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Report: Customs Responsible for 82% of Charges at Nigerian Ports

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  • Report: Customs Responsible for 82% of Charges at Nigerian Ports

A study by Nigeria’s leading accounting firm, Akintola Williams Deloitte, has blamed the high cost of doing business at the nation’s seaports on the Nigeria Customs Service (NCS) and other government agencies, claiming that customs processes are responsible for not less than 82.1 per cent of the charges incurred by consignees.

This assertion was contained an industry report titled: ‘Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study’ which it published and a copy was obtained at the weekend.

Akintola Williams Deloitte stated that its value chain analysis of a 20-foot container laden with cargo worth N44.42million ($100,000) imported into Nigeria from China, revealed that about N6.5million would be required to clear and transport the container out of the port.

It said of this amount, about N5.3million (representing 82.1 per cent) is paid to the NCS as import duty, Comprehensive Import Supervision Scheme (CISS), ECOWAS Trade Liberalisation Scheme (ETLS), Port Development Surcharge and Value Added Tax (VAT).

The firm further stated that other actors in the value chain include shipping companies, Nigerian Ports Authority (NPA), terminal operators, clearing companies and haulage services providers.

It said shipping companies are responsible for 13.8 per cent of the port cost (N897,000); terminal operators 1.8 per cent (N117,000); customs 82.1 per cent (N5.3million); transporters 1.1 per cent (N71,500) and clearing agents (N78,000).

According to the report, “The value chain of a typical container terminal operations begins with the shipment of the goods through a shipping line to the host country. The consignee pays the freight charges for the shipping as well as the container deposit fees. Demurrage charges may apply where the consignee fails to return the containers on time.

“Upon arrival of the container at the Nigeria port, the consignees pays terminal handling charges, storage charges, delivery charges and customs examination charges to the terminal operators. In addition, the consignees also pay the relevant customs import duty.

“Consignees pay for logistics services to get the goods out of the terminal.

“Consignees pay for the services of the clearing agents (where applicable). Large companies are directly responsible for clearing their goods.”

Notwithstanding their huge investment and meager earnings, the report stated that terminal operators bear the burden of most of the challenges at the port.

“Terminal operators face huge challenges in the area of storage as the terminals are used as “cheap storage warehouse alternatives” by cargo owners.

“The current policy provides for a free three days storage after which a charge of N900 is applied per day and regulated by the NPA. Importers take advantage of the low storage charges offered by the terminal operators to store their imported goods at the terminal as opposed to a site warehousing facilities that charge as much as N60,000 per day,” the report stated.

The report further stated that before the port reform and concession of 2006, the Nigerian port system faced major challenges which made it highly inefficient. “The average ship waiting time before berthing was 21 days, vessel turnaround time was 5 days while dwell time for cargo was as high as over 30 days. The ports had poor infrastructure (roads, rail, quay, buildings, equipment, and yard) and were heavily congested leading to insecurity and pilferage, delays in cargo clearance and inefficiencies in cargo handling largely due to manual processes.

“As a result of the challenges, the federal government of Nigeria in 2006, concessioned the ports to 25 terminals operators over a 25-year license period.

“The primary aim of the port concession agreement was to eradicate the poor state of the ports, increase capacity

and promote economic growth and development via the Nigerian ports.

“The federal government adopted the Land Lord model for port operations which gave exclusive rights to the terminal operators (“the concessionaires”) to operate, maintain and carry out investments on port facilities, within designated terminals while the NPA retains ownership of the terminals.

“The “Land Lord” model reduces the financial burden on the federal government as the terminal operators are responsible for both infrastructure development and annual concession fees in the form of lease fees and throughput fees.

“The tenure of the Nigerian concession agreements ranged from 15 to 25 years and the estimated revenue to government from the concession agreement is estimated at $6.54 billion over the period,” the report further stated.

It said as a direct impact of investments by terminal operators, the ports have witnessed increased ship traffic and throughput which has led to a 400 per cent rise in container throughput from 400,000 TEUs in 2006 to 1.6 million TEUs in 2014. “The investments have also led to the eradication of ship waiting time at the container terminals, as ships now berth on arrival. Vessel turnaround time has been reduced to from 5 days to 41 hours while average dwell time for cargo clearance went from over 30 days to just 14 days.

“In addition, due to improved security and lighting of the terminals, the ports now run a 24 hours and 7 days a week operations. This has been made possible by the investments and transformations made at the ports by the terminal operators,” it stated.

The Akintola Williams Deloitte port industry report added that port concession saves Nigerian importers and exporters about $800million (N244 billion) annually which was hitherto paid to shipping companies as congestion surcharge.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Oil Rises as Threat of Immediate Iran Supply Recedes

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Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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Oil Prices Rise as Demand Improves, Supplies Tighten

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Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.

Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.

U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.

“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.

“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”

Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.

The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.

“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.

The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.

IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.

On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.

U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

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FG Spends N197.74 Billion on Subsidy in Q1 2021

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Crude oil - Investors King

The Federal Government has spent a total sum of N197.74 billion on fuel subsidy in the first quarter (Q1) of 2021, according to the Federal Account Allocation Committee (FAAC) report for May.

The report noted that the value of shortfall, the amount the NNPC paid as subsidy, in the March receipts stood at N111.97 billion while N60.40 billion was paid in February.

In the three months ended March, the Federal Government spent N197.74 billion on subsidy.

The increase in subsidy was a result of rising oil prices, Brent crude oil, against which Nigerian oil is priced, rose to $73.13 per barrel on Monday.

The difference in landing price and selling price of a single litre is the subsidy paid by the government.

On May 19, the Nigerian Governors Forum suggested that the Federal Government removed the subsidy completely and pegged the pump price of PMS at N380 per litre.

The governors’ suggestion followed the non-remittance of the NNPC into the April FAAC payments, the money required by most states to meet their expenditure such as salaries and building of infrastructure.

However, experts have said Nigeria is not gaining from the present surge in global oil prices given the huge money spent on subsidy.

Kalu Aja, Abuja-based financial planner and economic expert, said “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.”

“Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.”

Adedayo Bakare, a research analyst, said that the current prices do not really mean much for the country economically.

He said, “The ongoing transition away from fossil fuels and weak oil production from the output cuts by the Organisation of Petroleum Exporting Countries will not make the country benefit much from the rising oil prices.

“Oil production used to be over two million barrels but now around 1.5 million barrels. We need OPEC to relax the output cuts for the naira to gain.”

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