To reposition the maritime industry, freight forwarding and cargo clearing policy should be reviewed

Frank Ojadi is a Maritime expert and a Lecturer at Lagos Business School. He has a thesis on how Nigerian ports could be transformed to be more efficient. This is in the public domain. To start with, Ojadi draws attention to the fact that freight forwarding and clearing of cargo is an integral part of port business and so the law setting it up should be revisited to give it international hue. Unlike where others are focusing, the man who majors in logistics and supply chain believes that reviewing the law will go a long way in galvanizing the fortunes of the under maximized industry.  He spoke with FOSTER OBI on this and other issues.

Excerpts:

Let’s know more about you?

My name is frank Ojadi.  Before joining the Lagos Business School, I have had about 18 years’ experience working in various industries and after I joined the School, the drive was to be able to impact knowledge to people and help also to create knowledge in the environment and see exactly what people make of the phenomenon and things going on; that’s how I got into the Business School. My area of interest while I was working was essentially in the area of logistics and supply chain but at the same time I have had considerable knowledge and experience in operations management but of course everyone understands that operations management encompasses logistics and supply chain. And these days you talk about supply chain as the embodiment of everything operations. So that is what I have been doing for the past 16 years I have been here.  In other words, I have already accumulated 34 to 35 years’ experience and when you are in the academic world where you interact profusely with the private sector and the informal sector, you tend to really go on because you see these problems come alive, watch their impact to see if there is need to really get things going properly.

How has your wealth of experience impacted the country?

Talking about impact, you will look at it in so many different spheres. With respect to our students here, anyone of them that go through my classes and sessions naturally will be able to learn what is logistics, what is supply chain, what is operations management in the context of the country and even abroad. To that extent, it equips them and enhances their capability to really put in their best and get things done properly. This also extends to those in the public sector who occasionally will still attend most of our programmes. To that extent therefore based on the years of experience that I had, I will actually be judged from the point to the extent which these individuals that I have taught, that I have guided in the course of our studies would be able to take up these knowledge, apply it to their work places and improve the performance of their private organisations.

At the governmental level, I have my thesis sitting on my desk on ‘Improving Nigerian Port efficiency.’ I have thrown open the paper into the public gallery by way of writing and extract of that paper. And it is on the internet. But I have also taken that opportunity to speak on one or two occasions where I have tried to bring out the kind of things that form the problems and how these problems will be solved. We haven’t seen much going on. I will give you an example; we just finished a survey of Freight Forwarders and the Customs, and Clearing Agents of Nigeria, regarding why they are not able to contribute much as their contemporaries in other parts of the world and they highlighted exactly the same problems that I uncovered in the course of my thesis in 2012. So what it means is that not much is being done in that respect.

It might also interest you to note that we highlighted trade fraud, as the main problem that bedevils port efficiency. When we talk about trade fraud, we mean international trade and international trade involves importation and export, because we do a lot of importation and we are paying dearly for it now because we didn’t develop our export infrastructures very well and the awareness was completely taken off us. It means simply that when people go abroad to import, they buy things and they bring them in; some choose to follow government guidelines; some do not want to follow government guidelines for obvious reasons. These are reasons that are clearly unethical. The long and short of it is that they don’t want to pay duty and therefore if you bring in something and you know upfront that you don’t want to pay duty, it means that you are going to bribe those that will check your goods. So if you look at the industry, people think it is corruption, yes there might be outright demand for money here and there, but you take an example of what happens on the road. If your vehicle documentation is complete, the police cannot stop you for too long.  So you can’t therefore beg the police release me to go. Even if the police say this is forgery and you know that document you have is not forged, and you are willing to follow the police to the office, you will experience after some elements of delay and you go your way; you will see that that police will be naturally chastised by the boss.  So trade fraud whereby people go through the gray channel to bring things into the country, or take things out of the country is what procreates corruption and not the other way round.

So if you have your all documentations like you find in most companies, your goods will come in and go away. They may delay you hoping that you may give them what they call facilitation fee. It is not that I support it; your goods will eventually be released. What I am saying here is that trade fraud procreates corruption.

That is one, the other is where you have scarcity of infrastructure capabilities, then you want to really get out as quickly as you can. If the resources there are not enough, then there is that tendency for you to say let me jump the queue. You want to give some people money so they can attend to you much quicker than others. So if you compel people to follow government approved system of import, and then you make the resources at least 80percent to deal with these problems, you will reduce this incident.

But import duty is on the high side like the used cars where the law requires an importer to pay 35percent duty and 35percent levy; does that not induce corruption?

Let me look at this one in the perspective of economic, management and development. Who imposes the duty? Essentially you have the tariff book where these things are specified. You say you are supposed to pay 30 35percent for used vehicle depending on the age; the age thing is the one that government came in to deliberate on to fix. Now the other aspect of it is importers again not being very sincere and not being able to provide the document that clearly specifies the age of those vehicles. Based on depreciated value you can come out with it ease and charge the appropriate value; there is no part of the developed world where things leave their country to come to this country or other parts of the world that they do not depend and obtain departures order and documentations and how much you bought that vehicle. You get the picture. All we have to do to solve this problem is to build a bridge between the customs of these other countries and those documents can easily be sent to us for a fee which we will use to know the actual money this guy bought this vehicle and tax him appropriately. The thing about government coming to say cars of 10 years old, pay x amount of money; cars of five years pay xy amount of money, is frivolous. If you work properly with the customs of these other countries(I know what I am talking about because I have seen clear cases where if you are taking anything out of the United States for instance, the customs will demand that you bring purchase order that you use to buy that item. if you say it was a gift to you, you will bring that gift paper and based on that gift paper they can track back to know exactly how much the car was bought, the year and so on and appropriately send those documents to our people here which will be easy for them to then apply their duty. If the government decides to increase their revenue and they think that applying a fiscal policy of levy on top of duty will bring in revenue, that is purely a governments fiscal policy and that is what you have that is manifesting now in the car business. They said they would want you guys here to produce cars so they add what they call graduated levy on top of the duty so that the guys here can then respond and begin to produce vehicles.  So if they are not producing vehicles, then it is left for the government to carry out a research, get the facts and data and then attempt to modify their policy. But here they hardly conduct researches; when they do, it is no use to the system. That is why I am still surprised that my thesis (I am not using these medium to advertise my thesis and have no intention of doing that) that has what it takes to make the port efficient, no one in interested in that.

From your research what could be done to get Freight Forwarders and Clearing Agents to be more useful in the system?                                                                                                            

There are things about freight forwarding and Custom brokers. Freight forwarding and Customs brokerage business, both of them are recognized by the Nigerian law. But then you must ask yourself the question; what freight forwarding is and what a custom brokerage activity is. Primarily speaking, customs brokerage activities deal with what? First they are registered by the Customs Service; second they help Customs to collect duty so they have a lot of activities they carry out in the course of clearing import or export. Because we put a lot emphasis on duty, if you import a container load of different items, it is these guys that will list all these items in the course of preparing the documentation for clearing or for applying for PAAR and so on.

Therefore that work that they do there is very important and they are licensed to do it by Customs. That is the main job of these fellows. If you look at that maritime sector, you will notice that there are truck owners who bring up their trucks for business transaction; so a typical Customs broker, after clearing a cargo of import can walk with a transporter to move that cargo to the final point of destination within the country; that is freight forwarding. On the reverse side, if an exporter is taking some cargo out of the country, he can also decide to use his own capabilities and work with a trucker to truck those things to the port, to the inland container depot, rent a space, with them and then get a container down there to stuff and then engage a Customs broker to clear the cargo through the Customs so it can now get it into the terminal for export. So if you look at that export one, it means simply that freighting could be done by the exporter himself, if he chooses; it can also be done by a freight forwarder if he chooses. For the freight forwarders to be very relevant in the scheme of things in Nigeria, the way the industry is structured, they cannot function very well if they are not also registered by Customs to carry out the clearing with Customs both for import and export because there is very limited freighting of import and export in our country.

I will explain. Check the volume of containers that get into this country, about 80percent of them could be stripped within Lagos and transferred into smaller vehicles and that is what we call deconsolidation and then taken to different parts of the country. Only very few companies that will want their container to be freighted up to them to their locations and these are people living faraway from Lagos. We call them the hinterland of the port. While the foreland is just within the port vicinity, and may be as far as Ibadan as the case may be. Now if you therefore talk about freighting it means that for you to do that you either do it by road, by rail or coastal waterways. Which of these three is heavily functional in Nigeria? Its only road. The rail is still being done by two companies, the APM Terminal and the CNL; so these other fellows therefore are now doubling up as freight forwarders themselves, but the individual guys who registered themselves as freight forwarders and co are not able to do that but the bulk of their work is clearing at the port.

So the problem is actually systemic?

The problem is this, i think that the law setting up freight forwarding activities need to be revisited. Look at the back there you see heaps of questionnaires; we are going to use it to analyse the situation there and come up with a position paper. It is purely what they think it’s not me. There is a lot of knowledge in there. We will come up with a position paper on the problems they encounter and why that have to be changed. So there is absolutely no reason why these two people should be fighting each other. The two jobs are clearly marked out and we think that for the good of this country both of them need to come together and work very well so that they build trust collaboration, and must be seen to that way such that the international freightforading organizations can liaise and work with them.  As long as they are not able to get that together, they lose that opportunity; that is one aspect of it.

You need to take these things in context. If you notice, it was around 1986 that the federal government abolished the cocoa marketing board; prior to that, the bulk of exporting was done by government Boards.  The only one that was actually done by Indi duals and ANCLA then was importation, which is the clearing and stuff. So the point I am therefore making is that it tended to reduce the extent to which people can express themselves in this art of freight forwarding. I don’t know if you are conversant with they call international terms of trade.

If you go deeper into international terms of trade, you will notice that Nigeria export is actually sold on the basis of FOB. FOB means there is no freight cost inside it. And FOB means that it is the person buying that thing, that is the person located in other parts of the world that would determine the kind of freight he is going to use to move those things because shipping activities is highly competitive so they will be given that opportunity to choose a much more cheaper and yet reliable ship or aircraft that comes into Nigeria regularly and be able to leave those things and take them away. So to that extent, the work of a typical freight forwarder in Nigeria ends at our port. Once you get the thing FOB, you get it across and they load into the vehicle, brought by the buyer, that’s the end of the story.  So if the term of trade is on CFR or delivered at Terminal or delivered at Place, then it behooves our clearing and forwarding guys here to link up with another freight forwarding guy over there to link up with our man and that will enable him to build an alliance so that cuts it off. So that’s the type of policy in terms of term of trade that the government has actually made. I don’t like calling government, we have gotten to a point in our business that we should now begin to take some of these responsibilities up by ourselves and then influence or impress it upon the government to make a change. So that’s how it works. So let us not digress far away from where I started. The point is that this impact can be felt also if we have a strong link between those in the government and those in the academic world who will make these people to understand that there quite some serious guys in this industry who are willing to carry out developmental research work that will aid the development of country and things, that is not yet happening.

So what strategies could be applied to transform this industry to take over from oil?

Let’s put it again in context. When you talk about Maritime you are dealing with quite a lot of things. What do you understand by the word marine, it has to do with something below water; when you talk about maritime you are looking at something above water? So for marine you are looking at harvesting the oceans, mining things that are in the oceans including fish and so on, and even carrying out research that will enable you use resources in the ocean to generate income and revenue, like this water hyacinth thing and stuff like that. That is not the focus. We have the Institute of oceanography and co; they probably deal with some aspects of that. The real area which is maritime is the one that deals with the one on the surface and that includes the shipping. The vessels that come in and goes, that includes the terminals, that includes the import and export activities and that includes quite a lot of other activities. In that context therefore you now need to look at those things to figure out what kind of services would they offer that will generate income. The only one that directly comes to mind as we speak in the present context of things in Nigeria is that of exporting things. That’s one. Two, the maritime could also serve as what I will call a base in which you could develop the port to become some kind of a hub that offers services to other people. If we create that kind of environment where we could operate as a hub, because at the moment we are only operating as a gateway-the way to Nigerian hinterland and out; but what it means is exporting things to other countries and serving other linkages but if you create a hub it means that vessels will want to come down here because they as often as they could have chances of moving their goods to other parts of the world

 

  

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