FX scarcity, CBN ban on 41 items form major setback for port business in 2016

Scarcity of foreign exchange, continuous fall in the value of the naira and the Central Bank of Nigeria’s (CBN) restriction on 41 items from accessing foreign exchange from the official window were some of the issues that impeded the growth of port business in 2016, analysts say.

Analysts, who took turns to review the ups and downs of business activities in 2016, say that the worse hit for most businesses was the inability of importers to have access to foreign exchange, as shortage of dollar compelled importers to use more naira to buy foreign exchange needed to carry out their transactions.

According to them, the lingering economic recession and high rate of inflation also led to hike in the prices of goods, and also reduced the purchasing power of consumers, who preferred to invest their little income on household supplies, food items and less luxury items, thereby making importation business less interesting.

“The year 2016 has been very challenging because shippers do not have the foreign exchange to do business, and further depletion of oil revenue helped to fuel inflation in the system. This is why we did not have the usual Christmas rush that is fuelled by people shopping while many would be going to shop in Benin Republic,” Jonathan Nicole, president of Shippers Association of Lagos State, says in an interview.

Nicole, who blames the CBN forex policies for low business shippers faced this year, also states that the unstable policy of government is not only thwarting the effort of genuine importers to create jobs and wealth, but also imposing cost on shippers.

“Formally, December used to be ‘rush period’ to import, but where is the money? If we buy dollar at say N313/$ and an importer needs about $30,000 to bring a container load of goods, it will amount to about N9 million and that is huge. This amount is less duty, shipping, terminal and other charges, and how is the importer going to recover? And this will result to more job loss,” Nicole explains.

Stating that government has not helped the industry that depends on importation for the essential raw materials for production, as it ought to, Nicole notes that this is one of the reasons why Nigeria has a lot of bad loans in the system because industries find it difficult to break even.

To Nicole, another policy that negatively affected port business in the year under review is the arbitrary raising of exchange rate for import duty payment by the CBN, which the apex bank attributed to the rise in foreign exchange rate at the interbank market.
“Before the importer can embark on importation, he or she obtains a form ‘m’ that is approved by the CBN and it has an attached exchange rate showing that the shipper has entered into a contract with the CBN. It is based on the exchange rate on the Form M that the shipper pays the supplier and import duty, but this sudden change rendered Form M invalid,” he says.

The Nigerian Ports Authority (NPA) third quarter report reveals that a total of 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 tons in January this year to 5.6 million in September, which is also the lowest in the year.

It also shows that a total of 3,347 ocean-going vessels have called Nigeria this year with about 100,152,274 metric tons of goods. The breakdown shows 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.

In his own view, Tony Anakebe, managing director, Gold-Link Investment Limited, a Lagos-based clearing and forwarding company, says ship traffic and the volume of containers as well as other cargoes coming into the nation’s seaports have reduced significantly this year.

As a result, Anakebe notes that many businesses, manufacturers and individuals are not able to raise finance to go into importation due to high dollar rate, and the most affected are industrial supplies like raw materials and construction goods.

“Volume is down and the importation culture of Nigerians has changed following the CBN monetary policy that does not allow importers free hand to import. With the CBN policy restricting importers of 41 selected items from accessing foreign exchange at the interbank rate, many importers’ including manufacturers no longer import as they used to while some that could not cope have shut down,” Anakebe says.

Appraising business performance in 2016, Lucky Amiwero, national president, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), says high import duty of 70 percent on vehicles, made Nigerian seaports to lose its volume to ports in the neighbouring countries of Benin Republic and Togo.

Amiwero, who notes that Nigerian ports lost close to 80 percent of their vehicles as many importers divert roll-in, roll-out vessels carrying vehicles to the ports of neighbouring countries where it is cheaper to import vehicles and bring them through the borders, and this also led to high rate of smuggling by importers.