Freight forwarding business is one of those numerous businesses in Nigeria riddled with many challenges especially, in the area of financing. In this piece, ANOZIE EGOLE reports the challenges and possible solutions
Many assume that a freight forwarding job or better still, being a clearing agent is an easy job. This involves going to the port to clear consignments, with lots of money to spend. Some even assumed that it is easy getting the bill of lading from an importer, collecting money from the importers, and going straight to the office of the Nigeria Customs Service and terminal operator for necessary payments; they feel the money goes into your pocket as a clearing agent.
So many forgot that every job has its challenges and peculiarities, especially in Nigeria where an inconsistent policy of the Federal Government is adversely affecting businesses. The challenges with cargo clearance in Nigeria, especially in the areas of financing are getting worse by the day due to the bottlenecks bedeviling the sector. In fact, finding by the PUNCH have shown that practitioners in the sector are struggling to stay afloat.
Now, with the recent happenings in the sector in the last few months in the area of policies, exchange rate for cargo clearance, and the recent increase in tariff on imported cars by terminal operators, you will agree that cargo clearance is now tougher than what it used to be in the past.
The Customs, following the directive from the Central Bank of Nigeria moved the exchange rate for cargo clearance from N423 per $1 to N589 to $1, which is approximately a 40 per cent increase higher than what most of those importers must have budgeted before importing these consignments, a move which many practitioners kicked against.
Recently, the CBN and the NCS took the ongoing foreign exchange reforms to the maritime sector with a 40 per cent increase in the exchange rate used for calculating import duty.
The NCS raised the exchange rate used for the calculation of import duty from N422.30/$ to N589/$.
The development, which has led to a corresponding 40 per cent increase in import duty on imported cargoes including vehicles, has angered operators in the maritime sector with clearing agents, freight forwarders, and importers calling for an immediate reversal of the policy.
Stakeholders say the policy will lead to job losses in the maritime sector, and a drastic fall in the number of imported vehicles.
This, they say, can affect businesses and economic growth. Economists also say the government is insensitive, and that the policy is capable of affecting Nigerians negatively. Now, aside from the fact that this will lead to an increase in the cost of doing business and the prices of such commodities in the market, a lot of clearing agents who may commence some jobs will suffer due to this policy.
The Chief Executive Officer of Siktemstar Logistics, Remilekun Sikiru, while speaking on the new exchange rate, says that the customs duty payable on vehicles has increased astronomically.
He says, “For instance, the total duty payable on a Toyota Camry was N901,000 before now; but it has been increased to N1,270 m; duty payable on Venza was N1.632m before now, but it has been increased to N2.278m. In the same vein, Toyota Corolla was N786,000, but now it has been increased to N1.097m while Lexus Rx which used to cost N1, 828,000 now costs N2,550,447. It’s pathetic. We woke up to see this in the early hour on Saturday 24th of June 2022. The Federal Government needs to reverse this.”
According to him, this development may lead to cargo including vehicles being trapped at the terminals.
“The customs duty has been increased and it will lead to a heavy increment in duty payment on general goods/cargo. This will bring hardship on importers”
With this development, a clearing agent who may have approached a commercial bank for a loan to clear some goods may end up stranded as is likely going to find it difficult to pay up.
The money he borrowed to clear the goods is likely not going to be enough for the cargo clearance because the agent may be banking on the old exchange rate.
The most difficult part of this development is that these agents mostly complain that most of them are not aware before any of such development is carried out, they only wake up to see the development.
A freight forwarder and Chief Executive Officer, 2B Frank Nigeria Limited, Nwegbe Frankypaul, says, “Freight forwarders woke up on Saturday to realise that the dollar rate has been increased from about N423 per dollar to about N590 per dollar.”
Nwegbe pleads with the President to ensure depreciation on the value of older vehicles.
With all these development, this noble profession is mostly in the hands of the rich who can afford to clear the goods with the hope of getting their money back from the importers as young entrants into the profession aside from hustling to get importers are also battling with the steady increase in charges.
This is the reason some practitioners are lamenting that there will be a massive loss of customers with this new exchange rate and tariff.
A clearing agent, who simply gave his name as Mr Tochukwu Nwaibo, says that most of them who newly joined the sector are struggling to meet up.
He says, “If there is a job anywhere I wouldn’t have chosen this. Most of the challenges we are having here have to do with finance. Sometimes an importer will bring in goods and plead with you to use your money to clear and does every other thing with the promise to pay you back later.
“Some will even plead with you to clear, and sell some of the goods to recover your money, especially vehicles. And in a situation where you can’t raise money to clear the goods, it will be accruing demurrage and the importer will not be happy with that.
“And if it gets too much, most of the cargo may end up abandoned at the terminal and if this happens, the importers won’t like to use you again, he or she will go to someone who can clear the goods with their money. So you find out that the business is gradually moving to the rich who can sponsor the whole thing and in that case, you have lost a customer.”
This is also aside from the fact that there has been a massive drop in the importation into the country.
Aside from the government ensuring a consistent financial and monetary policy where importers can plan themselves before their goods arrive in Nigeria, the government can as well help these practitioners by ensuring the establishment of some policies that will ensure that these clearing agents have access to a loan for cargo clearance at a considerable interest rate.
Considering the huge opportunities in the sector, a sector that has been estimated to be worth billions of dollars, the government should as a matter of urgency put all the necessary measures in place to boost and encourage the sector.
Attention should be given to the sector, especially in the area of accessibility of funds for cargo clearance and ensuring the right policies are in place.