2016: A Forgetful Year for the Maritime Sector

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Eromosele Abiodun writes that 2016 was a very difficult year for stakeholders in the maritime sector and to avoid a repeat of the turmoil experienced, the federal government must address inconsistent policies and high customs duties, among others impediments to the sector’s growth

If there is a year all stakeholders in the Nigerian maritime sector would never want to see again or remember, that year is certainly 2016. Everything that had to go wrong went wrong in the sector with even the biggest players laying off over 50 per cent of their staff members.
The year started with the foreign exchange crisis and the hangover from the ban on 41 items from the official foreign exchange window. While importers, shipping companies and terminal operators waited endlessly for things to improve, it never did.

As a matter of fact, things went downhill. The situation would have been better if the federal government had an idea how important the port is for the nation’s economy. However, it was not all bad news. On July 13 this year, President Muhammadu Buhari appointed the former Chief of Staff to the Kaduna State Governor, Mallam Nasir el-Rufai, Ms HAdiza Bala-Usman as the new Managing Director of the Nigerian Ports Authority (NPA). Her appointment brought some respite to the industry following her effort to carry out the needed reforms in both the NPA and the industry as a whole. Her efforts could, however, not enough to correct years of bad trade policies.

During the year under review, seaport operations in Nigeria was 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. The ports also suffered from the restriction of 41 items from accessing the official foreign exchange window by the Central Bank of Nigeria (CBN).

Signals that signposted that Nigeria was on a journey to recession came early in 2016 when 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 first time in the last seven years. The bureau attributed the decline in the first quarter activity to a sharp drop in both import and export trade.

Also, data at the NPA showed that 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.

The statistics also showed that a total of 3,347 ocean-going vessels have called Nigeria so far this year, estimated at about 100,152,274 metric tons. 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 blames FG
Experts blamed the drop in cargo volume and huge loss of revenue by port and terminal operators on the anti-trade policies of the federal government. These policies have also made the country unattractive to investors.
For instance, the National President, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero said the current hike in import duty on vehicles in 2014/2015 from 10 per cent to 35 per cent with an additional surcharge of 35 per cent, bringing the total tariff to 70 per cent, has negatively impacted operations at the port and led to massive revenue and job loss.

He said the arbitrary import duty hike led to 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.
According to him, the reduction of activities by 70 per cent 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 per cent of their vehicle cargo as a result of this hike, which has done more harm than good to the economy. It has promoted smuggling and led to huge loss of government and private sector revenue to the advantage of the ports of neighbouring countries. It is estimated that no fewer than 5,000 jobs and about N30 billion is lost annually to the policy.

Investigations also show that break bulk terminals at the ports are struggling to pay their bills and meet their financial obligations to the NPA due to the plethora of banned products and the hike on import duties on others. For instance, the hike in import duty on rice, the restriction imposed on the importation of fish and on cement are all taking a huge toll on the income of the break bulk terminals as their revenue has dipped by over 60 per cent. The imposition of 100 per cent import duty on rice and an additional 10 per cent levy have had the most debilitating effect on the break bulk terminals as handling of rice cargo accounts for more than half of their revenue.
The restriction of 41 items from the CBN foreign exchange window has also taken a huge toll on port operations.

On his part, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI), Vincent Nwani, said: “There must be an urgent review of the CBN’s policy on the restriction of access to foreign exchange placed on 41 items, 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 of the items.”

LCCI and the Manufacturers Association of Nigeria (MAN) said the decision is hurting the manufacturing sector in such a way that could no longer be ignored, having led to the closure of many companies and relocation of others from Nigeria to Ghana and other neighbouring countries.
The development, they added, has also led to drastic reduction in the volume of cargoes handled at Nigerian ports, with affected port terminals losing about 60 per cent of their cargoes to the CBN restriction policy.

The Chairman, Senate Committee on Customs and Excise, Senator Hope Uzodinma recently said the upper legislative chamber would review some of the country’s trade policies including the contentious hike in tariff of some imported goods.
Uzodinma agreed that most of the country’s policies are anti-trade, favouring only neighbouring countries. He said 85 per cent of cargoes landed in Cotonou Port, Benin Republic, find their way into the Nigerian market.

“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,” Uzodinma told stakeholders in Lagos at a recent parley.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the drop in imports is directly related to the CBN foreign exchange policy, which he said needs to be reviewed.
A clearing agent and member of the Association of Nigerian Licensed Customs Agents (ANLCA), Mr. Dom Obi blamed the present government for not reviewing the anti-trade policies of the past administration. He argued that until government revisits the policies, the trend will continue and the impact on the ports would become progressively worse.

President of the Save Nigeria Freight Forwarders Association of Nigeria (SNFFIEC), Mr. Patrick Osita Chukwu, 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.

He added, “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).”

CEMA Review
Another major development in the industry last year was the move by the Nigeria Customs Service (NCS) to amend the Customs and Excise Management Act (CEMA).
The NCS had in August last year presented the draft bill for amendment of the CEMA to maritime industry stakeholders for observation and input before submission to the National Assembly for consideration and passage. The CEMA is the principal law guiding the Administration of Customs and Excise in Nigeria.

It is divided in to 13 parts, spanning 195 Sections and 3 Schedules. Section 37 – 5 deals specifically with Duty on Imported goods, Relief from duty of goods entered for transit or trans shipment; Relief from duty of goods temporarily imported, Exempt from goods and goods delivered free of duty; Valuation of imported goods for purpose of ad valorem duties among others. This is not the first time effort has been made to review CEMA.

In 2010, the federal government forwarded a bill to the National Assembly requesting that the lawmakers repeal and re enact the CEMA 2004 as well as repeal the existing Destination Inspection Act 2003 to allow Nigeria Customs Service take over all obligations of the Federal Ministry of Finance and the CBN under the Act. At that time, there were indication that the National Assembly tinkered with the Customs CEMA in order to make it more proactive to meet the challenges of a modern day customs service. This, the lawmakers said, became necessary after it was discovered that some of the conditions adopted by the CEMA to deter crimes especially via fines were no longer relevant or stringent enough to deter such crimes.

However, key stakeholders in the maritime industry unanimously kicked against Section 5 of the draft bill which suggests that the Comptroller General of Customs be made Chairman of the Board of Customs.
This, they argued, is against the previous provision which gives the position to the Minister of Finance.

Those who kicked against Customs Controller General chairing the board at a stakeholders meeting in Lagos included: the M ANled by its president, Mr. Frank Jacobs Udemba, the Nigerian Maritime Administration and Safety Agency (NIMASA) represented by Mr. Momoh Alhassan, the LCCI represented by Mrs Julie Ogboru and Association of Nigerian Licensed Customs Agents (ANLCA) led by Mr. Olayiwola Shittu.
Others are: the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN), Association of Maritime Truck Owners (AMARTO) as well as many private organisations and individuals.

Ending Smuggling
During the year under review, the NCS made some effort to tackle smuggling with their effort leading to loss of lives.
The Comptroller General of the NCS, Col Hamid Ali (rtd.) had in a chat with news men lamented how the Service lost 70 of its officers in various battles with smugglers along Nigeria’s border with Benin Republic.

He solicited the corporation of Customs in Benin Republic, as well as its stakeholders to partner Nigeria in the fight against smuggling.

According to him, the biggest problem confronting Nigeria Customs service till date is the lack of compliance on the part of traders, who make dishonest declarations.
Ali, emphasised the fact that borders are imaginary as far as ECOWAS is concerned, stressing that the Benin Republic Customs administration must work hard to ensure that trade between both countries are without unnecessary hindrances.

He further charged both customs services to cooperate and forge an understanding to move goods and services seamlessly among countries in West Africa.
The Customs CG also reiterated the need to review existing MoUs and agreements, with a view to bringing them in conformity with internationally accepted standards in trade, between countries.

He emphasised that both countries must address issues of dumping and smuggling across borders.
He also promised to bring up the challenges for discussion, especially that of the commonly traded items like rice, vehicles, and find solutions to the numerous complaints made to the embassy and also, arising from other stakeholders meetings held earlier.

He advised that everybody involved in the business of trading across West African countries must read the ETLS protocol and understand the laws as it affects their trade, and challenge Customs whenever they feel marginalised.

Also speaking on the matter, National President of ANLCA, Shittu drew the attention of the CGC to the expensive nature of doing business across the Benin-Nigeria border.
In his words: “Cost of transiting ETLS (ECOWAS Goods) from Ghana to Lagos needs to be checked to provide room for trade facilitation and trade competitions within the west African sub region. That is, a truck of ETLS cargo from Ghana pays 300,000cfa to exit Ghana into Togo and pays 400,000cfa to exit Togo into Benin Republic. The same truck will be charged 2,800,000cfa to ext Benin Republic into Nigeria, for reasons best known to Benin Republic Customs.”

Shittu said the multiplicity of security agencies are further aggravating the expenses incurred in transiting cargoes across the borders, demanding a review of these agencies downwards.
Shittu pleaded with the CGC to intervene on the exchange rate and the increase in import duty.
He said imports are drying up fast because of the unfriendly policy and it is robbing government of much needed revenue and threatening thousands of jobs.

On the issue of DTI closures, the ANLCA President urged the CGC to hasten the process of allocating passwords to 2016 renewed Customs licenses, as most jobs have been left hanging with the abrupt shutdown again of commercial DTIs.
He said that the private DTIs will ensure that particular licenses are immediately held responsible, whenever infractions occur.

On his part, Rice Millers Association’s leader Alhaja Karamatou Ibironke demanded to know the legal conditions for the exportation of rice to Nigeria so that they can abide by it.
Also speaking, Chief Alaba Lawson-Chairperson of NACCIMA, Ogun State branch, wondered how rice gets into Nigeria massively despite its ban through land borders, urging Customs to do more to curtail the trend or find a way to accommodate it, in order to generate revenue for the government.

Prohibition of Vehicle Importation
The 2016 ended with federal government announcing the prohibition of importation of vehicles, new and old, through land borders.
This was contained in a statement issued by the NCS Public Relations Officer, Mr. Wale Adeniyi.
The statement said there was a presidential directive restricting all vehicle imports to Nigeria Sea Ports only, adding that the order would take effect from January 1, 2017.
According to him, “The restriction on importation of vehicles follows that of rice, whose imports have been banned through the land borders since April 2016. Importers of vehicles through the land borders are requested to utilise the grace period up till December 31, 2016 to clear their vehicle imports landed in neighbouring ports.”

The government was said to have, with this restriction, acceded to one of the requests made by Nigerian Automotive Manufacturers Association (NAMA) to ease their operations.
The Chairman of NAMA, Mr. Tokunbo Aromolaran had before the announcement stated that manufacturing has been tough in this environment for the reason that specific attention has not been paid to “our own peculiarities.

All the people that we compete against operate in an environment that makes it easy for them to access the things they need to put together to add value to their various environment, but here, you have to build your own power station, roads, water system, coming through the port is a hell, inflation affects us too, at 21 per cent, and when you put all these together, the cost of production is naturally higher.”

Aromolaran, who is the Managing Director of VON Automobiles Limited, said if the government wants to encourage the auto sector then “there should be preferential policies to ensure that people, who are getting Nigerians employed and assisting to put food on the table in millions of homes, should be encouraged to grow and grow faster. When they get past that threshold, then they can compete with anybody. Now, we are not able to compete and that is why it is easier to import. For those who prefer to import, it is easy business. Nigerians are suffering; we are seeing people working in other countries while our own people are walking in the streets.”

He said if not that VON was strong enough they would have been down-sizing by now because, “there is no business. But we have taken a stance that we will keep our workers because we have spent millions training them and it does not make sense to invest in people and let them go.”

He said: “Right now, we are bleeding. That is why working in manufacturing in this country right now is not the best situation you can have. We are hoping that government looks at the policy again that surrounds manufacturing, let’s have some preferential interest rates, let’s look at the foreign exchange allocation to allocate to sectors that generate something back for the country. We spend a lot of money paying for invisibles, most of our dollars pay for things nobody sees, and if they are not there we wouldn’t miss a thing. But there are those things that add value to us and if we can look at our policies again and redirect them, Nigeria will be better for it.”

FG’s agencies
The economic downturn in the country also affected federal government agencies in the maritime sector as they struggled for funds to address their core functions.
This was as a result of terminal operators and shipping companies’ failure to meet their dollar obligations to the agencies as a result of the foreign exchange crisis.

The economic recession officially confirmed during the year led to a 51 per cent decline in revenue for operators.
The federal government agencies affected include: NIMASA, the NPA and the Nigerian Shippers Council (NSC).

In a chat with THISDAY, Chairman, Seaport Terminal Operators Association of Nigeria (STOAN), Dr Vicky Haastrup told THISDAY that terminal operators were not able to remit their dollar obligations to the NPA because they ddi not generate enough dollars because of the government policies that has slowed down activity in the sector.

She said the decision by the government to exclude 42 items from access to foreign exchange led to a 57 per cent decline in activity in her company adding that others like APMT are worse hit.

According to her, “Every segment of port operations was affected by the exchange rate crisis. Ten years ago when the ports were consessioned, the naira was exchanging for N125 to a dollar. Today the exchange rate is N473 or N490 in the parallel market. We just have to use the parallel market because government does not have the capacity to fulfil demands for the dollar so the fallback position is the black market. For terminal operators, we don’t generate enough foreign exchange to sort ourselves out. Don’t forget we have the lease fees to pay, we pay royalties in dollars and at the end of the day we do not generate enough income to be able to pay those dollar obligations to the government.

“What do we do? We go to the black market and at what exchange rate? Our equipments are procured in dollars; there are so many things we do that require the green back. Even our customers whose services are done in dollars, there fallback position is the black market. Everybody is bleeding, the ports operators, importers; the NPA is also bleeding because it is difficult for us to meet our obligation to the NPA now. We have to go to the black market to exchange dollars to be able to pay the NPA. Government indirectly is also bleeding. Government needs to invite all stakeholders for discussions, we need to talk about this and make suggestions to government how it can work.”

The Director-General of NIMASA, Dr. Dakuku Peterside also confirmed the development in a meeting with members of the League of Maritime Editors and Publishers in his office.
Peterside said specifically that NIMASA’s revenue was 51 per cent down, a situation attributed to the hard economic times facing country.

Although the DG did not give further elaboration on how the economic recession affected the agency’s revenue, he gave a clear indication that the economic recession did not spare the sector adjudged as next to oil in terms of revenue generation to the national economy.
However, Peterside attributed the economic recession to the way things were done in the past, adding that the effect was beginning to show on the economy.

“We were living in borrowed times and resources in the past, now we are beginning to face the stark reality”, he said, adding that this situation would take time to adjust.
Peterside, however, assured that despite the hard times, the management team of NIMASA would do everything within their powers to ensure that the core functions of the agency do not suffer.