In this interview with PAUL OGBUOKIRI, General Secretary of the Association of Concerned Freight Forwarders and Transporters, Johnny Ubaka, decries the current scarcity of foreign exchange in the country, saying it is stifling importation and cargo clearance in the Nigerian ports
Nigeria has been battling with scarcity of foreign exchange in recent times due to low crude oil export and dwindling forex reserves. How is this affecting the cargo clearance business?
The situation we have now is very critical when it comes to business. Doing business now in Nigeria is a very difficult thing due to concerns around foreign exchange, imports, duties and all that. Talking about foreign exchange, for you to get it now in the market, the official rate is the region N440/$ for only $20,000. And this $20,000 is just for three months because they do it quarterly. So, for you to get Form-Q of $20,000, you have to get it at an official rate of N440/$. Form-Q is part of the documents required by the Central Bank of Nigeria just like Form-M. It is for importers who actually want to get foreign exchange from the government. And $20,000 cannot fetch you what you want, which means you still need to look for more funds in order to get the commodity you seek. And getting the dollar from the parallel market is about N900/$ as at today. So, these are the issues that are making the cost of goods very high. $20,000 cannot close a 1×20-foot container. So, it is an issue that needs to be addressed. I am requesting that the Federal Government increase the amount from $20,000 to at least $50,000 and also reduce the official rate to enable things to go well. For you to source forex, it takes a lot of time.
The exchange rate for cargo clearance was recently increased. Is that why you people are complaining now?
The Nigeria Customs Service will tell you that they are not responsible for the increase because their work is based on global tariff. So, the exchange rate generally is not from Customs. It is a Federal Government policy. They are the ones who fix the exchange rate. Customs are just there to enforce the policy. So, it is left for the Federal Government to come with a policy that will favour the masses. But, I can tell you for free that the negative impact of that policy is huge.
Remember that I told you that importers depend on the parallel market to source forex for importation. If you go into the ports today, you will understand the point I am making. Activities are very low, contrary to what is obtainable at this season of the year.
Talking about Customs, does it have the right to auction abandoned vehicles as scraps?
On auctions, it is there in the Customs Excise Management Act, that once your commodity stays more than 90 days in the ports, it will be auctioned. The idea is that you don’t import goods and leave them at the ports. So, there is a policy for overtime cargoes, which is also applicable to vehicles. It is more applicable to vehicles because some people who bring in vehicles may not have money to clear them. So, Customs cannot wait perpetually until you have money to clear it before you can come. They give a maximum number of days for you to come and clear them. But what happens is once cargoes are tagged “overtime,” the Customs goes to court. So, they don’t just auction cargoes. They go to the court, get a court verdict before they can auction the cargoes.
Do they have the right to sell these vehicles as scraps?
The issue is that when these vehicles have overstayed at the ports, it is assumed that they are scraps. You know auction generally works all over the world and an auction is something you sell below the cost price through bidding. So, it depends on who and who is around for them to bid and get the goods.
Recently, there were controversies regarding Vehicles Identification Number for clearing of vehicles. Customs Brokers have continued to complain that the platform is riddled with challenges. Has that improved?
The only challenge we have with the VIN is that it is a new policy of the government. It is from the Federal Government and not the Customs. The idea is that vehicles from 2012 upwards will have unique duties all over the world. And also there is this policy of the government that has been on ground and centres on the fact that you don’t bring in over-aged vehicles, say from 12 years upwards.
So, if you bring in a vehicle of 2006 model which is common here, you will want to pay duty as for 2006. But because the VIN has been programmed to only collect duty from 2012, a Toyota Corolla vehicle, even if it is 2006, will pay duties from 2012. In fact, on that platform there is no 2006 model there. So, when you come, they give you a duty for 2012, which is the least they can give you even if the vehicle is 2006. So, you will now begin to ask why you are paying 2012 duty on a 2006 vehicle. What they are trying to do is to discourage Ubakaover-age vehicles from coming in and this VIN you are talking about is a world valuation and not Nigerian alone.
Looking at the economic situation of the country, do you think the policy is sustainable?
The only problem I have is that sometimes some of our policies are done in haste. Things are not put in order before implementation, just like hatching your eggs before they are laid. Sometimes, our policies are not well comprehended before we implement them. Now, you said vehicles above 10 years should not come in and we don’t have manufacturers here. How do you now want the people who may not be able to get these newer vehicles to cope? They can’t even bring them in, not to talk of clearing them, because for a 2012 vehicle abroad, you can’t compare it with a 2006 vehicle, in terms of cost of importation. So, now, they are saying they don’t want underage, they want vehicles from 10 years upwards, which you know is a little bit difficult. Because I know a lot of people are still moving about with vehicles from 2006 downwards considering the cost of living.
Customs Brokers are also complaining that a lot of importers have abandoned their vehicles at the ports due to the challenges with VIN. Is there any truth in that?
Of course, if you don’t have money to clear it, there is no option than to leave it at the port and the more you leave it, the more you run into the danger of cargo entering overtime. And before you know it, after 90 days, you have lost the title of that vehicle. It now becomes government property because it has been grouped as over-time cargo.
What percentage of vehicles would you say has been abandoned at the ports in recent times?
From what I see, we have over 40 per cent abandoned vehicles at the ports. What I am trying to say is that the government should give rebates to those vehicles. They should not just say because they are over 90 days, they should be auctioned. They should be given a second chance and also rebates, or some reduction in Customs duties. They should make efforts before heading for auctions because if owners had the money, they would have paid for the duty.
The Minister of Transportation recently threatened to sanction some terminal operators over non-compliance in the collection of practitioners’ operations fee. Should the terminal operators be mandated to collect the fee?
The terminal operators should not be held responsible for that but mandating them is the only way the fees can be collected. Like what is happening now at the ports, terminal operators are complying while some are not complying because they have not been able to see the rationale behind the collection of the POF. I was at the meeting when the POF was discussed and it is a gradual thing. They need to educate agents on what the money is for, what it is meant for and why we should pay for the POF before everybody will start complying. So, sanctioning them now does not really make any sense. You need to take out time to educate them and make them see reasons, and where the POF money is going to. This is because an ordinary man will think that it is one of those policies that the government is bringing up in order to extract money from them, those multiple taxes that have nothing to contribute to the development of the industry or boost the operators business.
But do you think there is any justification for the collection of that levy?
Yes, there is every need for the collection of the money. If the purpose of that POF is met, there is a reason for the collection of the POF. On whether we are meeting the purpose, it is a management issue, which I may not want to delve into for now. But if it is properly managed, it is also a good means of servicing the industry.
Customs, in the last four months, collected about N40 billion from FAAC. How do you think that will go in boosting trade facilitation?
Yes, of course, it will go a long way in boosting trade facilitation. You see, the maritime industry is the second cash cow for the Federal Government. That is the second means of revenue generation for the government. If you look at the industry very well, you will find out that it is only through the maritime industry that the government is breathing now. They said our oil has gone to oil thieves.
What I am trying to say is that the allocation will boost trade. To me, Customs is doing its best but its best is not good enough. The government needs to look into that and ensure that the money is spent appropriately. If you look at the roads where these monies are coming from, they are dilapidated – and it is not good. It doesn’t facilitate trade. We have policy somersault and all that. If the monies are being channeled properly, Nigeria will not be lacking in terms of trade. Nigeria, they say, is an African giant. So, there should be more focused trading because an average African lives on Nigerian markets.
Barge operators are saying 20 per cent transportation budget should be allocated to water transport to boost barging. Do you think it will help in addressing the numerous challenges in the sector?
Talking about barges, the government does not need to think twice before financing the sector because it helps a lot. You know we don’t have good roads and even if the roads are done now, in the next couple of years, they will be dilapidated again. So, we need more barges to be able to facilitate trade in Nigeria because a lot of companies are also depending on these for importation. So, by the time you depend only on roads to move containers, it will not be enough. The sector even needs more than 20 per cent for them to work properly.
The Lekki Deep Seaport will soon commence operations. What difference do you think the port will make, looking at the level of competition from Apapa and Tincan Island Ports?
The Lekki Port is one of the best things to both Lagos State and the maritime sector in recent time. So, by the time we have enough space to work on, and we have more containers coming in, it is a plus to the government. Duties will be collected and workers will be employed. So, in various ways, it is a blessing in disguise. You won’t condemn the port out rightly on the account of unavailability of access roads because while we are having the ports, other facilities will be constructed. It will create a lot of employment and also boost the market in Nigeria.
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