Factories, ports hurt as FG dithers on 41 items

The Federal Government’s unwillingness to remove factory inputs from the list of 41 items banned from accessing dollars from the local foreign exchange market  is hurting manufacturers and slowing down port business, as well as revenue that could have accrued to Nigeria as import tariffs.

“As we speak, there is low tonnage at the ports because manufacturers who used to bring in raw materials in large quantity in the past, have not been doing so recently,” Tony Anakebe, managing director of Gold-Link Investment Limited, a port operator, told BusinessDay.

“We also foresee severe downturn at the ports this year if the Federal Government fails to review the 41 items policy, along with the upward review of Value Added Tax (VAT) on imported luxury goods,” Anakebe  said.
He further observed that the implementation of the policy has crippled port business as only a few imports are currently coming in through the country’s seaports.

Anakebe said shipping companies and terminal operators have been seriously undermined by low business caused by the shortfall in dollar supply.He added that this has led to 6,000 job losses in the maritime sector between 2015 and early 2017.
The CBN restricted 41 items from accessing foreign exchange from the formal market in 2015. Senior government officials have consistently said this would be placed on a fiscal or administrative pedestal.

Nigeria’s vice president, Yemi Osinbajo promised manufacturers at an event held by the Lagos Chamber of Commerce and Industry in 2016 that the 41items would be treated as a fiscal measure.

Finance minister, Kemi Adesoun, said in December 2016 that the Federal Government would place administrative measures (with fiscal measures) on the 41 items, to reduce demand pressure in the parallel market. This is yet to happen, two months after the promise.

The price of palm oil, which is one of the items restricted from the foreign exchange market by the Central Bank of Nigeria, has moved up by over 200 percent, forcing up production costs of companies that use it as input.

Manufacturers like Chikason Industries are desperately looking for cheaper palm oil/ kernels from local farmers. Though the margins of local manufacturers such as Presco, PZ Wilmar and Okomu have risen recently, the demand-supply gap of over 700,000 metric tonnes has made the commodity scarce and its price extremely high.

“With  dollar scarcity and restriction of palm oil from the foreign exchange market, a lot of companies which import palm oil for industrial use are now sourcing locally. This has increased the demand for the product in the market, but production is still the same,” Celestine Ikuenobe, director of research, Nigerian Institute for Oil Palm Research (NIFOR), told BusinessDay.

Cold-rolled steel is among the 41 items, but Nigeria does not have the capacity to produce it and satisfy the demand, Frank Jacobs, president, Manufacturers Association of Nigeria, told BusinessDay recently. Cold-rolled steel/ coils are used for the manufacture of other metal products such as roofing sheets, all home appliances, metal furniture, desks, filing cabinets, shelves, tables and chairs,

In fact, roofing sheets manufacturers had a spat with Western Metal Products Company (WEMPCO), Midland and Kam Wire, which were given waivers by the immediate past government to produce cold-rolled steel,  because the three companies could not  produce enough to meet demand.

Government revenue has had a hit recently. The Nigeria Customs Service (NCS) said it generated N385.7 billion revenue from January to June 2016. This was against the N438.2 billion generated in the same period in 2015.
The NCS generated N898 billion as revenue in 2016, which was less than the N904 billion collected in 2015, according to Joseph Attah, the service spokesman.

Attah, who said the service was given a target of N937 billion as revenue in 2016, attributed the shortfall to the difficulty in accessing foreign exchange and removal of the 41 items.

Emma Nwabunwanne, a Lagos-based importer, observed that the effect of the policy restricting importers’ of 41 items is obvious in the skyrocketing prices of inputs and commodities in the market.

“The Nigerian Ports Authority (NPA) recently released statistics on vessel traffic and cargo throughput for the third quarter of 2016 which presented clear evidence  that Nigerian seaports are not doing well. However, we do not expect to see improvement in the first and second quarters of this year, given the continuous silence of the Federal Government on the review of the policy,” Nwabunwanne added.

Nted Emmanuel, president-general of the Maritime Workers’ Union of Nigeria (MWUN), urged the Federal Government to review or relax the foreign exchange rule to re-engineer economic activities in the nation’s seaport and allow dockworkers to retain their jobs in time of austerity.

ODINAKA ANUDU & AMAKA-ANAGOR EWUZIE