High import duty, constant upward adjustment of exchange rates for cargo clearing by Customs, and dollar scarcity are the major factors that limited the growth of the Nigerian port industry in 2023.
Foreign exchange crisis, which escalated with the removal of subsidies and the introduction of the Central Bank of Nigeria’s (CBN) floating naira policy in June, worsened importers’ woes as the naira tumbled against the dollar and other major foreign currencies.
The weakening naira in both the official and parallel markets also resulted in several adjustments of the exchange rate for cargo clearing at the port from N422.30/$ at the beginning of President Tinubu’s administration in June 2023 to the current N951.941/$.
According to industry analysts, this development negatively impacted port business as importers required huge amounts of naira to source dollars to bring in goods into the country as well as to pay tariffs and levies to the Nigeria Customs Service.
They said the harsh operating environment has forced some manufacturers to exit Nigeria to other neighbouring countries, while some importers have already abandoned cargo at ports.
“The losses recorded in the maritime industry in 2023 are not quantifiable. Several things went wrong. The FX rates of naira against the dollar and exchange rate for clearing imports imposed by the Nigeria Customs surged very high. All these led to a decline in the volume of imports,” said Tony Anakebe, a licensed Customs agent.
According to him, importers are now under pressure because they buy dollars at a very high rate even when it is also difficult to secure bank loans to fund import business.
He however said the end-users pay the ultimate price because importers push the cost back to the final consumers, which is why prices are high in Nigeria today.
Reviewing the port industry, Lucky Amiwero, an industry stakeholder, described 2023 as a tough year for the maritime sector due to the removal of subsidies and the floating exchange rate that affected imports and escalated prices of goods.
He said the surging inflation reduced the purchasing power of importers and consumers such that the volume of goods declined tremendously.
He added that many people are going through pain and businesses are also closing up shop.
Obi Nwabunwanne, a Lagos-based importer, said exchange rate volatility and scarcity of dollars forced many importers out of business, resulting in a lull in import activities.
Nwabunwanne further said that the rise in the cost of clearing cargo due to the upward review of exchange rates made importers pay more as import duties and levies.
“These FX issues were due to policy inconsistency and exchange rate volatility has done more damage than good to importers. As a result, the inflation and food prices have continued to surge without control as importers and manufacturers continue to adjust prices to cover for the production cost,” he said.
Before the end of 2023, Customs adjusted the exchange rate for cargo clearing at the port industry four times after it started the implementation of the floating foreign exchange rate regime introduced by the CBN in July.
The Customs had on June 24, 2023, adjusted the exchange rate from N422.30/$ to N589/$; on July 6, 2023, it was adjusted to N770.88/$; on November 14, 2023, it was further adjusted to N783.174/$; and on December 7, it was adjusted to N951.941/$.