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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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Gold

Gold Steadies After Initial Gains on Reports of Israel’s Strikes in Iran

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Gold, often viewed as a haven during times of geopolitical uncertainty, exhibited a characteristic surge in response to reports of Israel’s alleged strikes in Iran, only to stabilize later as tensions simmered.

The yellow metal’s initial rally came on the heels of escalating tensions in the Middle East, with concerns mounting over a potential wider conflict.

Spot gold soared as much as 1.6% in early trading as news circulated regarding Israel’s purported strikes on targets in Iran.

This surge, reaching a high of $2,400 a ton, reflected the nervousness pervading global markets amidst the saber-rattling between the two nations.

However, as the day progressed, media reports from both countries appeared to downplay the impact and severity of the alleged strikes, contributing to a moderation in gold’s gains.

Analysts noted that while the initial spike was fueled by fears of heightened conflict, subsequent assessments suggesting a less severe outcome helped calm investor nerves, leading to a stabilization in gold prices.

Traders had been bracing for a potential Israeli response following Iran’s missile and drone attack over the weekend, raising concerns about a retaliatory spiral between the two adversaries.

Reports of an explosion in Iran’s central city of Isfahan further added to the atmosphere of uncertainty, prompting flight suspensions and exacerbating market jitters.

In addition to geopolitical tensions, gold’s rally in recent months has been underpinned by other factors, including expectations of US interest rate cuts, sustained central bank buying, and robust consumer demand, particularly in China.

Despite the initial surge followed by stabilization, gold remains sensitive to developments in the Middle East and broader geopolitical dynamics.

Investors continue to monitor the situation closely for any signs of escalation or de-escalation, recognizing gold’s role as a traditional safe haven in times of uncertainty.

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Commodities

Global Cocoa Prices Surge to Record Levels, Processing Remains Steady

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Cocoa futures in New York have reached a historic pinnacle with the most-active contract hitting an all-time high of $11,578 a metric ton in early trading on Friday.

This surge comes amidst a backdrop of challenges in the cocoa industry, including supply chain disruptions, adverse weather conditions, and rising production costs.

Despite these hurdles, the pace of processing in chocolate factories has remained constant, providing a glimmer of hope for chocolate lovers worldwide.

Data released after market close on Thursday revealed that cocoa processing, known as “grinds,” was up in North America during the first quarter, appreciating by 4% compared to the same period last year.

Meanwhile, processing in Europe only saw a modest decline of about 2%, and Asia experienced a slight decrease.

These processing figures are particularly noteworthy given the current landscape of cocoa prices. Since the beginning of 2024, cocoa futures have more than doubled, reflecting the immense pressure on the cocoa market.

Yet, despite these soaring prices, chocolate manufacturers have managed to maintain their production levels, indicating resilience in the face of adversity.

The surge in cocoa prices can be attributed to a variety of factors, including supply shortages caused by adverse weather conditions in key cocoa-producing regions such as West Africa.

Also, rising demand for chocolate products, particularly premium and artisanal varieties, has contributed to the upward pressure on prices.

While the spike in cocoa prices presents challenges for chocolate manufacturers and consumers alike, industry experts remain cautiously optimistic about the resilience of the cocoa market.

Despite the record-breaking prices, the steady pace of cocoa processing suggests that chocolate lovers can still expect to indulge in their favorite treats, albeit at a higher cost.

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Crude Oil

Dangote Refinery Leverages Cheaper US Oil Imports to Boost Production

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Crude Oil

The Dangote Petroleum Refinery is capitalizing on the availability of cheaper oil imports from the United States.

Recent reports indicate that the refinery with a capacity of 650,000 barrels per day has begun leveraging US-grade oil to power its operations in Nigeria.

According to insights from industry analysts, the refinery has commenced shipping various products, including jet fuel, gasoil, and naphtha, as it gradually ramps up its production capacity.

The utilization of US oil imports, particularly the WTI Midland grade, has provided Dangote Refinery with a cost-effective solution for its feedstock requirements.

Experts anticipate that the refinery’s gasoline-focused units, expected to come online in the summer months will further bolster its influence in the Atlantic Basin gasoline markets.

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, noted that Dangote’s entry into the gasoline market is poised to reshape the West African gasoline supply dynamics.

Despite operating at approximately half its nameplate capacity, Dangote Refinery’s impact on regional fuel markets is already being felt. The refinery’s recent announcement of a reduction in diesel prices from N1,200/litre to N1,000/litre has generated excitement within Nigeria’s downstream oil sector.

This move is expected to positively affect various sectors of the economy and contribute to reducing the country’s high inflation rate.

Furthermore, the refinery’s utilization of US oil imports shows its commitment to exploring cost-effective solutions while striving to meet Nigeria’s domestic fuel demand. As the refinery continues to optimize its production processes, it is poised to play a pivotal role in Nigeria’s energy landscape and contribute to the country’s quest for self-sufficiency in refined petroleum products.

Moreover, the Nigerian government’s recent directive to compel oil producers to prioritize domestic refineries for crude supply aligns with Dangote Refinery’s objectives of reducing reliance on imported refined products.

With the flexibility to purchase crude using either the local currency or the US dollar, the refinery is well-positioned to capitalize on these policy reforms and further enhance its operational efficiency.

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