By Amechi Ogbonna and Isaac Anumihe
Ascanio Russo is the Deputy Managing Director of Ports and Terminal Multiservices Limited (PTML). PTML is the largest multipurpose Ro/Ro Terminal in West Africa.
The terminal is owned by the Grimaldi Group, a fully integrated multinational logistics company, which specialises in the shipping of vehicles, containers, break-bulk and project cargo. With a fleet of over 120 owned ships, Grimaldi is the largest commercial operator of conventional Ro/Ro vessels in the world. PTML was established in 2005 when the Grimaldi Group signed an agreement with the Nigerian Government to build a new port in Tin Can Island, Lagos.
Operations started in 2008 and in less than 10 years this port has received almost 1.5 million vehicles and well over 1,000,000 tonnes of general and project cargo. In the same period, the container throughput has exceeded 900,000 boxes. In this interview with Daily Sun, Russo spoke on a wide range of issues including shipping operations, cargo handling, foreign exchange crisis and impact of recession on logistics business in the country.
Excerpts:
Auto policy, Comptroller General, Customs and National Assembly
I would not want to make any comment on the ongoing discussion between the Comptroller General and the Senate.
I would rather like to confirm our full support for the original initiative of the Comptroller General, banning the importation of vehicles through the land border. That was definitely a step in the right direction. Over the years, hundreds of thousands of vehicles destined to the market have been discharged in the neighbouring ports and then transferred through the land borders to Nigeria, with incommensurable losses for the Federal Government and all operators in the industry.
Honestly, we have never understood the rationale of allowing over 50 per cent of all vehicles destined to the Nigerian market to be discharged in the neighbouring ports and then cleared at Customs Commands at the border, where, for some reasons, the level of duties payable are lower than the ones payable at the Nigeria Customs Seaport Commands.
By making it impossible for the importers to clear the vehicles at the Customs Command at the border, the Comptroller General is clearly attempting to halt this huge revenue leakage, as he knows that the level of compliance at the Customs clearance points at the border is lower than at Nigerian ports. The challenge we’re facing though, is that since the introduction of the Automotive Policy some time in July 2014, the level of duties applicable to second hand and new vehicles is still far too high and, therefore, the incentive to bring the vehicles through the port of Cotonou and then smuggle them to Nigeria remains very strong.
Our position is that we support the policy that vehicles imported into Nigeria should be cleared only through Port Customs Command. At the same time, we are not oblivious to the fact that the Nigerian border remains very porous and unless the level of duties payable on used vehicles is reduced significantly, there will always be an inducement to avoid Nigerian ports where the clearance costs are too high.
Nigerians pay highest duty in Africa
Since the implementation of the Automotive Policy in July 2014, the level of duties on used cars was increased to 35 per cent of the Cost Insurance and Freight (CIF) value. Considering the additional charges applicable on CIF values (port levy, MOWCA, CISS, VAT), the actual increase in clearance cost for used cars exceeded 65 per cent, while for commercial vehicles the impact was well over 400 per cent.
The first effect of this dramatic increase in clearance cost was an immediate drop in the number of vehicles discharged in Nigerian ports and a sudden further growth of the number of cars discharged in the neighbouring ports.
As it became very expensive to clear the vehicles at the port, most of the importers decided to move their vehicles through Cotonou port, while clearing them at the Nigeria Customs Command at the border where the level of duties payable was lower.
Most of these vehicles were not smuggled as it is usually erroneously said. They were properly cleared at the border. That’s why the Comptroller General took the right decision when he made it mandatory for all vehicles to be discharged in the Nigerian ports.
The problem though is that the level of duties payable in Nigeria is still too high and far beyond the purchasing power of the average Nigerian. It is therefore obvious that the importers will find all possible avenues to reduce their costs.
What we are seeing now in the port since the introduction of the new policy is that the very old cars, which are proportionally paying a lower level of duties are brought through the Nigerian ports, while the high end and the newer vehicles are discharged in Cotonou and then smuggled into the country.
Prohibiting the importation of cars through the border is definitely a positive development to bring back those vehicles to Nigerian ports, but it won’t be enough to recoup all traffic, which is still going through Cotonou port as the level of duties is still too high. The only way to bring these vehicles back to Nigerian ports is to make the ports competitive. And to make our ports competitive, two issues need to be addressed. The first one is the reduction of level of duties on vehicles. The second one is to make the clearance procedures more transparent and simple.
Clearing a vehicle in the Nigerian port is still a cumbersome process, which requires a number of manual interventions at different stages and different offices.
All this manual interventions make the process complicated and expensive. You will be surprised to know that the vehicle price used by Customs to determine the level of duties to be paid is not published anywhere. We know the duty percentage applicable on the CIF value, but we do not know the CIF value of the vehicle. The determination of this value is left to the negotiations between the parties.
Ideally, the process of clearance of the vehicles should be digitalised with very marginal human interactions. The goal should be to eliminate any human intervention in the valuation process, because this subjectivity brings uncertainty and additional cost for the importers and as a result higher prices for the Nigerian consumers.
The Minister of Finance has since 2013 demanded the publication of the price of vehicles but for some reasons, these prices have never been made public. As long as the clearance of vehicles remains an opaque process, subject to interpretation and the level of duties payable is not reduced, our port won’t be able to compete with the ones in our neighbouring countries.
Corruption in the ports
I believe the ANLCA and NAGAFF raised a very genuine problem, which everyone in the port industry knows very well and that is the intrusive nature of some governmental agencies in the cargo clearance. I believe the solution to this issue is very simple and it is to reduce the level of human interaction in the clearing process because the moment you allow an element of negotiation and discussion between two parties, there will always be room for extortion. So, the way forward is to make the process objective and transparent.
In addition, the role and the authority of each governmental agency shall be clearly defined and abuses of power shall be promptly sanctioned.
The introduction of a single window, as suggested by the newly published Nigeria Economic Recovery & Growth Plan is expected to facilitate the clearance process, while making the whole process faster, cheaper and more efficient.
Influx of contrabands despite various checks
You have identified already in your questions one of the issues. Nigeria Customs is faced with an enormous challenge because none of the scanners installed in the ports is working, so the majority of the boxes are physically inspected. A tedious and very labour intensive process, which, due to the number of containers to be checked and the quantity of cargo loaded in each container, can never be 100 per cent accurate.
As a responsible stakeholder, we have already engaged Nigeria Customs with other terminal operators, to discuss the possibility to provide scanners not only for containers, but for any other cargo, including vehicles, which could conceal contraband or prohibited cargo.
In addition to working X-Ray scanning, we believe it is critical to implement a computerised Risk Management System, which can help Customs officials to determine the risk incurred in trade transactions, based on econometrical and statistical modelling.
Abuse of fast-track policy and clamour for its withdrawal
While the original idea of having cargo released on fast track was commendable because it contributed to the reduction of the average dwell time of cargo in the port, there is no doubt that over time it has been subject to abuses.
Likely too many companies have been given the possibility to clear the containers on fast track, thus avoiding the more rigorous process of inspection in the port area. We believe that the criteria to license companies to clear their cargo taking advantage of this scheme shall be reviewed and made more stringent to avoid revenue leakage and to enhance security.
How foreign exchange issue affected importation
As a service company whose fortunes are inexorably linked to the volume of import and export, we have been badly affected by the foreign exchange crisis.
While Nigerian manufacturers and traders have been unable to access the necessary foreign currency to fund letter of credit, the number of containers and vehicles discharged in Nigeria has reached new low. In actual fact, we have recorded a severe slowdown of our activities since July 2014, well before the country entered recession, when the Automotive Policy introduced by the past government, raised the level of duties on vehicles and caused a massive shift of vehicles from the Nigerian ports to the neighbouring countries’ terminals.
The foreign exchange crisis and the recession of 2016 made things worse. Faced with the worst crisis since we started operations 10 years ago, we had no other option than restructuring our business, becoming leaner, nimbler and more efficient, while trying to expand the scope of our operations beyond our core vehicles and containers business.
We are hopeful that the recent easing of some exchange restrictions will help regain investor confidence. Steady oil prices and the growing production in the Nigerian oil industry, back to capacity, shall give the Central Bank of Nigeria (CBN) sufficient ammunition to defend the naira and hopefully to reduce to the minimum the gap between interbank and parallel market rates and remove the distortions of current foreign exchange regime.
Effect of policy change on your business
While we are seeing a slight growth in the number of vehicles discharged in the port since the introduction of the directive of Customs, which prohibits the importation of vehicles through the border, we believe that the growth is mainly due to the improved economic outlook and the strengthening of the naira.
As all the economic indicators improve, we expect the number of vehicles to Nigeria to grow, more so as we know that in the last couple of years, the volume of vehicle imported has shrunk by almost half a million units and therefore the average age of the vehicular stock in Nigeria has further deteriorated.
No doubt, Customs policy has brought back to Nigerian ports some of the vehicles which were previously discharged in the neighbouring ports. But until the level of duties on used vehicle is reviewed downward, there would still be a significant number of cars, which will continue to be discharged in Cotonou and then transferred to Nigeria.
Our value addition to Nigerian shipping industry
PTML is somehow different from all other concessionaires because stricto sensu we are not a concessionaire. PTML was not existing before all Nigerian ports were leased to private operators. The Grimaldi Group – the Italian Logistics Group which owns PTML – approached the Federal Government in 2003, long before the port concessioning, proposing to build a new terminal in Tin Can Island.