High import tariffs resulting from the adjustments in exchange rates for cargo clearing amid the further depreciation of the naira are putting manufacturers and importers under serious pressure.
Given the development, importers would require more money to source dollars to bring in goods and to pay import duty and levy to Customs – a development that will force many to cut down on their inventories, and raw material imports while many importers may abandon their containers at the port due to lack of funds to clear them.
In the last six months, Customs has adjusted the exchange rate for calculating import duties twice, from N422.3/$ to N770.88/$ in July, and then to N783.174/$ following the implementation of a floating foreign exchange rate regime by the Central Bank of Nigeria (CBN).
The Nigerian Ports Authority said that over 7,000 containers are currently abandoned at the ports, and industry analysts believe that the number will increase with the surging rates of import tariffs.
Jonathan Nicole, a shipping expert, told BusinessDay in a phone interview that manufacturers are the worst hit by the continued upward adjustment in the exchange rate for cargo clearing at the port.
He said many manufacturers are finding it extremely difficult to plan on how to restock their inventories because the situation comes with a lot of unpredictable events.
According to him, many companies are operating below the production capacity due to the present economic headwinds including the high energy costs occasioned by fluctuating prices of diesel and electricity tariff, which are increasing the costs of production for companies.
He said many companies will start cutting down on staff strength to reduce expenditure if costs continue to rise.
“The harsh economic climate is forcing many companies to leave Nigeria, especially those in the manufacturing sector. GSK has left, which was a big blow to the Nigerian market, and many others are making plans to relocate from Nigeria to more business-friendly climates in Africa,” he said.
Nicole said Nigeria needs technocrats to make good economic decisions that will salvage the nation’s economy.
Obi Nwabunwanne, an importer, said that payment of high import tariffs for clearing goods at the port will force many importers to abandon their goods at the port.
According to him, Nigerian businesses now need more money to bring goods into the country and even more to clear the goods from the ports.
“The inflation rate in Nigeria is going out of hand due to the FX rates and the exchange rate for cargo clearing. Prices of goods are unimaginable such that imported used cars are now priced as high as new vehicles were priced three years ago. People cannot buy used cars anymore, not to talk of brand-new cars,” he said.
He called on the Ministry of Finance and the CBN to rally around and find lasting solutions to the continued depreciation of the naira.
On his part, Tony Anakebe, a Lagos-based Customs licensed agent, told our correspondent that the regular adjustment in FX rates for cargo clearing at the port will drastically reduce the volume of imports coming into the country.
He said importers bringing in five containers of goods can only be able to bring in two containers because apart from the exchange rate for clearing imports at the port, the central bank’s official exchange rate has also gone up to over N780/$.
He said the situation is also adding to the surging inflation, which is heavily affecting the masses due to the skyrocketing food prices.
Citing an example of the economic impact of the regular adjustment of exchange rates for cargo clearing at the port, Anakebe said his company recently cleared a 40-foot container of medicines for N17 million.
According to him, his company used to clear a similar 40-foot container of medicines for N7 million about a year ago.
He said: “I wonder how the importer will sell the goods in that container, going by the costs of both imports and that of clearing. The prices of drugs are surging uncontrollably. This is putting both the sick and the importers of drugs under serious pressure.
“This situation is also breeding unhealthy competition among the importers as many of them will now have the room to bring in fake and substandard medicines into the Nigerian market. How can the poor masses afford the high prices of drugs? This is why Nigeria is having a series of sudden deaths in the country.”
Giving insight into what manufacturers face at the port, Mokutima Ajileye, managing director of Procter and Gamble Nigeria, said policy inconsistency is largely affecting the growth of the manufacturing sector, adding that the unpredictable state of FX rates does not enable manufacturers to plan.
She said at a recent forum in Lagos that manufacturers are facing a situation where they import a product under a certain HS-Code only for it to get to the point of clearing at the port, and Customs will tag the HS-Code as wrong.
“Then, the product will be held at the port while the importer tries to resolve the HS-Code issues but at the end of the day, the manufacturer will be forced to pay demurrage and rent to the shipping company and terminal operators,” she said.
According to her, such development only ends up putting the manufacturing sector under a lot of pressure.
On the impact of exchange rates on vehicle prices in Nigeria, Justin Ngini, deputy general manager of Ford Sales at Coscharis Motors, told our correspondent that a brand-new sport utility car such as the newly launched Ford Territory is sold for as much as N37 million in Nigerian market due to high exchange rate.