• Friday, March 29, 2024
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BusinessDay

FX crisis cripples businesses as port activity slows

FX crisis cripples businesses as port activity slows

Seven weeks to Christmas and New Year celebrations, the hustling and bustling usually seen at Nigerian ports in the run-up to the festive season is absent as foreign exchange crisis trouble importers.

BusinessDay gathered that businesses are cutting importation due to FX scarcity, the uncertainty in the economy, and the impact of surging inflation rate in the country.

According to port users, business activity at the ports is down by 50 percent as a Customs examination bay that normally has between 150 and 200 containers positioned for Customs examination a day now manages to see between 40 and 51 containers.

There are close to 8,000 imported ‘Tokunbo’ cars abandoned because of the high duty demanded under a new duty classification. For instance, a Toyota Highlander 2020 now attracts duty of N5 million, excluding value added tax and levy.

They also blamed the high exchange rate for calculating import duty at the port for the high cost of tariff payable on imported cargoes.

Just two months back, the Nigeria Customs Service adjusted the official exchange rate for calculating import duties and levies from N409/$ to N422.3/$ resulting in a 3.25 percent increase in tariff payable by importers.

Sunny Ugorji, a stakeholder at PTML Terminal in Lagos, said the volume of imports remains low despite Christmas being less than two months away.

This, Ugorji said, goes to show a lull in business activities at the port unlike before when car dealers would bring in a lot of used cars for buyers who are waiting for Christmas to make purchases.

Leonard Ogamba, president of the Shippers Association of Lagos State, told BusinessDay that the paucity of FX is caused by a high trade imbalance in the country.

According to him, Nigeria is a highly import-dependent nation that has fewer opportunities to earn FX from export trade but if there is a balance of trade, there would not be much pressure on the naira.

“Globally, there has been a frustration of currencies in favour of the dollar, which is also being encouraged by the impact of the Russia-Ukraine war on energy and food prices,” Ogamba said.

He said the volatility of the dollar has a huge impact on the landing cost of goods, which also results in the high inflation being experienced in Nigeria today and the world at large.

“When shippers compute their landing cost, it is usually high due to the high exchange rates and no shipper will sell his or her goods below the cost price,” he said.

Ogamba, who pointed out that there are other factors affecting businesses, said government policies such as the recently introduced e-invoicing and benchmark valuation are adding to the high cost of tariffs paid on imports by shippers.

Ogamba said: “Shippers are now bringing goods through the neighbouring ports due to these policies and it is also encouraging smuggling. The benchmark policy contravenes the provision of the transaction value as the basis for Customs duty valuation and is not different from open market pricing.

“It is not the standard operating procedure, which is why people send their containers to ports in the neighbouring countries and bring them in through the borders. These are contributing factors to why we do not have many containers coming into our ports.”

Citing an example of how high exchange rates and the e-invoicing policy led to payment of high tariffs on imports, Ogamba said when he brought cars, the tax base given by Customs was usually higher than what he bought the car abroad.

Tony Anakebe, a Lagos-based clearing and forwarding expert, said a 20-foot container pays up to N3 million as import duty while a 40-foot container pays nothing less than N5 million as duty due to a high exchange rate for import duty calculation and Customs Policy.

Read also: Nigeria’s used vehicles import drops 51.2% in H1 2022

He said the recent increase in the exchange rate for import duty payment by Customs from N409/$ to N422.3/$ means there is a 3.25 percent increase in the duty payable and that importers have to source more money to pay duty.

“The FX scarcity has slowed down the volume of imports into the country. Importers are finding it very difficult to access the dollar from the central bank’s official window, and in the black market, Dollar is heading to N900, which is going to worsen the importers’ woe because they will need more naira to access dollars,” he said.

Anakebe said there is total uncertainty in the economy and importers are not getting FX to do their businesses such that even Nigerians in the diaspora are sceptical about shipping goods to Nigeria due to the unfriendly economic condition.

“This is the time in the year when Nigerians in diaspora buy cars and some other personal effects to bring into the county, which also adds to the upbeat of activities in the port. But the case is no longer the same now,” he said.

Anakebe said his company has about six Nigerians in the United States who want to ship cars into the country but they are skeptical of the economic situation and if they will be able to recoup their money.

On the exchange rate, Timi Bomodi, public relations officer of Customs, said Customs does not peg the exchange rate for calculating import duty, rather it is the central bank that determines the official exchange rate for calculating duties.

The Nigerian Ports Authority Shipping Position shows that only about 24 ships with containerised imports, frozen fish, general cargo, bulk sugar, bulk wheat, bulk gas, premium motor spirit, and automatic gas oil are expected to berth at the Lagos Pilotage District between November 4 and 12.