CARGO AND TERMINAL HANDLING CHARGES: Nigeria's Inertia and Benin Republic's Unfair Trade Practices

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 Apapa Port Terminal

 

Under the terms of the 2006 concession of the ports, the private terminal operators pay a range of taxes - cargo dues and lease fees - to the Federal Government in US dollars. However, while tax on cargo dues is logically paid in United States dollars, the terminal operators are compelled to pay lease fees also in dollars. Essentially, lease fees, paid annually, is a product of charges on rent and storage collected by the operators and is collected in naira. In order to meet the requirements, they apply to the Central Bank of Nigeria (CBN) for dollars to be remitted to the Nigerian Ports Authority (NPA).

At the time of inception of concession, the dollar exchanged for N120 and the CBN readily obliged. In the past two years, the terminal operators have had to source for the dollar at the black market to pay the lease fees which the Federal Government receives using the official exchange rate. The incongruity in the requirement became more pronounced when the naira closed in on N500. When the operators buy the dollar at N500 and NPA remits to the Federal Government who in turn uses the official exchange rate of about N300 to account for the revenue, it raises questions on who benefits and loses from the huge disparity in both exchange rates.

Beyond the paradox in the denomination of the currency for the payment taxes to the federal Government is the challenge posed by the smart economic engineering of the Benin Republic authorities. And when the retinue of charges imposed on port users in Nigeria is added to the mix, the picture of a system structured to struggle against aggressive competitors is complete.

 

BENIN REPUBLIC’S AGGRESSIVE POLICIES

To economic analysts, it was illogical that importers would use Cotonou as their port of destination, pay duties and other charges to Beninoise authorities, transport their goods into Nigeria through Seme border where they are also required to pay duties and other requisite charges and still claim that the route is cheaper than importing directly through Lagos ports.

The seeming mystery behind some importers’ preference for Cotonou is the attraction of the aggressive marketing strategy of the government of Benin Republic to harness the latent advantage of sharing a common bounder with a big brother neighbour.

Investigations by Business and Maritime West Africa revealed that a package of smart economic policies have been adopted by the Francophone neighbour to harness the huge volume of Nigeria’s mainly inward cargo. Leveraging on the unique location of its main port of Cotonou which opens up directly to the Atlantic unlike the estuary ports in Nigeria, Benin adopted a very flexible tariff regime that eliminated the galaxy of charges and taxes shippers are compelled to pay in Nigeria.

Shippers are usually encouraged to classify their imports through Benin as transit goods with Niger Republic, Mali or even Chad entered as the final country of destination. Relying on the goods’ status as transit goods, no import duty is demanded or paid. All that is demanded is transit charge of the equivalent of N25,000 with  uniform handling charge of about 500,000 CFA paid for every vehicle and a set of graduated charges for containerized goods. No demurrage is paid no matter how long the goods stay at their terminals and no others costs are incurred.

As transit cargoes, the Benin Customs ought to escort the goods to the customs post of the country of destination. And this is the point they play the smart card. No such escort is undertaken as every party knows Nigeria is the true final destination.

The charges paid in Cotonou may seem low compared to what obtains in Nigerian ports. However, the volume of cargoes handled is enough to comfortably oil the wheel of their economy while the consignee saves substantial amounts of money even after paying import duty and other taxes at Seme before the goods legally enter the country.

In line with their flexible marketing, the Benin has also reacted to the collapse of the naira by reducing the handling of 500 CFA to about 200 CFA.

 

TERMINAL OPERATORS’ CHARGES

The range of taxes paid at Nigerian ports seems to have been designed to complement Benin’s marketing strategy to attract goods destined for the country. When the ports were concessioned to private terminal operators about 10 years ago, the expectation was that the cost of services and, by extension, the quality of service, will steadily increase to match the country’s status as the dominant destination for cargoes within the west and central African sub-region.

However, the wide range of charges and taxes imposed to cover general cargoes, break bulk, containers, vehicles as well as palletised and unitised cargoes may have aborted the dream. The charges include

  • Cargo dues
  • Delivery charges
  • Storage charges
  • Mechanical equipment charges
  • Vehicle entry permit
  • Terminal handling charges
  • Documentation charges per bill of lading
  • Admin fee for cancellation
  • Manifest amendment per bill of lading
  • Tally sheet
  • Documentation charges per bill of lading miscellaneous
  • Terminal security tariff
  • Weekend and public holiday charges
  • Cargo delivery invoice
  • Provisional cargo dues documentation
  • Wharfage fees
  • Royalty fees

 

For the concessionaires who have largely continued to meet their obligations to the government, they have warned that the collapse of the naira in the foreign exchange market and the ever increasing cost of providing services have made the retention of the terms o the concession untenable.

According the report on the state of the port industry in Nigeria, seaport terminal operators in lost about N58.9 billion to the rising foreign exchange scarcity, Consumer Price Index (CPI), among others, in eight years. According to the report compiled by a leading audit firm but yet to be officially released, the loss was due to a combination of factors which include rising Consumer Price Index (CPI) and the terminal handling charges (THC) which remained largely unchanged since 2006, among other things.

It said that “while the THC has remained largely unchanged, the CPI for Nigeria has increased by 119 per cent within the same time frame.

At concession, dollar to naira rate was $1.0 to N151 (parallel market). However, the rate is now much higher. There has been no change in the terminal operators charges as well as no element of CPI adjustment. The effect of the exchange rate has not been applied on THC since the concession agreements were signed.  Average estimated loss over the years amounted to N58.9 billion.

It added that an adjustment of the CPI of Nigeria and the foreign exchange fluctuation on the THC shows that the THC should be charged at a 238 per cent increase on its present fees, which would put it at N153,780 instead of N45,500.

The report said the exchange rate had affected the business of the terminal operators in the payment of government fees as most of the commitments of the terminal operators were in dollars.

These findings also identified insufficient power supply, dilapidated port access roads, traffic gridlock and uncertainty of policy direction, among others, as part of challenges to the nation’s port operations.

The report noted that though the 2006 port concession had yielded significant improvement in port operations, including the coming of “larger vessels with improved cost effectiveness, improved cargo handling technology and delivery speed as well as reduced unit freight cost, much of the expected revenue has been negatively impacted by government policies and their effects on the economy.”

To enhance the operational efficiency of the concessionaires, the Federal Government had undertaken through the NPA to among other things conduct regular maintenance dredging of the channels to all ports and supply reliable electricity to the terminals. For Calabar Port which has a peculiar challenge as the port is located 84km inland, capital dredging was expected to be carried to bring the draught to the advertised depth of 10 meters and enable container carriers access the port.

While the terminal operators have largely met their financial obligations, the government has observed the agreement in the breach. Each operator has had to meet its power needs through the acquisition and maintenance of huge generators serviced by diesel that has been increasing in cost.

The port in Calabar has not been able to receive container vessels, the modern and efficient mode of cargo delivery, due to its low draught, making the concessionaire, Ecomarine Terminals Limited, unable to utilise the available storage and holding facility and earn revenue from which to pay lease fees. For those in the frequently patronised ports in Lagos, the terrible state of the access roads has made the use of the ports a nightmarish experience.

The audit report on the ports had made a compelling argument for the review of the terminal handling charges used by the operators. However, even though that could easily appeal to them, they are equally mindful of its potential collateral damage. Rather, they will prefer a more comprehensive review of the entire process with emphasis placed on government fulfilling its own part of the bargain.

"Today’s importers are facing challenges with procuring foreign exchange. If we now add that to the need to increase port charges, you can imagine the enormity of the problem on the importer and, by extension, the consumer", Moruf Adedayo Balogun of Ecomarine Terminals told Business and Maritime West Africa. To him, the continued collection of lease fees in foreign currency defies logic. After the operators are forced to buy US dollars at black market rate, the money is accounted for by the government through the official rate.

According to him, the practise unnecessarily puts additional pressure on the naira while government and the operators lose money, leaving black market operators as the ultimate winner in the entire process. Balogun said NPA should dredge the channel to Calabar Port and re-introduce the 30 percent rebate used to lure more vessels to the port that was scrapped by NPA at the time of the concessioning.

The call for a review of the concession is steadily garnering official acknowledgement. At a recent stakeholders’ meeting in Lagos, Minister of Transportation, Chibuike Amaechi openly voiced his dissatisfaction with the state of the nations seaports. He admitted the need for a review of the port concession as a way forward. Even though the NPA says the concession agreement between her and the concessionaires has been good so far, there is still room for improvement. On his own part, Olisa Agbakoba (SAN), foremost maritime lawyer recently criticized the performance of the 10-year-old port concession and concluded that it has failed in its original objective of making Nigerian ports cost-effective.

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PIX: Apapa Port Terminal