Nigeria may lose N500 billion yearly to new cargo policy

Finance Minister, Kemi Adeosun

• Palletisation plan threatens foreign reserve
• Triggers cargo diversion to neighbouring countries

The Federal Government’s new policy on cargo palletisation could rob the economy of over N500 billion yearly and send importers to the ports of neighbouring countries.Palletisation is a method of storing and transporting goods stacked on a pallet and shipped as a unit load. It permits standardised ways of handling loads with equipment like forklift trucks.

The Minister of Finance, Kemi Adeosun, had said the new import-export policy, which began on January 1, would aid manual examination of consignment, “while the country awaits the acquisition and installation of functional scanners at the seaports and land borders.”Importers and other stakeholders, however, expressed dissatisfaction with the move, saying it would result in higher costs.

Additional cost incurred on imported goods is expected to deplete the nation’s foreign reserve, given the fact that Nigeria’s import is still higher than its export. Importers and some manufacturers would also be compelled to spread the excess cost on the prices of commodities in the domestic market.

The Guardian learnt that the cheapest pallet (wooden) costs between $5 and $10 apiece and requires special treatment, which could cause delay. The plastic variant costs between $10 and $15 apiece.There had been reports that the policy has been suspended. The Executive Secretary, Nigerian Shippers Council, Hassan Bello, however, confirmed: “Palletisation is not suspended. It has already started and there is no going back.” He added: “The concerns of stakeholders would always be noted and we will ensure that some of the issues are addressed.”

But the President, National Association of Government Approved Freight Forwarders (NAGAFF), Increase Uche, said the policy posed a threat to importers and the entire industry and therefore needed an urgent reversal.He said: “Palletisation is a global shipping phenomenon. But Nigeria is not ripe to incorporate that in our shipping laws because of the low volume of cargoes. We don’t have vessels. The scanners are not working. You will discover that the ports’ access roads are in a very sorry state and the ports are not efficient. In fact, there are many issues beckoning on the government to have a rethink, because cargoes that are meant for Nigeria are now being diverted to neighbouring countries.

“There will also be reduced use of containers, as people might resort to cars, buses and trucks to bring in cargoes. Nigeria will suffer depletion of foreign reserve, if palletisation is allowed to continue. This is because cargoes to be freighted in one container will now be split into two or three, and importers will need to pay three times the original cost of freight, automatically affecting our foreign reserve.”

The National Publicity Secretary, Association of Nigerian Licensed Customs Agents (ANLCA), Kayode Farinto, warned: “This country will lose about N500 billion, if the government continues with the policy. It would lead to an increase in the number of containers required to package goods from abroad, and about 60 per cent of the cargoes would be diverted.”He explained: “Imagine you have a consignment that should enter a 1×40 ft container. Because of palletisation, which reduces space, you will be forced to hire two containers. It means you are paying for two freights. You will pay for two clearance of cargoes. You will need two trailers to evacuate the cargoes. This is contrary to the ease of doing business policy. It will make costs to skyrocket.

“Business-oriented entities will begin to look for shortcuts. They will start diverting cargoes to the nearest alternative, which is the port in Cotonou, and import them through land borders. The policy will reduce the number of cargoes that come through Nigerian seaports. Don’t forget that what you pay as duty at the land border is not the same as what you pay at the seaport, so the Federal Government loses.

“When you quantify the whole thing, over N500 billion will be lost to this policy. I am not even talking about the jobs that would be lost or the shipping companies that are already winding down and threatening to go to Cotonou. Don’t forget that the port of Cotonou has been outsourced to reputable managers for better efficiency.”For Farinto, palletisation is used only in Europe. He said: “Nigeria is a developing country. You cannot compare a child that was born 10 years ago with a child that was born two days ago. That is what is happening in Nigeria. Our policy formulators are not focused. They are not technocrats. You need technocrats who have the technical know-how to formulate policies.”

The President of the National Council of Managing Directors of Customs Licensed Agents (NCMDCLA), Lucky Amiwero, said the extra cost would eat deep into the nation’s foreign reserve and discourage shipment into Nigerian ports.He alleged that the policy was introduced because of non-functional scanners. He urged the Nigeria Customs Service and the Federal Government to fix the equipment and stop frustrating business through physical inspection of cargoes.

The Managing Director and Chief Executive Officer, Air Sea Freighters Limited, Sir Enoch Iwueze, also flayed the policy, saying it would drag the nation’s economy backward.The President, Shippers Association in Lagos State (SALS), Jonathan Nicol, urged the Federal Government to suspend the policy, saying: “If government continues with it, shippers will suffer. And the cost of doing business in Nigerian ports will be high.”He expressed concern that the government could lose cargoes to the ports of neighbouring countries, noting that some shippers have already left Nigeria as a result of the directive.

“We expect government to restructure the entire maritime administration because shippers are facing a lot of challenges at the ports. The Nigeria Customs Service generated N1.03 trillion in 2017, which showed that most operators at the ports did what was right,” he said.The policy, meanwhile, has reduced documentation requirements from 10 to seven for exports, and from 14 to eight for imports. While stakeholders welcomed this, the issue of palletisation has remained thorny.

Adeosun had earlier explained that the review of the Nigerian Export and Import Guidelines was motivated by the desire of the present administration to deepen the ease of doing business in line with Executive Order 1.

In this article:
Kemi AdeosunNAGAFF
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