Nicol: Rising cost of business negates ease of doing business at ports
Collapsed ports access roads have remained a niggling issue over the years. How are shippers getting by?
SHIPPERS are the ones who bear the brunt of what is happening, especially when it comes to cost. Most stakeholders rely on the shippers’ cargoes, so at the end of the day, it is the shippers that pay all the bills. The freight forwarders are naturally our direct contractors; they take our bills of laden, arrange customs’ clearance, and pay all the bills on our behalf.
I must tell you that last year we recorded a loss of about N2t, so the trade is not as lucrative as it used to be. But we have to do something for survival. Can you imagine paying an agent N800, 000 for haulage from Apapa, to Isolo, and N1m from Apapa to Ikeja because of the bad roads, especially the Tin Can Island roads? This is simply not how to do business. But we are hopeful that 2021 will usher in a very simple method of resolving these road problems.
In advanced countries, the shipping lines and oil companies come together to fix roads for the government by way of corporate social responsibility. That does not happen here because most governments want the money in their hands, and there is the tendency for the money to be embezzled once that happens. This simply needs to change. The colonial masters built Apapa Port through collective efforts, and we have Nigerians who can even finance all these things.
Shippers are increasingly finding it very hard to raise money from the banks because they have been unable to pay the ones they collected earlier. A situation, where we are struggling to recoup capital makes it difficult for us to talk about profit for several years back. In the midst of all these, the taxman will always arrive, and we must pay our taxes, but from which profit? Paying N7.5m as Value Added Tax (VAT) under very difficult economic conditions like the Coronavirus is not an easy task. I expected the government to even reduce VAT to encourage industries to stay afloat.
Let me also make it clear that anybody that thinks that Nigeria will clinch the International Maritime Organisation (IMO) seat is joking, because without motorable access road you don’t have a port. So, since good roads are critical, it is very important that we fix our roads.
Reducing cost of doing business at the ports is important, just as making our ports to be like marketplaces is also a disincentive. That is exactly where we are now, but this year, shippers will do everything to make sanity return to the ports.
Shippers are not supposed to get involved in road construction, but we did. Dangote is part of our prime members and it came out so solve this problem to the best of its ability, and I think that the government should be very considerate with us that shippers have gone far beyond their limit. This year, we will come together. We are discussing with the Nigerian Shippers Council (NSC) to set up our intervention team.
What will the intervention team be doing?
We need to go to the Nigeria Customs Service (NCS) and tell them that the way that they are doing their assessment is wrong. You cannot issue a document that is worthless –the Pre Arrival Assessment Report (PAAR) and say that it is an advisory document. Also, why are we paying one per cent Comprehensive Inspection Scheme (CIS) charges to the NCS when they are doing their statutory duty having been set up to collect duty? When you present your document, you are made to pay upfront for PAAR before your goods are even checked and confirmed to be there. It never used to be like that. What is the desperation when performing an examination is their duty? Why must they advise us and collect money again? On that document alone, we paid over N30b in 2020. So, we think the huge cost of doing business will not bring progress to this system. There are people who are even happy that the whole system is in a shambles because they make money from it, and these people are powerful people, and have been doing this for so long. All of these should stop because government’s interference in trade has brought so much hardship.
Of what impact has the Federal Government’s Ease of Doing Business at seaports been?
The Ease of Doing Business came as a result of our protest to the government. We wrote a document tagged, “Save Our Souls,” where we asked for the creation of a system that will ease business execution and reduce the cost of doing business. Two of them go together and there cannot be ease of doing business when there is no reduction in cost of doing business at the ports. Anything other than this is just a worthless slogan.
People trek from Apapa to Tin Can Port daily to do business, and the transport system from Ajegunle to Apapa is horrible. If you go to Ajegunle, there is a small stream where we used to swim in those days. It has been there for over 25 years now, instead of the government to make a small bridge to allow cars move from Ajegunle to Apapa roundabout, it is canoes that are plying the route. That is Lagos State government for you. They collect tax, but cannot provide facilities for the people.
There is also canoe transportation from Tolu area of Ajegunle, to Marine road. We don’t have big vessels coming through that route, so the government should build a bridge to link Tolu to Apapa. A port environment should have several alternative roads. If that were to be the case, not everybody would be passing through Apapa Expressway. All these areas have been there for many years, but why is no one thinking about alternative routes to ease transportation in and out of the port?
COVID-19 must have posed such a huge challenge to shippers, how did they cope?
The year 2020 was very challenging for the maritime sector as significant increase in revenue generation eluded shippers, importers and exporters. Besides the stubborn pandemic, there are no maritime infrastructure in place; railway to link the port still under construction, and link roads leading to the Lagos Ports Complex, and even Onne Port in Port Harcourt are still under construction, making it difficult for trucks to access the ports. The numbers of trucks that are on the roads are more than what was recorded in 2019 by about seven per cent.
The infrastructure deficit, it should be noted, was not created by the shipping lines, or by the terminal operators. But leaving the problems to persist for a long time led to the emergence of more challenges, as the traffic situation became intractable.
Not many may be aware, but those deployed by the government to manage the traffic situation ended up extorting truck owners as much of N280, 000 (per truck) to access the Apapa Port, and about N300, 000 before they could access the Tin Can Island Port. It was alleged that some faceless individuals under the presidential task force team were collecting N300m from the proceeds of the extortion, while shippers suffered losses on all fronts.
Many do not still believe the way things have gone bad at the ports, but everyone will come to terms with that once some industries shut down in 2021 if something is not done quickly to correct the situation. As we speak, some factories have not been able to take delivery of raw materials that they imported even though all charges have been paid.
Also, additional 22 per cent demurrage on cargo raised against shippers for the inability of trucks to access the ports, which is no fault of the shippers, or importers has remained another challenge. Evacuation of empty containers from cities is now a challenge that has become endemic.
Could factors like this have been responsible for shipping lines surcharging Nigeria-bound cargoes? If so, what could be done to halt this trend?
Shipping lines charges remain constant with some liners using codes to prepare their invoices, but we pay for some unknown headings. Some shipping lines are still charging NOWCA fees, which disappeared in 2018. Shipping lines are also faced with delay in berthing due to congested terminals with empty boxes and export cargoes. The congestion in the berthing of vessels is beyond shippers having been created by their agents, and the supervisory regulator that failed to penalise them. Most shipping lines do not have empty containers holding bay in Nigeria. Those that have charge trucks N80, 000 to offload their empty boxes, which never happened before in this country. While all these direct challenges are confronting the shippers, some government agencies are mopping funds secretly from the platform, including some unscrupulous freight forwarders that are conniving with them. The operating cartel is very powerful hence the shippers are helpless, knowing that at the end of the day, he will push his expenses to the general public. This contributed to inflation during the third quarter of last year, and the cost of goods is still rising daily.
Nigeria shippers are faced with unexpected bills from the carriers, including the Peak Season Surcharge (PSS), which witnessed an astronomical 400 per cent increase. Recently, another surcharge surfaced and contributed to increase the cost of shipping on our export cargo.
However, there is another charge called Empty Container Imbalance Fee. The sum of $180 is paid for a 40” and $150 for a 20” container respectively. The fee is to make up for bookings not met due to the bad traffic situation, especially, for export cargo. So containers are delivered in piece meals as the traffic dictates.
The Nigerian Export Proceeds Form (NXP) compulsory registration introduced by the Central Bank of Nigeria (CBN) also created bottlenecks that almost suffocated the entire export trade.
Export cargoes were rejected by terminal operators for lack of space, while exporters battled with registration on the Central Bank platform, and the Nigerian Shippers Council as supervisory.
The collapse of our Import Adjustments Policies also affected imports drastically. The Nigeria Customs Service (NCS) was given a blank cheque to pursue revenue at all cost. It jettisoned trade facilitation under the World Customs Organisation’s treaties, thereby, militarising the trade platforms with gun-totting customs officers.
Our Customs tariff is unbearably high, and that is why stakeholders advocated for a reduction of the tariff items. But the NCS is an institution of its own that no one can talk to. So, whatever they want you to do, you must comply. Official duty returns are inflated through the forceful duty regime that importers are made to pay with tears.
We appeal to Vice President of the Federal Government, Yemi Osinbajo to please restructure the government import policies if truly we have a workable economic team that is supposed to know what is evident in our trade portals.
The Nigerian Ports Authority (NPA) concession agreement should be reviewed and should contain relieves for cargo owners with protection through the preservation of our God-given commonwealth.
The Nigerian Shippers’ Council has been very proactive in the cause of cost reduction. But couldn’t do much as practitioners flouted regulations and implementation of the rules. Therefore, our judiciary should be restructured completely and maritime cases given preference over political cases because it is from this sector that the government gets money to fund politics.
Many goods will be abandoned for inability of importers to clear their cargo because the cost of clearing is increasingly becoming more than the value of goods. Major investors have left the scene to other countries because their investments cannot be protected. Other African countries are glad to accommodate our traders in their countries, and they deliberately reduce their Customs duty tariffs to encourage trade. Why can’t we do the same in Nigeria?
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