“There is a big challenge of access to Tin-Can and Apapa ports, it is affecting both imports and exports and it has also affected the turnover”
Mr. Muda Yusuf is the Director General of Lagos Chamber of Commerce and Industry. In this interview with Anozie Egole, he spoke extensively on the many challenges facing the Nigerian maritime sector and the way forward. He also alleged that one of the biggest problems bedeviling Ease of Doing Business is the Nigeria Customs Service.
“The automobile policy is not a sustainable policy”
What is your assessment of the Nigerian Maritime industry in the first quarter of 2018?
The first quarter has been a mix-bag in the sense that, the foreign exchange situation which was a major problem for importers last year has improved significantly. So the challenge of liquidity in the foreign exchange market which affected the traffic of imports has improved. More people are now better positioned to import than what we had last year. But the big issue in this quarter that affected the maritime sector is the infrastructure at the ports. First there is a big challenge of access to the ports, Tin-Can and Apapa ports. That is a very serious problem affecting both imports and exports and it has also affected the turnover, the type of businesses that could have been generated at the ports. It has increased the cost of haulage because you have to retain vehicles for a longer period. Demurrage cost has increased significantly; both with the shipping companies and terminal operators because cargoes are not able to be evacuated on time. Those who are importers who borrowed money to import, interest cost has increased because for as long as your cargo is tied- down at the ports, interest will be increasing because you borrowed money to do the import. Insurance cost too has gone up because of the situation at the ports; insurance on vessels coming to Nigeria also went up because things are not so stable in the ports. Shipping charges also went up because when a ship owner knows that you are not likely to discharge immediately when you get to Lagos ports, then you have to pay additional charges for the number of days that you will retain the ship. So all these things put a lot of pressure or created major challenge in the first quarter of 2018.
What do you think is the economic cost of all these challenges and what is the way forward?
Well the economic cost of all these challenges is, first it will increase the cost of goods that are imported into the country which will invariably impact on the inflationary situation in the country. Because the cost that importers and maritime stakeholders bear, the additional cost they bear in terms of interest cost, demurrage, increase haulage cost; all these costs will be transferred to the final consumers ultimately. This means that the cost of living and cost of production goes up and that is not good for an economy. Another point is the fact that quite a number of our cargoes are being diverted to neighboring countries. And when you divert cargoes to neighboring countries, it is as good as diverting businesses to these countries. The maritime business that is supposed to come to our maritime investors or sector operators here are lost to the neighbouring countries. I understand that in those neighbouring countries, you cannot go there as a Nigerian and say you want to go into clearing, they won’t allow you. In a situation where we are talking about unemployment problem and you now create a situation where we are losing jobs to other countries because of the situation, I think it is not good.
There is also the issue of the transit cargoes; these are cargoes that are supposed to come through Nigerian to the land-locked countries, like Niger among others, a lot of those cargoes have been lost to other countries. All these things are of a very serious cost to the government.
How effective do you think Customs Post Clearance Audit is?
It is good; it depends on the profiling; if your profile is such that the risk of allowing you to go to your factory and pay your duty is low because of your credibility that is fine. That should encourage more people to be complaint because if you reward compliance, more people will comply. I think it is a product of the credibility that these companies have built for themselves. And as long as they do not abuse it, I think it is not a bad idea. It will even help us to decongest the ports; rather than waiting, you move straight to your companies.
Anybody that abuses it has to be sanctioned and it depends on the percentage of people abusing it. All of them cannot be good people, but when you apply sanctions and people see that the people that violated these things have been dealt with, they will sit up. What is your assessment of Ease of Doing Business policy at the ports that was introduced by the Vice President?
We are making some gradual progress on the ease of doing business. The vice president is very committed to it, the private sector meets with the vice president quarterly to discuss issues on the ease of doing business in the ports, PEBEC has also been doing a lot. Typically and in most times there is always a lot of resistance to this. We are talking about a system that has been in existence for more than five decades, people who have entrenched themselves to that system. A lot of people have serious interest in the system; a lot are making money from those systems. So it is not easy to change these things over night, even with all the authorities of the Vice President there will be serious resistance. What is important is that the efforts should be sustained and the stakeholders should regularly be giving government feedback; particularly the PEBEC office. Through that I think we will be able to achieve something, because it is good start at least the government recognizes the need to able to do this ease of doing business programme. And one of the biggest problems they still have in that programme is the customs. So both the stakeholders and government need to rally round to see to the success of this.
The difficult areas to achieve the objectives of ease of doing business are around this maritime area and customs is a major player in that sector. Let me give you an example, they said that once a cargo exits the ports, nobody should stop it except there is very strong information.
But go between Apapa ports and Mile 2, the CGC taskforce just intercepts containers without any concrete evidence and they create a lot of problems for business people. Now a member of mine went to buy roofing sheets from the market here that he wants to use to roof a building in the East, they impounded the vehicle at Okada town and they asked him to produce import documents. The man told them that he didn’t import it and that he bought it from the open market; they still insisted. So we need a law, strong advocacy in that area so that customs will realize the need for them to do things better in the interest of the Nigerian economy. What is your take on the automotive policy in Nigeria?
You see the automobile policy is not a sustainable policy. If you want to industrialize a nation, you start from the point of comparative advantage. You look at the resources you have and you now leverage your industrialization on the resources that you have. It is not a wishful thinking thing, you say you want to start vehicles production; you now introduced automobile policy that moved tariff and levy to 70%, the duty on commercial vehicles were moved to 35%. These duties are too high, that is not what is going to deliver made-in-Nigeria vehicles. What will deliver made in Nigeria vehicles is to create the environment for all these players in that sector to come and set up their plants here. That is what is happening all over the world. I am not saying that we should not introduce our own vehicles, but we don’t need to reinvent the wheel, we should create a situation where Toyota, Ford, Nissan, amongst others can set up their plants here; there are Nigerians who can partner with them. That is what is happening in South Africa, Argentina and India. Today most of the Toyota vehicles you are seeing here are brought from South Africa because the environment is good. People have gone there to set up the plant. We should be creating good environment so that when people produce these vehicles it will actually be affordable. Then you look at the resources that you have, do you have the iron and steel industry that is very critical for an automobile industry, battery industry, glass industry, tyre manufacturing industry, you don’t have all these things, what is the essence of saying that you want to produce a car. I am not saying that we should not aim at producing a car, what I am saying is that we have to do things gradually and be strategic.
We have quite a couple of millions of vehicles on the Nigerian roads, why don’t we begin to produce spare parts to service those vehicles first.
We need a lot of components of the vehicle, let us start from there and build capacity. If you put in decisions on that and allow some companies to produce that and you will gradually build capacity. Now look at the problem they have created now too much smuggling, a lot of smuggling is taking place, then we are losing revenue at a time when they government need revenue.
Then we have created a room where the decent people in the sector can no longer do business and they now created space for criminals to be doing business. You don’t run an economy like that.