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Reducing Cost of Doing Business at Nigerian Seaports

Reducing Cost of Doing Business at Nigerian SeaportsA major plank of the Seaports Reforms which include concession of the ports terminals to the private sector by the Federal Government in 2006 is the need to reduce the cost of doing business at Nigerian seaports in other to accelerate the pace at which the country will emerge as hub or preferred destination for cargoes globally.

Stakeholders

The consensus in the maritime sector is that apart from the excesses of the terminal operators and those of the foreign shipping agents,which have largely contributed to the prevailing high cost of doing business at the nation’s seaports, the inadequacies of other stakeholders in the seaport sector have worsened the problem.

Investigations  have  shown that due to the uncompetitive nature of the Nigerian seaports,cargoes and vessels  have over time been diverted to   the ports of smaller countries in size namely Cotonou Port in Benin Republic, Accra and Tema Ports in Ghana, Lome Port in Togo  and  Dakar Port in Senegal  and then smuggled into  Nigeria  despite its  natural advantages  over these  other nations.

Efficiency

While the Federal Government has a very good intention of increasing the efficiency of the seaport sector with the various reforms it had enunciated in the industry particularly the port concession scheme, the fact that it did not howeverimmediately appoint a regulator or a referee to coordinate the activities of the stakeholders is believed to have led to series of arbitrariness among the operators, a development which contributed to the cost of doing business at the ports.

Consequently, the consensus in the maritime  sector has been that the Nigeria seaports is the costliest places to do business among their peers  in the West and Central Africa sub- region  as well as in other parts of the world .

Though the  seaport reforms has led to the modernization of the operations of the ports,reduced cargo dwell time, vessel waiting time and  boosted ship turn -around time,  but  the  gains soon fizzled out due to the  illegal activities of the concessionaires and the shipping line  agents and  these anomalies  made it impossible for the benefits to translate to reduction in cost per se.

However, the   Executive Secretary / CEO of the Nigerian Shippers’ Council which is the Economic Regulator of the Seaport Sector, Barrister Hassan Bello has said that regardless of the gains of the ports reforms,   there has been a dire need for the Council   to harness other potential areas of the port sector with a view to enthroning realcompetition andbringing down the cost of doing business at the Nigerian seaports.

Sanity

According to him, a vacuum was created by the late appointment of an economic regulator that would have acted as a referee earlyenough and would have made it possible for the benefits of the reforms to be realised pointing out that the Shippers’ Council since it came on stream as a regulator has nonetheless helped to sanitize the activities of the seaport sector and brought about some level of efficiency in the industry.

Maritime experts such as  Chief OlisaAgbakoba, a former President of the Nigerian Bar association ,OtunbaKunleFolarin , the  Chairman of the prestigious Nigerian Ports Consultative Council(NPCC) were of the view that  the various operational excesses of the concessionaires and shipping line agents , in the form of illegal and arbitrary charges among others due to the late appointment of  a regulator  have  led to high cost of clearing goods at the seaports..

Economic Regulator

Thusthe Federal Government had to appoint the Shippers’ Council as the Economic Regulator of the seaport sector in February 14, 2014 to regulate the activities of stakeholders in the sector and monitor the charges   they impose on consumers of shipping services, following persistent complaints by shippers and their agents of arbitrary charges in Nigeria ports which made the cost of doing business very high.

The consensus in the seaport sector is that the shippers’ Council between the time it was appointed to implement its new functions has performed its regulatory function so effectively that it has served as an unbiased coordinator and referee that has made it possible for the stakeholders in the sector to eschew the penchant for imposition of arbitrary and illegal charges.

Little wonder that just last month, its regulatory role under the title , the Nigerian Shippers’ Council( Port Economic) Regulations, 2015  received  a Federal Government Gazette , making it one of the fastest laws to  be sogazetted.

Endorsement

Experts are of the view that the gazette of the functions of the Council  has led credence  to the endorsement for its activities and the excellent manner it has discharged its responsibilities and thus affirming the agency as an Economic Regulator and strengthening and protecting it against unwarranted disobedience to its directives from the stakeholders.

Mr Lucky Amiwero , the President of the National Council  of Managing Directors of Licensed Customs Agents (NCMDLCA),  Prince OlayiwolaShittu  and  the President of the Association of Nigerian Licensed Customs Agents (ANLCA) that the  sterling performance of the Shippers’ Council  so far  as an Economic Regulator  has made it mandatory for the Federal Government to elevate the regulatory functions of the Council to cover the shipping sector.

It is believed in the seaport sector that the success of the Council as an Economic Regulator has been largely due to the technical know-how, knowledge and the ability of Barrister Bello to effectively manage human and material resources, his capability to ensure that the Council acted as an unbiased umpire in the process of discharging the functions of the regulator as well as the effect of a capable work force paraded by the agency.

Activities

Due to the earlier regulatory activities of the Shipper’s Council and the earlier gains of the reforms volume of cargo has increased from less than 60 million metric tons to over 150 million metric tons , from about 300,000 TEUS of containers to 1,8 million .

The physical barriers that have been removed so far from the seaport sector due to the activities of Economic regulator and the various discussions that the shippers’ Council hashad with landlockedcountries  on the shipment of cargoes  has also almost ledto the commencement of shipment of chemicals on behalf of one of the land-locked countries through  the Nigerian Ports.

Thus in response to the need to enhance the efficiency of the Nigerian seaports and fast track the attainment of its becoming thehub, the Shippers’ Council has engaged in series of fresh consultations with the stakeholders as it advises them to further modernize and automate their operations even as it is working on a fresh list of charges, rates and tariff that will guide the services offered by stakeholders especially concessionaires and foreign shipping agents.

Charges

It was in a bid to initiallyremedy this problem of illegal and arbitrary charges that the Council in October29, 2014, eight months when it became the Economic Regulator announced the reversal of progressive storage chargesof the terminal operators at the ports under the aegis of the Seaport Terminal Operators Association of Nigeria (STOAN) and shipping line agencies under the umbrella of the Association of Shipping Line Agencies (ASLA) .

It had ordered the concessionaires  to revert their charges to what was in force  as at May 1, 2009 as approved for them by the then Transport Minister  while it also directed  an increase in the free storage period at the port from three days to seven days.

The Council equally directed shipping companies to reduce their shipping line agency charges from N26, 500 to N23, 850 per TEU (20-foot containers) and from N48, 000 to N40, 000 per FEU (40-foot containers), even as it ordered shipping agencies to refund container deposits to importers and agents within 10 working days after the return of the empty containers.

However, shortly after publishing the order which was to come into effect on 3rd November, 2014, the STOAN andASLA secured an interim injunction of the Federal High Court, Ikoyi, Lagos stopping the NSC and/or its agents from implementing the directive.

Verdict

But unfortunately for the STOAN and the ASLA, the presiding judge, Justice Ibrahim Buba dismissed the originating summons filed by ASLA and STOAN andaffirmed the position of the NSC as the economic regulator of the Nigerian port industry,foiling STOAN and ASLA‘s claim  that there was no law in the land empowering the Council to act as economic regulator.

It was not a surprise then that the judge declared the shipping line agency charge as illegal and therefore ordered the shipping companies to account for allthe monies(which amount has been put at about N1 billion by experts) collected as shipping line agency charge since they started imposing the charge while he directed subsequent payment of same into the Cargo Defense Fund of the Nigerian Shippers’ Council (NSC) for the benefit of the entire shippers.

Apart from the fact that the STOAN and ASLA appealed the judgement , while the last adjournment  of the case was  for  February 2016, many well- meaning stakeholders have however hailed the ruling  and faulted the concessionaires and the foreign shipping lines for resulting to the courts on an issue on which they were considered to be guilty.

Already there are pressures on the Shippers’ Council to ensure that the hearing of the case is fast tracked for the fact that, it has been giving opportunities to the terminal operators and the shipping line agents to continue to collect the illegal and arbitrary charges.

Illegal SLAC

For instance, investigation has shown that the Shipping Line Agency Charge (SLAC) collected by the foreign shipping agents in Nigeria isout rightly illegal, because comparative charges of the shipping lines in other west and central African countries namely Ghana, Sierra- Leone, Senegal, Cote D’Ivoire Togo among others with what is collected by their counterparts in Nigeria showed that such charges are non- existent in those countries.

The Deputy Director Compliance , Monitoring and Enforcement at the Shippers’ Council, Chief CajetanAgu and the Head of Public Relations of the Council who is also a Deputy Director, MrIgnatius Nweke saidSLAC, imposed by agents of foreign shipping lines operating in the country on cargoes  shipped  into Nigeria is an illegal charge.

According to a prominent Customs Broker who is the General Secretary of the Tin Can Chapter of the Association of Nigerian Licensed Customs Agents, MrKanikwuChuks- Davies .If you look at the contract of affreighntment, these charges that are being illegally collected by these agents of foreign carriers in the name of SLAC are already embedded in the freight, since the importer has paid the principal with whom it had a contract.

Chief LexcyNwangwu, the Vice – Chairman of the Board of Trustees of the Association of Registered Freight Forwarders of Nigeria(AREFFN) explained that if  the agency lines you have in Nigeria arerepresenting their partners abroad, and if you are an agent to a principal, your principal pays your charges because  the principal entered into a contract with the shipper, who has paid all charges to the principal to bring his goods to the desired destination.

Improvement

Chief Boniface Anieobonam, the Founder of the National Association of Government Approved Freight Forwarders (NAGAFF) and some other maritime experts saidbeyond their illegal charges,the concessionaires and foreign shipping agents must also improve on their level of cargo handling equipment as well as check the high frequency at which they have server breakdowns because of the impact of the shortcomings on additional cost on clearing of goods.

ChiefAguof Shippers’ Council said that almost every stakeholder in the seaport sector is guilty of one form of distortion or the other which lead to thehigh cost of doing business at the seaports adding that there is a need for the customs and the other agencies, including the clearing and forwarding agents to embrace measures that will lead to reduction in the clearing of goods at the seaports.

Customs

Many importers and customs agents have kicked against the issue of the impossible revenue target given to the Customs by the Federal Government, for the fact that it has made the para military agency to resort to under hand dealings, including the secret application of the Benchmark( Fixing permanent duty on goods ) method  of import duty imposition, which leads to an increase in duty paid on imports  to ensure it meets its target.

The Port Consultative Council Chairman said the Customs should be a revenue collector and a trade facilitator as it is in many countries of the world but pointed out that the situation of things that has made the Nigerian Customs to be a revenue generator because of the government needs for funds needs to be checked to make clearing of goods less costly.

The general believe in the sector is that using scanners to examine more containers instead of subjecting most of the containers to 100 per cent examination as it is being done by the customs would help to enhance cargo dwell time at the seaports .It has been advocated that the two scanners each available to the customs at Apapa and Tin Can Commands should be increased.

Importers/ Clearing Agents

Experts are of the view that accumulation of demurrage on goods due the delay in the process of documents by customs which invariably add to cost of clearing as a result of the insincerity of importers and customs agents in duty payment or their ignorance of customs and clearing procedures would be reduced if the shippers learn to be more honest and get themselves enlightened on the latest clearing procedures.

Also shippers under the aegis of the Shippers Association of Lagos State have also consistently blamed the high cost of doing business at the Lagos seaports on multiplicity of charges andlevies , which many stakeholders have agreed with them must be reduced for the ports to be competitive.

Levies

For instance some of the levies imposed on imports include the 2 per cent National Automotive Council Levy(NAC) , the five per cent value added tax (VAT), which it’s said to be charged on cost insurance and freight (CIF) instead of import  duty alone , the sugar levy , rice levy, the proposed35 per cent levy on used vehicles  the common external tariff (CET ) levy among others.

Security Agents

It is a good development that the Federal Government has held on to its policy on streamlining the number of security agents operating at the seaports, but the problem is that even for those operatives, permitted to function at the ports on invitation by customs, when they have one inspection or the other to carry out on imports, findings are that they still hold importers to ransom through their demand for gratification.

Corruption

Shippers’ Council and many stakeholders are of the view that corruption is still endemic in port operations and it is a big albatross which must be eliminated from the port system for a marked reduction to be achieved in the cost of doing business.

In this wise, captains and crew of ships have raised alarm over thealleged extortionist tendencies of operatives of the Nigerian Immigration, cargo surveyors, and those of the Nigerian Maritime Administration and Safety Agency (NIMASA) when they board vessels at the seaports to carry out their official surveyactivities.

NPA

Despite that theNPA has in recent times embraced e- commerce, e payment among other electronic forms of rendering services, it should however live up to its responsibilities of discharging its marine functions to the concessionaires in the areas of provision of water, power, maintenance of common user facilities and repair of quay aprons.

The general believe in the seaport which is also shared by the CEO of the Shippers’Council is that NPA and government needed to provide the necessary enabling environment in terms of good roads, power among others for concessionaires, shipping line agents among other investors to enable them recoup their investment and check a situation where they have to use the excuse of non- availability of such facilities to add to the cost of doing business at the ports.

This is why the Federal Government and the NPA must quickly find solutions to the persistent traffic gridlock on the Lagos seaports access road – Ijora, Apapa axis and that of the Mile 2- Tin Can ports which importers and customs agents have agreed that it is a major contributory factor to the high cost of doing business at the Lagos seaports.

Traffic Gridlock

Just has NPA itself has complained that the persistent traffic gridlock on the Lagos seaports access road – Ijora, Apapa axis and that of the Mile 2- Tin Can ports has reduced its revenue by 50 per cent, so also it has condensed the earnings of all stakeholders in the maritime sector, made the truckers , that is haulagers of goods to increase their charges  the problem has been identified as a major contributory factor to the high cost of doing business at the Lagos seaports.

Leaders of the customs agents associations are agreed that the use of the rail and the pipe should be encouraged to convey petroleum productsinsteadof trucks patronizing the tank farms at Apapa and Tin Can to load fuel, that the tank farms should be relocated in the long run while the bad portion of the access road should be repaired and the road itself expanded to accommodate the increase in the number of trucks due to the rise in the volume imports into Nigeria.

Electronic Application

Experts are of the view that another effective solution to the gridlock problem is for NPA to ensure that there are terminals where trucks will assemble while it must perfect the use of electronic traffic management based on call ups which would require that any trucks that will enter the tank farms or the seaports either to load or drop containers must have an Authority to load (ATL) and can only gain access when called from the terminals.

Conclusion

Overall, the Shippers’ Council has said that automation of the entire processes and procedures by all the stakeholders is the solution to most of the causes of high cost of doing business at the seaports even as it forges ahead vigorously in its regulatory activities aimed at making the Nigerian seaports cost effective and efficient to do business as well as the preferred destination for goods in West and Central Africa.

 

By Shola Fadeyi , a Lagos based journalist, is the Managing Director, Simofad Communications Limited and Publisher, Marine& Economy

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