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By Steve Agbota, [email protected]
Moves by the Federal Government to promote the ease of doing business may have taken a turn for the worse as port operators have lamented the incessant increase in import duty charges.
The development, according to industry observers, has led to diversion of cargoes to the neigbouring countries and swelling the volume of overtime cargoes at the ports.
The situation has also led to a downtime in port activities, especially on the clearance of cargoes with businesses remaining dull as many importers are now abandoning their cargoes due to high import duty charges.
More worrisome is the lull in the activities of bonded terminals operators who scramble for the few available cargoes.
At the moment, bonded terminal operators are contemplating to lay off some workers to reduce cost and keep their businesses afloat as the rough operating climate accentuated by tumbling naira is threatening to sink them.
However, experts have predicted that the development will result in higher inflation and job loses while consumers of imported goods should prepare to continue to pay more.
For instance, last week Thursday, the Central Bank of Nigeria (CBN), adjusted the exchange rate for Customs clearance of cargoes at the nation’s seaports to N1,515.092/$, making it the sixth change in 13 days since the beginning of the administration of President Bola Tinubu in May 2023.
On June 24, 2023, the CBN adjusted the exchange rate from N422.30/$ to N589/$, and on July 6, 2023, it was adjusted to N770.88/$, on November 14, 2023, it was adjusted to N783.174/$, in December it was adjusted to N951.941/$.
Also, on February 2, it was adjusted to N1, 356.883/$ and on February 3, it was raised to N1, 413.62/$.
Not yet done, on February 10, it was changed to N1, 417.635/$, on Monday February 11, it was adjusted to N1, 444.56/$1. By Wednesday, February 14, it was readjusted to N1,481.482/$1 and on Thursday, February 15, 2024, the CBN adjusted the exchange rate yet again, to N1,515.092/$.
Ironically, the latest increase represents a 2.2 per cent increase in the Customs duty rate. The implication is that importers and manufacturers that depend on the nation’s seaports for the importation of critical production inputs have to pay more to clear their goods as import duties are benchmarked against the dollar.
Daily Sun learnt that it was also the eighth time the apex bank has adjusted exchange rate in eight months since President Tinubu’s administration commenced the floating of the naira, a reform aimed at stabilising the forex market.
On June 24, 2023, the CBN adjusted the exchange rate from N422.30/$ to N589/$, and on July 6, 2023, it was adjusted to N770.88/$. On November 14, 2023, and adjusted to N783.174/$, in December 2023.
Daily Sun further learnt that the cost of clearing a 40 feet container has gone up astronomically. This has forced 40 per cent of Nigerian importers to abandon the nation’s ports in preference for neigbouring countries.
To ensure stability in the system, port users and the Sea Empowerment Research Centre (SERC) have called on the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, to direct the CBN to halt the frequent increse of the exchange rate for Customs duty assessment.
Reacting to the development, a source in one of the bonded terminals said cargoes received at the terminal have declined drastically, adding that some operators are gradually going out of business.
He said the management of the bonded terminals are considering laying off some workers in order to balance their books. He said Nigeria is now facing the challenge of cargo diversion and overtime cargo at the ports.
Former chairman of the Association of Nigeria Licensed Customs Agents (ANLCA) at Seme Border, Bisiriyu Lasisi Fanu, said the frequency at which the CBN is adjusting the exchange rate has become worrisome, which was why there are so much overtime cargo at the port.
“CBN can’t change the rate and expect the importer who has made his calculation on what the landing cost and profit will be based on the previous exchange rate to survive. How do you expect the importer to generate the difference immediately to clear the goods from the port? It is not possible,” he said.
He said the hike in Customs duty through high FX rates would affect all goods in the market because every commodity in the market has an import cost element.
Meanwhile, a trade and supply chain expert has predicted a looming diversion of Nigeria-bound cargo to neighbouring countries over the arbitrary and seemingly uncontrolled hike in foreign exchange rate for import duty payment by the CBN, insisting that the country would be the ultimate loser at the end.
The supply chain expert, who pleaded anonimity said that the international trading public was just beginning to build confidence in Nigeria’s port systems following the introduction of some reforms that have brought some level of efficiency at the seaports, coupled with a relatively stable duty foreign exchange rate over the few years.
He, however, expressed fears that the trading community might begin to route their shipments through African neighbours, especially Togo and Republic of Benin, where the duty rates are more stable.
This, he said, will lead to more consignments coming into the country under various guises, especially given the porous nature of Nigeria’s land borders.
“Nigeria’s seaports are just recovering from over two decades of massive cargo diversion through, which the country lost several trillions of naira in trade revenue. The direct implication of this erratic import duty forex hike is that the importers will pay higher duty in Nigeria for goods compared to what is paid on the same goods when shipped through Togo or Benin Republic and the natural response of a trader is to go places where the duty is lower in order to guarantee profitability.
“I hope the management team of the CBN is conscious of what it is doing to trade in the country by these arbitrary hikes in forex duty rates, which ordinarily should be determined by the forces of demand and supply. Apart from the looming cargo diversion, the country would also risk higher inflationary trends, which would further pauperise the citizens and force many organisations to close shop”, he warned.
However, the Sea Empowerment Research Center criticized the CBN’s approach, stating that frequent duty exchange rate increments were an unconventional and unexplored solution to the challenges faced by global trade.
The center proposed a thorough impact analysis on the recent exchange rate increment, urging the Coordinating Ministry to assess its effects across international markets, manufacturing sectors, and the general public.
The head of the Center, Eugene Nweke, emphasised the necessity of considering economic implications before implementing fiscal and monetary policies, aligning with the renewed hope mantra.
The Center questioned the government’s commitment to understanding the economic landscape, urging a meticulous review of critical indicators such as business closures, downsising, unemployment rates, stability in the labour market, inflation impact on purchasing power, and the overall contribution to economic hardship and poverty.
He argued that neglecting these concerns demonstrated poor administrative sensitivity, calling for a systemic reevaluation of monetary policy tools to ensure fair market practices.
Nweke also raised questions about the CBN’s role in duty exchange rate increments, alleging that it might be a deliberate strategy for revenue generation.
The Center emphasized the need for an independent study to evaluate the impact on international trade, suggesting that such insights could guide the restructuring of monetary and fiscal policies.
Nweke further lamented the disruptions observed in foreign exchange regime administration, particularly concerning the International Chamber of Commerce (ICC) Rules on Uniform Customs and Practice (UCP) for Documentary Credits.
Nweke argued that the Coordinating Minister should conduct an unbiased system study within the nation’s international trading climate to provide recommendations for policy reform.
He further stressed the importance of addressing issues related to international loans, currency devaluation, and the activities of currency dealers (Bureau De Change) and called for measures to discourage insider trading and hacking in banking.
The Sea Empowerment Research Center called for the immediate cessation of the CBN’s practice of incessant exchange rate increments for customs duty assessment.
Speaking in the same vein, Africa Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON), called on freight forwarders and their importers to heap every blame on the Ministry of Finance and the management of Central Bank of Nigeria and not on Nigeria Customs.
Africa Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON), called on freight forwarders and their importers to heap every blame on the Ministry of Finance and the management of CBN and not on Nigeria Customs.
The National President of APFFLON, Otunba Frank Ogunojemite reacted to the consistent increase in Customs duties that its beyond the control of the Nigeria Customs Service rather a deliberate action by Ministry of Finance.
While some are throwing the blame at the feet of Customs, Ogunojemite is rather calling on freight forwarders and all concerned, to haul the whole blame on the Ministry of Finance and the CBN under the watch of Mr. Olayemi Cardoso.
Ogunojemite, who advised freight forwarder to join force with the Civil Society groups, the Nigeria Labour Congress and trade unions and redeem the masses from the excruciating economic situation which in his words, is clearly as a result of sheer incompetence on the side of the current managers of the economy.
The APFFLON President berated the Ministry of Finance and the CBN for losing control of the Naira, which has warranted its free fall. He regretted the level of hardship being experienced by Nigerians, saying that the continued upward revision of Customs duty exchange rate would continue to hit harder on the masses that are the end users.
“Customs has no hand in the continued increase in tariff, it should be blamed on the CBN under the watch of Mr. Olayemi Cardozo and his counterparts at the Federal Ministry of Finance.
“What we are witnessing today is as a result of sheer incompetence on the side of those managing our economy. Businesses are dying, manufacturers are shutting down. The ports are almost deserted because freight forwarders have no jobs any more,” he said.
On server failure, Ogunojemite noted that attitude of the ministry of finance towards redeeming the economic situation has increasingly proven to be lukewarm.
He berated the ministry for upholding a contractual agreement with Web Fontaine, saying that outfit has only succeeded in making nonsense of the federal government policy on Ease of Doing Business (EoDB).
“Until the Ministry of Finance resolves to get essential service providers commit to compensation agreement or have their contracts revoked, the likes of Web Fontaine will continue to take Nigerians for granted. If nothing is done to keep them on their toes, and also address the challenges posed by the perennial Apapa gridlock, the core essence of the Federal Government’s policy on Ease of Doing Business will never be actualised,” he said.
