How Maritime Fared in Q1

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 Eromosele Abiodun writes that the first quarter of this year was quite challenging for stakeholders in the maritime sector

A top global accounting and audit firm, Deloitte, recently published a report on the maritime sector highlighting several problems bedeviling the sector.

The report amongst others revealed that Terminal Handling Charges (THC), which is the main revenue stream of terminal operators, declined by 22.4 per cent between 2006 and 2016 as a result of depreciation of the naira and inflation.

The report revealed that at the beginning of port concession in 2006, THC collected by the operators stood at $232 per TEU but declined to $180 per TEU by 2016.

According to Deloitte, “The THC is the main source of revenue for the Terminal Operators. This is the payment received from transferring cargo from ship/quay side to the yard for release to clearing agents/customers.”

According to the report titled: “Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study,” during the same period between 2006 and 2016, the terminal operators business was adversely impacted by the rise in Consumer Price Index (CPI)/inflation, with the CPI Nigeria rising to over 177 per cent since 2006. It said foreign exchange (FX) fluctuation also impacted the value of the THC with over 224 per cent FX depreciation between 2006 and 2016.”

The report, which was released by Deloitte Nigeria’s Director of Strategy and Operations, Bola Asiru; Senior Manager, Oladotun Bamigbetan and two others, stated that if the terminal operators were to adjust the THC yearly in line with changes in foreign exchange and Nigerian CPI , the rate should have increased to N185,112 per TEU.

“In real economic terms, the operators are losing revenue by not adjusting their THC in line with market realities,” Deloitte stated.

The firm said the foreign exchange challenges that Nigeria faces as a result of the fall in global oil prices is further pronounced for terminal operators as a large part of their capex (capital expenditure) and operational costs are in United States Dollars. It said the operators’ dollar denominated costs includes equipment acquisition and maintenance costs and payment of lease fees to the Nigerian Ports Authority (NPA).  That has been the story of the sector since the beginning of the year.

 Apart from the Nigerian Customs Service (NCS) who has managed to record some achievements in terms of revenue collections, other players in the industry have had one or two negative stories to tell. From terminal operators, customs agents and government agencies and regulators, it’s been lamentations and cry for government to review some of the policies that has driven cargo away from the Nigeria ports.

 

Controversy Galore

While operators were wailing, the NCS was swimming in controversy. It started the year with the ban on the importation of vehicles via the land borders and ended the first quarter with the controversial directive by the Comptroller General of the NCS, Col Hameed Ali (rtd) that all vehicles in the country whose customs duties have not been paid, to do so.

The service had advised all motor dealers and private owners of such vehicles to visit the nearest Customs zonal office to pay the appropriate duty on them.

The NCS in a statement signed by its acting Public Relations Officer, Mr. Joseph Attah, said the four zonal offices of the Nigeria Customs Service are: Zone A Headquarters, , Yaba, Lagos; Zone B Headquarters, Kabala Doki, Kaduna; Zone C Headquarters, Nigeria Ports Authority, Port Harcourt; and Zone D Headquarters, Yelwa Tudu Road, Bauchi State.

“The CGC therefore calls on all persons in possession of such vehicles to take advantage of the grace period to pay appropriate duties on them, as there will be an aggressive anti-smuggling operation to seize, as well as prosecute owners of such smuggled vehicles after the deadline of Wednesday 12th April, 2017.

“For the avoidance of doubt, all private car owners who are not sure of the authenticity of their vehicles’ customs documents can also approach the zonal offices to verify their status with a view to complying with the provision of the law,” the statement concluded.

But in a swift reaction, the Senate ordered the NCS to, henceforth, halt the order directing all vehicle owners to verify the payment of their vehicles’ customs duties within one month.

The upper legislative chamber therefore ordered the agency to suspend the directive until it has duly appeared before the Senate to brief it on the rationale behind the move.

Raising under Order 42 of the Senate Standing Rules, Deputy Majority Leader, Bala Ibn Na’Allah, who described the NCS circular as ridiculous, said the agency failed to present a clear-cut guidelines on which category of vehicles would be affected by the directive.

According to Na’Allah, the implementation of such ambiguous circular will create a huge discomfort for innocent Nigerians, bearing in mind that it has already caused significant anxiety among citizens.

Against this background, the Senate ordered the NCS to suspend all moves towards implementing the directive and also resolved to engage the Service with a view to ensuring that it comes up with acceptable policies to Nigerians in a typical democratic setting.

“Mr. president, the basis for being here as parliamentarians is to define the rule of engagement between us and those who elected us into this very, very coveted office, to the effect that we would all swear to uphold, protect and defend the Constitution of the Federal Republic of Nigeria and the law. We already have an existing law called the NCS,” he said.

While describing the directive as ridiculous, Na’Allah challenged his colleagues to uphold the oath they swore to by resisting any obnoxious policy meant to further complicate life for the already troubled Nigerians.

Supporting the motion, Deputy Senate President Ike Ekweremadu highlighted the excesses and outrageous policies of NCS as he recalled how the Senate had adopted a motion decrying the harassment of traders in Sango-Otta, Ogun State, by men of the Customs who violently took away purchased items from the market under the guise of non-payment of appropriate customs duties.

He said it was unfortunate that the Senate was yet considering another outrageous move of the agency which he said was attempting to foist illegality on the citizenry in its drive to generate more revenues.

He also said the NCS lacked the power to impose punishment on Nigerians over deeds committed in the past, arguing that even though the constitution vests the National Assembly with the power to make laws for the federation, the legislative institution does not possess the power to impose penalty on anyone over perceived wrongs of the past and much less a mere agency like the NCS.

 

Cheering News?

Perhaps the most cheering news for stakeholders in the maritime sector was the report that the federal government had indicated its readiness to lift the forex ban it placed on some 41 items in 2015. Finance Minister Kemi Adeosun, had in the 2017 Fiscal Policy Roadmap, said Federal Government “will replace administrative measures on list of 41 items with fiscal measures to reduce demand pressure in the parallel market.

Reacting to the news, the National Association of Government Approved Freight Forwarders (NAGAFF) lauded the federal government’s plans to lift foreign exchange restriction on 41 imported items. Mr. Stanley Ezenga, the National Publicity Secretary of the association, gave the commendation in an interview with newsmen in Lagos.

Ezenga said that the plan would boost importation activities at the nation’s ports. He said that lifting of ban on the items would not solve the declining value of the naira, urging government to come up with a more result-oriented forex policy.

“The plan by the government to lift foreign exchange restriction on some 41 imported items is good news for import. “We can now have more import activities at the ports and the various jobs lost to the restriction can now come back. However, the unbanning alone will not solve the problem of the naira. Government should come with a more workable policy to boost value of the naira,“ Ezenga said. He said that freight forwarders had lost 50 per cent jobs to the restriction, hoping that the lifting would address the situation.

 

NIMASA ISPS Code Implementation

Another major development in the industry in the first quarter of the year was the move by the Nigerian Maritime Administration and Safety Agency (NIMASA) to enforce the International Ship and Port Facility Security (ISPS) code. As part of the measures to get operators to comply, it shut three jetties and port facilities for non-compliance with the provisions of the ISPS code. NIMASA in a statement said the decision is pursuant to its mandate as the Designated Authority (DA) for the implementation Code in Nigeria.

The facilities are: Heyden Petroleum Jetty Ijora Lagos; Waziri Jetty, Dockyard Road Apapa Lagos and Starz Marine Shipyard Limited Onne in Rivers State. These facilities, the agency stated, have persistently failed to comply with the ISPS code necessitating their closure in order to forestall a situation where security breaches in such facilities will negatively impact the compliant ones.

These closures, it added, are in exercise of the agency’s powers in line with provisions of Part VIII of the ISPS Code Implementation Regulations 2014 under which the facilities were adjudged to be non-compliant despite repeated warnings to remedy the deficiencies.

NIMASA has consistently stated its commitment to the enforcement of full compliance with the ISPS Code especially in the face of growing terrorists’ activities globally.

While hosting a pre-assessment team from the United States Coast Guard (USCG) recently, the Director General of NIMASA, Dr. Dakuku Peterside expressed the determination of the agency to enforce the code saying that, “ultimately all of us are working for a common purpose, a safer world through safety and security of the maritime sub sector. If we fix our different corners of the earth, the whole world will be safer for everybody. And so no effort should be spared in trying to guarantee safety and security.”

“All shut facilities are to remain closed until the managers of such facilities correct the identified deficiencies in line with the dictates of the Code as the Agency aims to achieve 100 per cent compliance with the cooperation of all stakeholders. This exercise is a continuous one, “it stated.