How high Customs duty, CBN forex rule paralysed port activities in Nigeria


Seaport operations in Nigeria have been badly hit by some ill-conceived trade policies including the hike in the import duties of vehicles and rice as well as the introduction of a fish quota system by the administration of former President Goodluck Jonathan. The ports have also suffered from the restriction of 41 items from accessing the official foreign exchange window by the Central Bank of Nigeria (CBN).

Signals that signposted that Nigeria was on a journey to recession came early this year when the National Bureau of Statistics (NBS) announced that the country recorded a decline of N793.5bn in the first quarter merchandise trade to close at N2.72trillion from N3.51trillion in the fourth quarter of 2015, the first time in the last seven years. The bureau attributed the decline in the first quarter activity to a sharp drop in both import and export trade.

Data at the Nigerian Ports Authority (NPA) showed that 341 vessels entered Nigeria in September 2016, the lowest in nine months and a fall from 400 recorded in August 2016. Cargo throughput also dropped from 6.3 million metric tonnes in January this year to 5.6 million in September, which is also the lowest in the year.

The statistics also showed that a total of 3,347 ocean-going vessels have called Nigeria so far this year, estimated at about 100,152,274 metric tons. The breakdown showed that the Lagos Port Complex Apapa received 318 vessels in the third quarter as against 301 in the second quarter. Tin Can Island Ports received 406 vessels in third quarter, against 368 in the last quarter; Rivers Ports, 80 ships against 84 in the previous quarter; Onne received 152 vessels against 163; Calabar Port, 51 against 52; while Delta Port received 132 against 109.

Experts have blamed the drop in cargo volume and huge loss of revenue by port and terminal operators on the anti-trade policies of the Federal Government. These policies have also made the country unattractive to investors.

National President, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero said the current hike in import duty on vehicles in 2014/2015 from 10 per cent to 35 per cent with an additional surcharge of 35 per cent, bringing the total tariff to 70 per cent, has negatively impacted operations at the port and led to massive revenue and job loss. He said the arbitrary import duty hike led to the diversion of vessels carrying vehicles to the ports of neighbouring West African, thereby boosting operations in those ports – especially the Port of Cotonou – at the expense of Nigerian ports. The development has also negatively affected the operations of dockworkers, licensed Customs agents, freight forwarders, truckers and others.

According to him, the reduction of activities by 70 per cent in the operation of terminal operators who pay the Federal Government based on cargo, through earnings and shipping companies, has drastically affected their activities.

At present, Nigerian ports have lost about 80 per cent of their vehicle cargo as a result of this hike, which has done more harm than good to the economy. It has promoted smuggling and led to huge loss of government and private sector revenue to the advantage of the ports of neighbouring countries. It is estimated that no fewer than 5,000 jobs and about N30billion is lost annually to the policy.

Investigations also show that break bulk terminals at the ports are struggling to pay their bills and meet their financial obligations to the Nigerian Ports Authority (NPA) due to the plethora of banned products and the hike on import duties on others. For instance, the hike in import duty on rice, the restriction imposed on the importation of fish and on cement are all taking a huge toll on the income of the break bulk terminals as their revenue has dipped by over 60 per cent. The imposition of 100 per cent import duty on rice and an additional 10 per cent levy have had the most debilitating effect on the break bulk terminals as handling of rice cargo accounts for more than half of their revenue.

The restriction of 41 items from the CBN foreign exchange window has also taken a huge toll on port operations.

Director, Research and Advocacy, Lagos Chamber of Commerce and Industry (LCCI), Vincent Nwani, said, “There must be an urgent review of the CBN’s policy on the restriction of access to foreign exchange placed on 41 items, as about 16 of the total items in the list, serve as critical raw materials for intermediate goods produced in Nigeria, especially as the country lacks the capacity for optimal production of the items.”

LCCI and the Manufacturers Association of Nigeria (MAN) said the decision is hurting the manufacturing sector in such a way that could no longer be ignored, having led to the closure of many companies and relocation of others from Nigeria to Ghana and other neighbouring countries. It has also led to drastic reduction in the volume of cargoes handled at Nigerian ports, with affected port terminals losing about 60 per cent of their cargoes to the CBN restriction policy.

The Chairman, Senate Committee on Customs and Excise, Senator Hope Uzodinma recently said the upper legislative chamber would review some of the country’s trade policies including the contentious hike in tariff of some imported goods.

Uzodinma agreed that most of the country’s policies are anti-trade, favouring only neighbouring countries. He said 85 per cent of cargoes landed in Cotonou Port, Benin Republic, find their way into the Nigerian market.

“We have seen that some of the trade policies are skewed and they are favouring more foreigners than Nigerians. We want the opposite to be the case and in doing that, we will change some of the policies that have not helped local empowerment,” Uzodinma told stakeholders in Lagos at a recent parley.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the drop in imports is directly related to the CBN foreign exchange policy, which he said needs to be reviewed.

A clearing agent and member of the Association of Nigerian Licensed Customs Agents (ANLCA), Mr. Dom Obi blamed the present government for not reviewing the anti-trade policies of the past administration. He argued that until government revisits the policies, the trend will continue and the impact on the ports would become progressively worse.

President of the Save Nigeria Freight Forwarders Association of Nigeria (SNFFIEC), Mr. Patrick Osita Chukwu, believes the only way to bring cargo back to Nigerian ports is by reducing the Customs duty payable on imported vehicles and rice and by lifting the foreign exchange restrictions imposed by the apex bank.

“If you reduce tariff, it will create a big incentive for importers. No importer wants to burn his fingers. A lot of them are moving to Cotonou now but if you reduce the tariff by half, they will all come back because the reduction will help them defray the heavy expenses they incur when they import here,” he said.

Reducing Nigeria’s Customs duties on select import items to the level charged by other countries in the West and Central African sub-region will not only help in reducing smuggling through the land borders, it will also return the era of boom at our seaports and boost government revenue through the Nigeria Customs Service (NCS).

Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to as the source.