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

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Seaport
  • 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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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