The naira hit the N1,000 mark at the parallel market last week, shuttling between N975 and N990 to a dollar while it traded at N738 to a dollar at the Investors’ and Exporters’ FX window towards the close of the week. In this report, TOLA ADENBI highlights why an unstable naira will hurt port business.
Ports are a major entry point for goods and transactions are mostly carried out in dollars. This implies that the rate at which a country’s currency exchanges to the dollar could determine the cost and amount of cargo clearance at the ports.
From importation to different port charges, shipping charges and Customs duty rates, the naira exchange rate to the dollar determines the cost of doing business at Nigerian ports.
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Prominent among the charges that are calculated based on the exchange rate of the dollar is shipping charges. With Nigeria not having a single ship to move goods all around the world, almost 100 percent of cargoes that come into Nigerian ports are moved by foreign shipping lines who peg their fees using the dollar rate. The rate of dollar in a particular country will determine the rate at which an importer will bring in his goods.
A major factor why many cargoes litter the nation’s busiest ports of Apapa and Tin-Can is down to very high shipping charges. For many importers, raising funds to clear the shipping bills has remained a herculean task, thus leaving many of them with no option but to abandon their cargoes inside the port terminals.
In recent past, shipping charges have soared high due to congestion at the ports. Anytime the ports are congested, visiting ships stay longer before discharging their cargoes and this increases the cost of cargo clearance because every additional minute or hour spent by any visiting ship is spread on the number of cargoes it is carrying as demurrage charges.
With the efforts of the Federal Government though the Nigerian Ports Authority (NPA) to reduce the turnaround time of ships at the nation’s ports, the huge amount of charges slammed by shipping lines on cargoes destined for Nigerian ports has continued to go down as they spend lesser turnaround time at the ports and lesser amount slammed as demurrages on cargoes by the visiting shipping line.
However, the shipping charges, which also include demurrages fees and container deposit fees, are all billed in dollars and an unstable naira against the dollar will always make the cost of doing business at the nation’s port very high.
Nigeria operates a landlord-tenant mode of port operation where private enterprises have taken over operation of the different port terminals while the NPA oversees the private operators as tenants since 2006.
For all the terminal operators, payments to the Federal Government through the NPA has been in dollars, meaning the rate of the dollar at any given moment translates to what the terminal operators pay to the government.
With the naira sliding further down to the dollar, operators, have over the years, transferred the difference of what they pay as lease fees and cargo throughput fees on port users.
In the words of a port worker who wouldn’t want his name in print, “The terminal operators don’t run charity organisations. Whatever they pay to government due to the increasing difference in the naira to dollar rate is transferred to port users, be it an importer or an exporter.
“We keep reading reports of Nigerian ports being among the most expensive ports in Africa, but our unstable foreign exchange rate plays a major part in this situation. It is beyond the terminal operators because they are in business to make profit.
“The terminal operators, since they took over the ports, have increased Nigeria’s port efficiency. The era where vessels spend more than a month just to turn-around is gone. Vessels now spend less than a week to turn around and this has greatly reduced the amount cargo owners pay as demurrages on cargoes at Nigerian ports.
“Terminal operators have changed the face of Nigerian ports business with modern and state-of-the-art cranes that handle cargo much more easier and faster, thus reducing turn-around time of ships.
“The terminal operators will continue to do more but they don’t have a control over how much the naira exchanges to a dollar. If terminal operators pay to the government in dollars, they have to recoup such expenses and it must come from the port users.”
Import duty is calculated by summing up surface duty (percentage of CIF), surcharge, administrative charge (CISS), ECOWAS Trade Liberalisation Scheme (ETLS) and 7.5 percent value-added tax (VAT).
Since the Nigeria Customs Service calculate import duty rate based on the official rate of the dollar at any given moment, forex volatility has not been fair to Nigerian importers in recent months.
“As a government agency, we don’t deal with what the black market or parallel market says about the dollar. Customs calculate import duty based on official market rate which is the Investors’ and Exporters’ (I&E) window that the Central Bank of Nigeria (CBN) uses.
“Whatever you see in our system is what has been communicated to us by the CBN. It is determined by the Central Bank of Nigeria. It is a monetary policy. We only implement what is given to us. It is a monetary policy and anything monetary is not determined by Customs; it is determined by the CBN. We only use what is communicated to us to determine import duty of imported goods,” the National Public Relations Officer of Customs, Abdullahi Maiwada, said recently in a chat with the Nigerian Tribune.
With major charges determined and calculated based on dollar rate, the cost of doing business at Nigerian ports will continue to soar if the naira continues to slide further down to the dollar.
It is imperative that the new leadership of the CBN get things right by restoring confidence in Nigeria’s forex market or Nigerian ports will continue to rank as one of the costliest in sub-Saharan Africa.
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