The Centre for the Promotion of Private Enterprise (CPPE) has issued a cautionary statement that Nigeria may lose cargo to neighbouring countries due to the high exchange rate imposed by the Nigerian Customs Service (NCS) on import charges. This was revealed by the group in a statement released under the signature of Dr. Muda Yusuf, Director/Chief Executive Officer (CEO), in which they bemoaned the burden that the high exchange rate for collecting import duties has had on businesses and the expense of living in the nation. The federal government’s drive to generate money may be adversely affected by the possibility of cargo berthing in neighboring countries, as per the statement.
It further elaborated how the high and unstable exchange rate for assessing import duties is exacerbating the already high inflation, driving up Manufacturing and operating expenses for producers and other enterprises, exacerbating the crisis caused by the rising cost of living, endangering investments and jobs in the maritime sector, and eroding investor confidence. Also, there is an increased danger of Smuggling and cargo diversion to nearby nations, which could compromise the achievement of customs Revenue targets. It is noteworthy that the Nigeria Customs Service recorded a decrease in shipment volume in the first half of the year in spite of a 127% rise in income during that same period.
Current exchange rate for custom duties is unfavourable.
CPPE reaffirmed its request that the President issue an Executive Order setting the customs duty exchange rate at ₦1000/$ for the ensuing six months. It stated that the suggestion is in line with the federal government’s ongoing initiatives to lessen the difficulties that individuals and companies are facing. The Organised Private Sector (OPS) strongly backed this strategy, and in fact the Presidential Committee on Fiscal Policy and Tax Reforms had made a similar proposal. CPPE cautioned that the exchange rate for customs duties on the Nigeria Customs Service portal, which is currently ₦1578/$, has been fluctuating nearly weekly and is unfavourable for investors.
Concerns on Trade policy and foreign exchange policy were also brought up by the center. It stated that, in accordance with the terms of the current foreign currency policy, the Central Bank of Nigeria’s (CBN) involvement should be limited to the opening of Form M for importers. While issues relating to international commerce should come under the purview of the Federal Ministries of Finance and Trade and Investment, as these organizations are legally in charge of trade policy. The statement indicated that the CBN’s decision of the exchange rate for customs duties was deemed an excessive extension of trade policy, necessitating prompt rectification.
Customs lengthy procedures have drawn criticism.
A number of causes, including shippers’ growing preference to transit their goods through ports in neighbouring nations, are contributing to Nigeria’s loss of cargo traffic to those countries. The lengthy and onerous procedures used by Nigerian Customs have drawn criticism. Up to 30 percent of cargo that is meant for Nigeria is thought to be detoured to ports in nearby nations like Benin (Cotonou), Togo (Lomé), and Ghana (Tema) prior to being trafficked or brought into the country lawfully. These ports have made investments in state-of-the-art infrastructure, enabling faster vessel turnaround and cargo clearing times.
At Nigerian ports, the estimated price of clearing a container which is $1,500 to $2,000 per TEU (Twenty-foot Equivalent Unit), is much higher than at ports in neighbouring nations which ranges from $500 to $1,000. The amount of cargo handled at the Lagos ports (Apapa and Tin Can Island) decreased by almost 25% between 2020 and 2023. Congestion, inefficiency, and rivalry from nearby ports are some of the causes of this. The anticipated yearly loss of port revenue in Nigeria as a result of cargo diverting to neighbouring countries is around ₦300 billion, or roughly $780 million.
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According to reports, the diversion of cargo to ports in Benin, Togo, and Ghana costs the nation over ₦100 billion (about $260 million) in customs taxes each year. While ports in nearby nations like Lomé and Tema only have a cargo dwell period of seven to ten days, ports in Nigeria have an average dwell time of 20 to 30 days. The average berth utilization rate in Nigerian ports, particularly Lagos, is 70%, while Tema Port in Ghana has a rate of over 90%, implying that Ghana’s ports operate more efficiently. While ongoing and planned initiatives such as the reforms to the customs system and the Lekki Deep Sea Port are positive advances, the current situation of cargo diversion will need to be reversed with sustained effort.