Appraising maritime capacity as panacea for oil revenue shortfall

21 February 2016, Lagos – Expectations that the nation’s  maritime industry will  fill the funding gap  created in the national economy by the dwindling oil revenue may after all be an illusion  as the sector  is currently in comatose, having been hit by low ship and cargo traffic occasioned by the  federal government policies, writes Francis Ugwoke

fuel ship-vessel1So much has been said about the place of maritime in the nation’s economy. It is adjudged as next to oil in terms of contribution to the national economy. It is also seen as the only hope for the country at a time of dwindling incomes  from the oil sector. Industry experts have estimated that no less than N7trillion could be realised from the sector each year once all the necessary potential is developed. They have also said that with checks on various malpractices in the shipping sector, including   under-valuation of imports, under-declaration of goods, concealment,  cheating on gross registered tonnage (GRT) of vessels by shipping  lines  in which the nation loses hundreds of billions annually, trillions of naira would be generated from the sector.

Both the Transport Minister, Mr. Chibuike Amaechi, and the Comptroller-General of Customs, Col Hammed Ali (rtd), have all given their words to President Muhammadu Buhari that the sector will move  up in terms of contribution to the national economy as against what it has been all these years.   Amaechi, had frowned on the current 1.41 per cent aggregate contribution of transport to nation’s Gross Domestic Product (GDP).  He made it clear that the sector could only be appreciable with the potential developed. He said: “Countries like South Korea and Singapore have built their economies around a vibrant transportation sector. Although Nigeria is blessed with multiple modes of transportation that is the envy of many, these potential have largely remained untapped. The President Muhammadu  Buhari administration is determined to fully exploit the potential  in the transportation sector.”

Ali, on the other hand, has promised to raise the revenue level above what has been the case with a target of N1trillion this year. It does not matter to him that the times are hard. He has pledged to meet the target. But how far these promises and hope can be realised leaves much to be desired. Although there is no doubt about the great potential in the transport sector, particularly the maritime industry, the present economic hardship appears  to be slimming the chances of such optimism.

Forex Regime and Effect on Imports

Since the Central Bank of Nigeria (CBN) tightened measures on foreign exchange forex), importers of trade goods have been the worst hit. The policy has seen the naira falling so much in value against the dollar. When it was about N200 in the black market, people kept complaining, but many have been dumbfounded with the current rate of N352 per dollar in the parallel market. In all, 41 trade items were affected in the allocation of forex by the CBN. Among the items are rice, cement, margarine, palm kernel/palm oil, vegetable and processed vegetable products, poultry-chicken, eggs, galvanised steel sheets, roofing sheets, plywood, clothes, plastic/rubber products, woven fabrics, soap and cosmetics and tomatoes/tomato paste.

The matter was made worse when the CBN stopped allocation of foreign exchange to the bureau de change operators. This made foreign exchange rise so much that many traders have been reluctant to embark on importation. This scenario leads to the question of how the customs hopes to meet the revenue target it has set for this year. The customs  realised the sum of N903 billion last year and this may have been responsible for the target of N1trillion this year.  Ali has vowed to check all trade malpractices that have denied government revenue.

He had also lamented the failure to meet last year’s target of N954 billion.  He is hoping that with efforts on checking various corrupt practices, he would meet his target. But industry operators have cautioned against high handedness in which the officers at command levels would begin to impose surcharges on mainly  importers of trade goods in order to meet revenue target.  Importers have always been at the mercy of customs men, particularly unscrupulous ones who would use the opportunity of any fault to raise Debit Notices (DNs) in a bid to extort importers. The experience is that importers who under-declare or conceal are forced to settle some customs officers if they hope to get   DNs that would not  wipe all their profit.

Shipping Business in Comatose

With low traffic at the ports, many importers have been out of business. But they are not alone.  Every stakeholder in the shipping industry, including terminal operators, shipping companies and government agencies are affected.  Freight forwarders and other customs brokers are not left out.

To begin with, ships bringing in refined fuel have reduced, and so is the revenue generation from this. Although,  over the years,  collecting such revenue has been difficult due to waivers granted to the importers.  Similarly, many importers of trade goods have been out of business, complaining that they don’t seem to understand the economic direction of the present administration other than the strong efforts to fight corruption.

Those who import do so at a high price having to source dollar from the black market.  Recently, members of the House Committee on Marine Transport led by Hon. Pat Asadu, who visited the ports were surprised during the tour of the terminals as there was no serious activity compared to what it used to be.  In the past, there used to be examination of containers going on  simultaneously in one terminal. These days, one can move from one corner of the terminal to the other without noticing any. This affects all the terminals in Lagos ports.  Industry stakeholders say this is a clear case of  hard times.

And the question is: how does government plan to raise  contribution of the sector to the GDP? This appears to be the same question for the customs boss, Ali. The situation affects all, including the NPA and NIMASA – both agencies’ revenue depend on ship and cargo traffic  at the nation’s ports.

Stakeholders on Revenue from Maritime

With the situation in the maritime industry, stakeholders believe that  it is laughable to expect so much revenue from the sector. Beginning with the revenue target of the Customs, ANLCA National Publicity Secretary, Kayode Farinto, wondered how this would be realised. He queried, “If they are given N1 trillion target for 2016 knowing quite well that importation has declined, does it not mean that facilitation of trade will be jettisoned? With what is on ground, customs do not need to set any target.

How can they set a target for an economy that is already in comatose? That means they will want to go the extra mile to meet the target by arm-twisting Nigerians and jettisoning trade facilitation.  Customs in the past seven years has been blocking all revenue loopholes. Which loophole do they want to block now? Since there are no loopholes to block now, do they want to bounce back on importers who legitimately imported their consignments, or do they want to be issuing debit note at will just to meet the target?” Similarly, some members of the National Association of Government Approved Freight Forwarders (NAGAFF) have expressed concern about how the Customs hopes to  meet its target with the  situation in the ports.

The association cautioned against use of corrupt practices against importers who have goods at the ports.   Aggrieved about corruption in the ports, Secretary General of the association, Arthur Igwilo, in a letter to the Customs Comptroller,    said corruption in the ports  had remained  on the increase and called on the leadership to find a solution to it.

Maritime lawyer, Mr. Emma Ofomata,  while appreciating  some of the  economic policies introduced by the  federal government,  advised that whatever policy measure, it must have a human face. Ofomata reminded the federal government and indeed the CBN of what  the  Managing Director of International Monetary Fund (IMF),  Ms Christine Lagarde,  said when she visited the country recently. According to him, no policy should stifle trade. He said the situation in the shipping industry had become worrisome because of the increasing low  ship and cargo traffic. If this continues,  it will be economic woes for the industry and the players in it.

But beyond that, Ofomata opined that the Ministry of Transport should work hard to see that some of the maritime bills outstanding in the National Assembly are passed into law. These laws, he said, have a way of bringing about multiplier effect to the sector and subsequently increase revenue generation from.

 

 

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