Nigerian exporters are set to lose the sum of $360 million in the next two weeks as a result of the suspension of export receipts at the Lagos port. The management of the Nigerian Port Authority (NPA) on Monday March 22, 2021 announced the suspension of the receipt of goods bound for export out of the country for 14days. This means that between Monday, March 22, 2021 and Sunday April 4, 2021, any export transaction due for shipment within this period will not be allowed to enter the port. However, “this suspension does not affect export refrigerated cargo and trucks whose operators have secured call-up tickets as of March 19.” This is a sign of a deeper problem and the issue is the wrong disposition towards exportation of goods.
This singular action of the NPA is going to cost non-oil exporters of Nigeria an estimated sum of about $360 million and this figure is based on the weekly value of shipments of non-oil products from Nigeria which was estimated to be $180 million per week in the year 2019 (this estimate is based on NBS data). We have spoken a lot about the need for diversification of this economy, but this has only been in words and not in deeds. In as much as NPA in its wisdom thinks that this suspension of exportation is what needs to be done at this time, it appears to be that the decisions were not fully thought through because they could have offered some palliatives to reduce the negative impacts of this decision on the exporters and the economy at large. Examples of such palliative measures are suggested in the latter part of this article.
Let me start by stating that this decision has very far-reaching implications for the already maligned, discouraged, loss making and uncompetitive exporters in Nigeria. The negative implications of this decision include additional interest cost on the overall cost of the transactions to the exporter because of the delay caused by this suspension. In addition to this, the exporter already has an agreement on the latest shipment date with the buyer and this is agreed upon based on the anticipated delay at the port. This suspension will be extending the latest date of shipment, which constitute a breach of contract that can make the buyer to cancel the contract. The late shipment caused by this suspension will also lead to discrepancies in the document presented under letter of credit transactions and this will either cause delay in payment or total rejection of the goods.
Currently, some trucks carrying products in export containers are on their way to the Lagos ports from different parts of the country. The implication of this two-week suspension of export receipts is that those trucks and shipping lines are going to charge the export demurrage and detention fees respectively. This is a delay that is not the fault of the exporter, but he has to pay a daily fee to these service providers for the next two weeks. The implication of this delay is also that the goods in the container might begin to deteriorate because of the heat of the sun on the stationary containers. In addition to this, goods coming into Lagos might need to be warehoused for these two weeks and afterward loaded on another truck for onward movement to the port upon expiration of the two weeks. This will come to the exporters again at an additional cost. All these extra costs created by delay, discrepancies, demurrage, detention fees and deterioration of the goods will eventually lead to loses that will put the non-oil exporters in debt.
It is important to state that there are several challenges for an average exporter in Nigeria. The Nigerian non-oil exporters are already struggling to be profitable due to the unfavourable exchange rate regime of the Central Bank of Nigeria (CBN); they are already not competitive because of the huge infrastructural deficit; they are already under priced because of the tarnished brand of the country in the international market; they are already having an unnecessarily long cash conversion cycle because of the various delays on the road and at the port. In addition to all these challenges that confront the exporters, the NPA has further complicated it and made worse by the two week suspension of export transactions imposed by the agency.
So what could have been done differently by the management of the NPA in order to ameliorate the challenges of exporters while the two week suspension lasts? The NPA should have given some weeks notice ahead on the effective date of this suspension of export receipt. This is to enable exporters inform their buyers, renegotiate the latest shipment date, amend their contract to reflect the new dates, amend the latest shipment date and expiry date on the letter of credit, put a hold on their shipments to the Lagos port from different parts of the country in order to avoid demurrage. In addition to this and in the short term, the NPA can work with different barge companies in Lagos to devote their barges to pickup export containers from their terminals and move them to the port within this period so at least some export transactions can still be done while the suspension lasts.
In the long term, this is a wakeup call for the NPA to do all that is possible to make the eastern ports work optimally and become attractive for shipping lines as destination ports in Nigeria. This will make more vessels to call at these ports and hence make more exporters to also consider using them as the loading port for their export transactions.
Finally, I will like to say that it is time to begin to walk the talk as far as export is concerned in Nigeria. In doing this, the various Ministries, Department and Agencies (MDAs) of government that are directly or indirectly working with exporters will need to give all the necessary support required to make non-oil export volume to grow in the country. The MDAs also need to have a stakeholder engagement with the exporters ahead of this kind of announcement in order to be able to get enough suggestions on how best to go about the suspension (if it is necessary) with minimal collateral damage.
