AfCFTA as Threat to Nigeria’s Ports

0

Eromosele Abiodun posits that Nigeria stands to lose revenue at the seaports when signatories to the African Continental Free Trade Area ratify the pact and the common ECOWAS tariff is fully implemented

On May 18, 2017, Vice President Yemi Osinbajo signed three executive orders giving specific instructions on a number of policy issues affecting the promotion of transparency and efficiency in the business environment designed to facilitate the ease of doing business in the country.

The other two were on timely submission of annual budgetary estimates by all statutory and non-statutory agencies, including companies owned by the federal government; and support for local contents in public procurement by the federal government. While government agencies in the port have commenced moves to implement the directive, the state of the ports still leaves much to be desired.

Despite the ease of doing business initiative of the federal government, apparently to fast-track operations, major Nigerian ports have been rated among the worst in sub-Saharan Africa. Stakeholders are unanimous in their submissions that the government has failed in its responsibility to position the ports among the best in Africa, following the series of failed policies.

Also, Nigeria is said to have shallow waters a situation that scar big ships away, making it difficult for shippers to attract business.
When compared with other climes like Dubai, Singapore and Shanghai, which has world-class international ports that can handle massive containers, Nigeria’s is a joke.

Due to the poor state of the ports and inefficiency, it is estimated that the Nigerian economy lose about N250 billion to neighbouring countries in 2016 alone.
Stakeholders observed that the facilities at the ports are obsolete, begging for upgrade. They also lamented the lack of modern scanner, a situation where scanning manually at the ports had led to delays in operation.

AfCFTA, Common ECOWAS Tariff

The failure by the federal government to do the needful over the years is set to jeopardise the future of the sector as there are strong indications that Nigeria will lose massive revenue currently being generated from its seaports across the country when signatories to the African Continental Free Trade Area (AfCFTA) ratify the pact and the common Economic Community of West African States (ECOWAS) tariff is fully implemented.

If the common ECOWAS tariff is fully implemented, Nigeria will lose businesses 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.
Also, prior to ratification, signatories to the AfCFTA will be looking for more colour on the pledge that the free trade area will move 90 per cent of tariff lines to zero duty.

Analysts at FBN Quest believe though the lines in question are yet to be identified, the measure is not based upon values or tonnages, “but on the number of lines, we understand.”

Nigeria officially put off signing the framework agreement for establishing the African Continental Free Trade Area following protests by major labour unions, which warned that the deal would harm the local economy.

“The Manufacturers Association of Nigeria is reserving its judgment, and adamant that it does not have a protectionist agenda. As with an Economic Partnership Agreement (EPA) with the EU, which it declined to sign, it wants to be sure that the area serves the interest of its members.

Additionally, it fears a surge of imports from the EU through Morocco, which has signed an EPA and applied for membership of the Economic Community of West African States (ECOWAS). This application has not been welcomed with enthusiasm by some community members (including Nigeria).

“In Kigali the AU also considered a protocol on the free movement of persons and an African passport, which we understand 27 members signed. The more integration on the menu, the fewer diners at the table, “said FBN Quest.
FBN Quest believe claims by the United Nations Conference on Trade and Development (UNCTAD) that tariff removal will boost regional trade looks less exciting when we consider similar broadbrush estimates.

“UNCTAD is said to have estimated that the removal of the import tariffs would boost regional trade by one third and lift Africa’s GDP by 1% over time. This looks less exciting when we consider similar broadbrush estimates for the impact of full access to electricity and the internet right across Africa.

“It is logical for trade agreements to come before currency unions. This has been the sequence of events in the European Union, the East African Community, where the single currency remains a step too far for members, and ECOWAS, where such a project even for a handful of its members has proved a still greater challenge, “they experts.
They added that the debate post-Kigali seems to overlook the fact that Africa already boasts a currency union with harmonised trade policy.

“The Franc Zone consists of 15 African states under three separate treaties. We can disagree whether the zone has been a developmental success although we may conclude that results have been mixed since its members have generally supported AfCFTA, “they added.
A statement released by the presidency had announced that, “President Buhari has cancelled his trip to Kigali, Rwanda, to attend an Extra-Ordinary Summit of the African Union on Tuesday, March 21, to sign the framework agreement for establishing the African Continental Free Trade Area,” according to the statement by Tope Elias-Fatile, the foreign ministry spokesman. This is to allow more time for input from Nigerian stakeholders.”

The Federal Executed Council had approved the signing of the deal, which it said would boost the country’s export, “spur growth and boost job creation as well as eliminate barriers against Nigeria’s products and provide a Dispute Settlement Mechanism for stopping the hostile and discriminatory treatment directed against Nigerian natural and corporate business persons in other African countries.”

Customs Agents Task FG

Meanwhile customs agents in the country believe shipping companies are responsible for most of the troubles in the industry. Recently, the customs agents called on the federal government to urgently check the unlawful activities of shipping companies and terminal operators whose actions they said hinder imports and exports and violate the ease of doing business directives issued by the government.
In a petition addressed to Osinbajo, the customs agents alleged that the shipping companies and terminal operators’ charges on storage contravene Sections 20, 31 and 97 of the Customs and Excise Management Act that limit the days for rent charges and conferred authority to Nigeria Custom to charge rent after specific days by the board.

The agents in the petition signed by National President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero stated that duplication of charges such as terminal delivery charges/ terminal handling charges, deposit repayment delays and process procedure that lack regulation of the economic interest in the port.
They stressed that there is the need for the federal government to intervene to address the cost of doing business by a total review of the procedure, process and cost in the ease of doing business.

The Presidential Enabling Business Environment Council (PBBEC), they added, should urgently address the following short falls, which is militating against our import and export trade that resulted to massive diversion of goods to neighbouring ports.
Also, the agents called on the federal government to use part of the seven per cent port development levy for the development of port access roads, trailer parks.

According to Amiwero, “The condition of the Tincan Island Port Axis of Apapa Oshodi express road leading to the ports is a death trap, big potholes and gridlocks resulting in loss of lives and continued destruction of loaded goods that always fall on cars, trailers and sometime persons.

“It is a complete setback to trading across borders (TAB) for ease of doing business on trucks that spend weeks to access and exit the ports which result to delay and rejection on most of the fragile export products in international market and high cost in import clearance.

“The Nigeria Ports Authority (NPA) is no more in port operation, the percentage collected from the seven per cent Port Development Levy should be used for the development of the trailer parks and port access roads.”
On the increase of revenue collection on the recovery of short levied duties on discrepant cargo as provided under Section 142 of Customs and Excise Management Act, he said: “The discrepant cargo, as covered under Section 142 of the Customs and Excise Management Act and the Import guideline paragraph J are non-contraband goods with discrepancy, which is allowable for treatment and issued with demand notice (DN) Section 142-(2).

“Recovery of Duties states: Where any duty has been short levied or erroneously repaid, then the person who should have paid the amount short levied or to whom the repayment, has erroneously been made, shall on demand by the proper officer, pay the amount short levied or repay the amount erroneously repaid as the case may be. Any such amount may be recovered as if it were duty to which the goods in relation to which the amount was so short levied or erroneously repaid were liable.”

Amiwero also called on the government to address multiple checks and delays of clearance by Nigeria Customs Service.
He said: “The process of clearance is associated with multiple interventions of various alerts headquarters Abuja, CIU, Valuation Gate etc that takes days and increase the cost and time in contravention of WCO Kyoto convention on simplification and harmonization of Customs procedures.

“The Customs procedure should comply with WCO Kyoto convention and (FAL) Convention of (IMO) for Minimisation, harmonisation and simplification of Customs procedure with regards to various checks after release from the Port, (FOU), CG Squad in line with international best practice of One-Stop-Shop process.”

Experts View

Maritime and commercial lawyer, Dr. Olisa Agbakoba, blamed institutional, operational failures, legal and administrative challenges for the situation in the maritime sector.
He noted that previous reforms had failed, owing to bureaucracy in the regulatory sections of the ailing sector.
Agbakoba said: “The cost of clearing goods remains a significant hurdle with the importing and exporting sections, as Nigeria’s seaports still rank as the most expensive in Africa. “Presently, on the import side, costs related to yard handling fees (which include demurrage and storage), longer than-ideal border clearance times, yard handling procedures, and informal payments to Customs and other government agencies have eaten deep into the fabrics of the ports’ operations.”

He added, “Most ships bringing goods to Nigeria prefer to go to other ports. It’s like you buying a car from Liverpool; the car will go to Benin Republic ports instead of going to Lagos because the Lagos port is completely inefficient. “You get Customs to inspect it, you get the terminal operators to work out the cost, which will be higher than what you get in Cotonou Benin.”

Agbakoba alleged that most ports in Nigeria were obsolete, “For example, while the Port Harcourt Port was built in 1913, the Lagos port was built in 1948.”

He added, “They are so shallow that big ships cannot come into them. If you have shallow waters and big ships can’t come, then you won’t be able to attract business. If you look at ports in other climes like Dubai, Singapore and Shanghai, they are world-class international ports that can handle massive containers and ocean vessels that can carry about 10,000 containers in one day, while ours can only do 80 containers daily.”

To this end, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf called on the federal government to review some of its trade policies
“Port activities generate tremendous multiplier effects for the economy especially in terms of job, revenue and incomes for people. So to the extent that we are losing so much to neighbouring countries, we are losing so many things including expertise. And ultimately, some of these products still find their way back into the country. That is the irony of it because the borders are porous. One way to address this problem is to ensure we review our trade policies. We should not set a tariff at a level that will make it more commercially expedient to make people avoid using our ports.

“Some of the reforms that we are putting in place to make our institutions more investment friendly is also very important. If we are able to drive that to a logical end and get our institutions that relate with importers at the ports, we need to change their orientations so that they can begin to see importers as customers and relate with them the way a business person will relate with a customer. Then the infrastructure too has to be there. If the infrastructure is not right, it could create bottlenecks for operators and it could make things more expensive.

“If it is taking you such a long time to discharge your vessel, to get your consignment out of the port, these are big problem that could lead some people to say rather than get stuck at the Lagos ports, it is better to go through Cotonou and come through the land border. Those are the things I think we can do to stop the diversion or reduce cargo diversion to neighbouring countries, “he said.