Shipping firms squeeze businesses with demurrage, container charges

Businesses including those in the manufacturing sector that depends on the seaports to bring in raw materials have raised alarm over the high cost of doing business at the ports as foreign shipping liners continue to squeeze their profit margin with arbitrary charges.

Aside the multiple charges imposed on importers by these shipping liners, which result in the high cost of doing business at the ports, importers also criticized the collection of container and demurrage charges upfront that must be paid before the cargo is released to the owner.
Precisely, cargo owners are mandated to pay a deposit of N200, 000 per container plus an advance demurrage fee of over N250, 000 per container before taking delivery of the consignment.
Though the above-mentioned charges are refunded, if the importer can return the empty container within the five demurrage free days, the shipping firms can also deduct demurrage from the sum depending on the number days the container overstays.

On average, over 2,000 containers leave the nation’s seaport daily and their owners are compelled to pay close to N450,000 as demurrage and container charges to shipping liners, amounting to over N328.5 billion per annum.
Effectively this means that shipping firms are getting billions of naira interest-free from businesses.
According to Nigerian Shippers Council (NSC) report, importers of containerized cargo get a maximum of five demurrage free days from the day the vessel berths while the demurrage starts to count after the fifth day.
“Nigeria has the shortest demurrage free days when compared to Ghana’s seven while Republic of Benin, Shanghai and Cameroon have 10 free days,” the report said.

READ ALSO: Planned reform of container regime to save over N1.7bn yearly

Privatising the port operators in 2006 was supposed to ease congestion dramatically and the increased efficiency leading to lower costs for importers.
That has yet to happen some 10 years later, making the ports one of the major source of low productivity in Africa’s largest economy which is hobbled by slow growth and institutional dysfunction.
Nigeria scored 183 out of 190 countries in the latest (2018) World Bank ease of doing a business report in the trading across borders category.
Data from the report shows that 172.7 documentary compliance hours and 283.7 border compliance hours are needed by importers on average before they get access to their goods.

Tony Anakebe, managing director of Gold-Link Investment Limited, a Lagos based clearing and forwarding company confirmed in a telephone interview that shipping companies collect advance demurrage from cargo owners before releasing the container to importers.
“This is only obtainable in Nigeria because the abnormal system in Nigerian ports creates an opportunity for shipping liners to squeeze Nigerians. For instance, the bad road situation makes it difficult for trucks to have timely access in and out of the ports without delay,” Anakebe added.
Already, the bad roads and ongoing road work in Apapa, as well as poor traffic management, has increased the turnaround time for trucks from 24 hours to an average of two weeks. Most trucks line up for days to gain access to the ports and also spend days trying to get out of the ports.

“Importers are compelled to pay 14 days advance demurrage on the container including a container deposit charge, which would be refunded to the cargo owner at the return of the empty container. However, if the container overstayed, the number of days would be deducted from the advanced demurrage while the balance would be refunded” Anakebe explained.
He, however, stated that the situation has continued to increase the cost of doing business for importers, who in most cases take bank loans to import, pay charges and duties on imports with very little profit margins. “The consumers are the most hit because these charges often reflect in the market prices of both locally manufactured and imported items.”
He faulted the introduction of new shipping charges by the Nigerian Ports Authority (NPA), adding that though NPA has the right to introduce charges as a regulator rather than impose charges, NPA must find ways to cushion effects of high cost on cargo owners.

READ ALSO: Cargoes trapped, demurrage pile up as NESREA intercepts cleared containers at ports

Businessday gathered that earlier in the year, the NPA increased costs for cargo owners by introducing an N70, 000 royalty to be collected on its behalf by shipping companies.
“These are all illegal charges that are not obtainable in other countries but we allow these illegalities to thrive in our system because we do not have a responsive government,” said Lucky Amiwero, a renowned maritime analyst.
Amiwero criticised the NPA for introducing new charges when stakeholders are complaining about the high cost of clearing goods at the port.

NPA has transformed from being a regulatory agency to a revenue collecting agency,” Amiwero said.
In his reaction, Hassan Bello, executive secretary of the Nigerian Shippers Council (NSC), told BusinessDay in an interview in his office on Wednesday, that charges introduced by shipping companies are not new but a recovery charge from the new shipping charges introduced by the NPA.

“When there is chaos in the system, people thrive in such a situation especially as regards to the problems created by bad roads in Apapa. The new charge by shipping companies is a reaction to the new NPA charge because we had a meeting with the shipping companies and they argued that they cannot render services to Nigerians for free,” said the NSC boss.
As the economic regulator for the port industry, Bello said that the Council is working assiduously with the NPA, shipping companies and other relevant stakeholders with the hope of streamlining the charges imposed on cargo owners by shipping liners.
“Very soon, we are going to announce the streamlined charges to be collected by shipping companies because no service provider has absolute right to introduce new charges but the fact is that the port today is a mirror of what is happening in the micro economy,” Bello said.
Bello further reiterated that the Council is not saying that service providers should not introduce new charges but such must take all the necessary and legal steps.