revealed that the nation has been losing so much in terms of duties that should have been paid by importers of wet cargo in the petroleum industry.

The Nigeria Customs Service, during the House of Representatives committee probe on the subsidy scheme, revealed that a circular had stopped it from inspecting petroleum products and also collecting import duties on them. Deputy Comptroller-General of Customs, Mr. Julius Nwagwu told the ad hoc committee that the circular came from the Central Bank of Nigeria and the Ministry of Finance.

The Central Bank had in turn disagreed with the Customs Service over the source of the circular that prohibited its personnel from inspecting petroleum products on ships and collecting revenue on them. The deputy governor, Operations, of the CBN, Mr. Tunde Lemo, penultimate Tuesday, denied the allegation made by the Customs Service. But Lemo was reported to have admitted that the circular in question was issued by a secretariat set up by the CBN. But NCS had countered, insisting that CBN could not wash its hands off from the controversial circular since it had links with the secretariat which issued the circular.  

From the foregoing, industry stakeholders were of the view that the Customs Service would no longer have to obey the directive stopping it from inspecting wet cargo ships and the collection of duties from such vessels. Nonetheless, it was gathered that NCS is not the only organisation losing revenue accruable from wet cargo vessels. It was revealed NIMASA has also not been able to collect tonnage dues from ships conveying petroleum products. This was revealed during the same public hearing and confirmed by a senior official of the agency who did not want to be named.

Enforcing Statutory Rights

Industry stakeholders who spoke to THISDAY said that the revelations coming from the fuel subsidy probe were surprising. They, however, contend that when the issues are addressed, revenue from the shipping sector can grow multiple-fold. Maritime lawyer, Mr. Emma Ofomata told THISDAY that the federal government should intervene in the matter. He said the attempt by CBN to distance itself from the issuance of the directive was enough for NCS to disregard it and now begin to perform its statutory functions as provided by law.

“In the first place, stopping customs from carrying out inspection and collection of import duties is unfortunate, and you can imagine the billions of naira that the nation must have lost as a result,” he said. He called on the management of the Customs Service to rise to the challenges of performing its statutory functions by jump-starting collection of revenue from oil imports.

“The Customs Service has the statutory power to collect duties on imported goods except such items enjoy duty waivers. Petroleum products do not fall into such category, so I expect the NCS to now enforce its rights, and this will help in boosting revenue from the shipping industry,” he said.

Ofomata also called on the management of NIMASA to enforce its statutory rights to collect dues from ships bringing petroleum products into the country. He expressed dismay over the huge revenue lost by the country in the area of wet cargo shipments, adding that such revenue may run into hundreds of billions of naira annually. According to him, the revenue accruing from importation of petroleum products could double the current revenue being collected by the Customs Service.
He called on the government to muster the political will to ensure that collectible revenues, especially revenue arising from petroleum products is not lost. “The Ministers of Finance, Petroleum and Transport should issue a circular directing that all ships must pay necessary duties and dues to both the Customs and NIMASA. By that circular, no importer or ship owner bringing petroleum products into the country will evade payment of duties and dues,” Ofomata said.

Setting Targets

Other industry stakeholders who spoke to THISDAY on how to increase revenue from the shipping sector said the best option is to set revenue targets for parastatals in the industry. NCS last year generated about N800 billion, from a target of N600 billion it had set for itself for the year. This year, government had given NCS a target of about N850 billion. But the Customs Service jacked this up to a target of N1 trillion. 

Maritime lawyer, Mr. Fred Akokhia told THISDAY that it is sad to learn that Customs and NIMASA have not been collecting import duties and dues from ships importing wet cargo into the country. He said that  with the revelation, it was time for the  management of the two organisations  to wake up to  their responsibilities, adding that from all indications, what has been lost as a result may have run into trillions.

He was of the view that collection of such import duties and dues will boost the nation's economy because of the increasing number of ships bringing in petroleum products into the country. Akokhia also expressed optimism that the NCS will be in a position to generate revenue far above its N1 trillion target once import duties on petroleum products are paid by importers.

Similarly, president of National Association of Government Approved Freight Forwarder, Mr. Eugene Nweke said that the target set by the Customs Service is achievable. He said, “The Customs Service is capable of realising the target it had set for itself for this year. It can even surpass that target.” But  Nweke  added that  there are other agencies of government that should be given revenue targets in the sector.

He was of the view that agencies like NPA, NIMASA, SON and NAFDAC should all be given revenue targets. He argued that government will be surprised if it sets target for the organisations and insists that such targets must be met. He suggested a revenue target of N800 billion for NIMASA while for NPA N450 billion was suggested. Last year, the budgets of both organisations were between N132 billion and N140 billion respectivvely. NIMASA disclosed recently that its revenue for last year increased by 18 per cent, but the agency did not state what the figure was.

Nweke said that with the revelations that the Customs Service has not been collecting duties on imported petroleum products, government should intervene to change the trend. He said once NCS starts collecting duties on petroleum products, its revenue will exceed the N1trillion target it has set for itself. He added that the same was applicable to NIMASA. According to him, NIMASA is in a position to collect at least N800 billion if ships are made to pay the necessary dues.

“NIMASA is being paid 3% of cost of tonnage for ships bringing goods into the country. If NIMASA collects dues from ships importing petroleum products, the revenue will multiply,” he said. Nweke also called on the federal government to set revenue targets for SON and NAFDAC since they collect various charges on imports.

Checking Fraud

Another avenue for maximising revenue, according to industry stakeholders is for the Customs Service to continue to improve on the welfare of its personnel to discourage them from succumbing to inducement from importers and customs agents. A top freight forwarder who pleaded anonymity said Customs Service personnel should insist on enforcing all regulations guiding imports, adding that this will eliminate such malpractices as concealment, under-declaration and under-valuation. 

He was of the view that such malpractises will come to an end once customs officers at the ports and border stations stop accepting bribes in exchange for low duties when giving Debit Notes (DN) to importers. He said with this, revenue generation from import duties would exceed the targets set by the agencies and government.   

Tags: Business, Featured, Nigeria, Shipping

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