Concerns over Rising Port Charges

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Eromosele Abiodun examines stakeholders’ call on the federal government to put in place measures to reduce port charges and improve the ease of doing business at the nation’s seaports

Last year, Nigeria’s leading accounting firm, Akintola Williams Deloitte, in a report, blamed the high cost of doing business at the nation’s seaports on the Nigeria Customs Service (NCS) and other government agencies, claiming that Customs processes are responsible for not less than 82.1 per cent of the charges incurred by consignees.

The report was titled: “Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study.”

Akintola Williams Deloitte stated that its value chain analysis of a 20-foot container laden with cargo worth N36.42 million ($100,000) imported into Nigeria from China, revealed that about N6.5 million would be required to clear and transport the container out of the port.

Of this amount, it said about N5.3 million (representing 82.1 per cent) is paid to the NCS as Import Duty, Comprehensive Import Supervision Scheme (CISS), ECOWAS Trade Liberalisation Scheme (ETLS), Port Development Surcharge and Value Added Tax (VAT).

According to the report, other actors in the value chain include: Shipping Companies, Nigerian Ports Authority (NPA), Terminal Operators, Clearing Companies and Haulage Services providers.

It said shipping companies are responsible for 13.8 per cent of the port cost (N897,000); terminal operators 1.8 per cent (N117,000); Customs 82.1 per cent (N5.3million); transporters 1.1 per cent (N71,500) and clearing agents (N78,000).

According to the report, “The value chain of a typical container terminal operation begins with the shipment of the goods through a shipping line to the host country. The consignee pays the freight charges for the shipping as well as the container deposit fees. Demurrage charges may apply where the consignee fails to return the containers on time.

“Upon arrival of the container at the Nigeria port, the Consignees pays terminal handling charges, storage charges, delivery charges and customs examination charges to the terminal operators. In addition, the consignees also pay the relevant customs import duty. Consignees pay for logistics services to get the goods out of the terminal. Consignees pay for the services of the clearing agents (where applicable). Large companies are directly responsible for clearing their goods.”

Notwithstanding their huge investment and meager earnings, the report stated that terminal operators bear the burden of most of the challenges at the port.

“Terminal operators face huge challenges in the area of storage as the terminals are used as “cheap storage warehouse alternatives” by cargo owners.

Meanwhile, there are many questions as to why or what is responsible for the high port charges across the nation’s sea ports. While some said shipping companies deliberately rip Nigerians off, others believe government over the years has failed to do what is necessary to avert unnecessary charges that drive business away from the ports.

Expert’s Views

Experts believe the government is to blame because it has failed to put the right policies in place. Managing Director and Chief Executive Officer of Cowry Asset, Mr. Johnson Chukwu said 65 per cent of the cargoes coming to West Africa are destined to Nigeria but only 30 per cent of the cargoes are discharged in Nigeria because of high import charges, bad port roads and rarity of port infrastructure to facility trade.

In his keynote address on ‘Port Charges: How Plausible,’ at the first national conference of Shipping Correspondents Association of Nigeria (SCAN), in Lagos, Chukwu wondered why Nigeria should allow Cote d’Ivoire to build the largest seaport in Africa when a larger chunk of cargoes are destined to Nigeria.

According to him, right now, Nigeria is rated the largest supplier and manufacturer of cement but there is no singular effort to have facilities to export the product.

He warned that if the common ECOWAS tariff is fully implemented, Nigeria will lose business because the common ECOWAS tariff means that once a tariff is paid in one country, no other tariff will be paid in any other country in West Africa.

To this end, he absolved the shipping companies and terminal operators of the high charges because having faced a lot of infrastructural challenges which impact negatively on their business, it makes some business sense if they hike charges to recover their expenses.

“We do not have enough infrastructure to handle the volume of cargoes we receive. Sixty per cent of the cargoes coming to West Africa are destined to Nigeria. But only 30 per cent of the cargoes are discharged in Nigeria. If 60 per cent cargoes are destined to Nigeria, why should we allow Cote d’Ívoire to build the largest seaport? The shorter the value chain the lower the cost,” he said.

Why NIMASA Imposes Levies

But the Director General of Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Dakuku Peterside, said that the Federal Government of Nigeria official gazette no 158 Marine Environment Management (sea protection levy) Regulation 2012 empowers NIMASA to impose levies on all commercially operating vessels of 100 GT and above in Nigerian waters.

Peterside, who spoke through the Head Shipping Development, Mr. Ogadi Anthony, said that the agency introduced the Marine Environment Sea Protection Levy (SPL)via the Marine Notice dated August 9, 2012.

The Sea Protection Levy (SPL) is to be paid by all commercially operating vessels of 100 GT and above in Nigerian waters and also on all potential oil polluters, installations and pipelines.

In her remarks, the Managing Director, Nigerian Ports Authority (NPA), Hadiza Bala-Usman, assured stakeholders that the authority is working hard to create a level playing ground for all operators, urging stakeholders that all hands must be on deck to improve port efficiency and competitiveness.

Bala-Usman, who was represented by the Manager, Audit, Sarah Oghomienor, said: “We have been working hard to ensure operational efficiency and effectiveness at the ports. It is not only the port charges that is so depressive, it is the entire system, the infrastructure, the roads, the insurance, among others are culminating to the higher cost. I think the onus lies on all of us. Its our responsibility, we should go to any length to ensure that we all benefit from the industry. We at NPA are working relentlessly to ensure that it is a win-win situation for all stakeholders,”

She urged the media to support the reforms in the industry and celebrate the innovations just as they highlight the challenges.

MAN Blames Shipping Companies

However, local manufacturers and other industry operators decried the high cost of clearing cargoes at Nigerian seaports, describing it as a cankerworm that has forced so many companies into extinction.

The stakeholders, including the Manufacturers Association of Nigeria (MAN) and National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACIMMA), Association Of Nigerian Licensed Customs Agents (ANCLA) and National Association of Government Approved Freight Forwarders (NAGAFF), among others who gathered at the maritime industry summit in Lagos, bemoaned the effect of high port charges on the survival of their businesses.

President, MAN, Frank Udemba Jacobs, said port charges are major source of worry for the manufacturers and it has contributed to high cost of production. Jacobs therefore called for reasonable ports charges.

Jacobs, who was represented by Niran Olajobi, bemoaned the deplorable of ports access roads and the gridlock, which has contributed to the charges, urging government to immediately fix the roads.

President, NACIMMA, Mrs. Alaba Lawson, however, commended the federal government on the initiatives of the Presidential Enabling Business Environment Council (PEBEC) for its action plan aimed at creating enabling environment and easy movement of goods across borders, calling for full implementation of the action plan.

Speaking on the theme: “Port Charges: How Plausible?” she said: “Delay in clearance of cargoes at Nigerian ports still persist despite PEBEC’s intervention which is a far cry from what is practicable in other African ports such as Ghana and Benin republic. The ports have a low level automation, data base and integrated process system. We urge government to put in place more effectively strategies to improve the overall efficiency at the ports and reduce the cost of doing business at ports to make Nigerian ports a hub for international freights and trade.”

Vice President ANCLA, Kayode Farinto, said the high cost at the seaports is ridiculous, very high and it is killing the industry.

“In fact we should commend the importers that are still bringing their cargoes through our ports. They deserve an award,” he said.

He called on the NPA to facilitate the review of the concession agreement in other tackle the issue of arbitrary increase of prices by the terminal operators, due to foreign exchange and other bottlenecks.

Farinto said, while Nigerian charges are going up, the neighbouring countries are busy reducing their charges, hence, the lost of cargoes to those ports.

On his part, Executive Secretary, Nigerian Shippers’ Council (NSC), Hassan Bello, said there should be commensurable service to the costs and anything less is unacceptable.

Bello, who was represented by Ignatius Nweke, pledged that the NSC would continue to do its best to make Nigerian ports efficient, effective and attractive.

Stakeholders’ Resolve

At the end of the summit, stakeholders agreed that charges in Nigerian port is ridiculous, very high, contributing to cost of production and it is killing the industries.

In a communiqué released at the end of the summit, they agreed that: “Government should put in place strategies to reduce the cost and improve on the ease of doing business at the nation’s seaports. That all hands must be on deck to improve on ports efficiency and competitiveness. That there should be a commensurate service to the costs, and anything less is unacceptable.”

They pointed out that so many factors are contributing to high cost of doing business at the ports, which includes, insurance, poor cargo clearing process and deplorable ports access roads among others.

They therefore, called on the government to immediately fix the port access roads, create alternative routes and adopt intermodal transport to ensure easy movement of cargoes in and out of the seaports.

“The NPA should facilitate the review of Ports Concession Agreements, so as to be able to solve the foreign exchange and other bottlenecks hindering the operations of terminal operators. Neighbouring countries are reducing costs, while Nigerian costs keep rising and making it difficult to be competitive within the sub-region.

Lagos ports, the communiqué read, have remained the most viable port in Nigeria because, “we have refused to open up other ports in Calabar, Warri, Port Harcourt to decongest Lagos port. Government and stakeholders should facilitate the establishment and construction of new deep seaports across the country.

“There is need for automation of cargo clearing process in other to reduce human interface and corrupt practices at seaports. The capitalist system reigning at the ports should be immediately checked.”