By Kelechi Mgboji
Since the Nigeria Customs Service (NCS) began to issue Pre-Arrival Assessment Report (PAAR) to importers late last year, there has been delay in the clearance of cargo, leading to a sharp increase in demurrage.
The delay had a crippling effect on manufacturing in the first quarter (Q1) of the year ended March 31, 2014.
Manufacturers grappled with unforeseen rises in the cost of imported raw materials and are counting huge losses.
The Customs authorities say they have no power of waiver for demurrage.
Investigation by TheNiche showed that the development affected the production schedules of companies which were not able to clear their cargo in good time, particularly raw materials.
While PAAR jacked up the cost of production the upsurge in smuggling dealt more devastating blow to the economy in Q1.
The rising cost of production, analysts say, reflects in the component of inflation referred to as core inflation. This may have given rise to cost-pushed inflation in the second quarter (Q2) which began in April, and the Central Bank of Nigeria (CBN) may expend more resources combating the spin-off.
Inflation rate trimmed down to 7.7 per cent in February but manufacturers and finished product importers say the figures will significantly rise when the National Bureau of Statistics (NBS) releases the inflation rate for Q2, covering April to June.
However, during the first quarter, exchange rate at the parallel market and bureau de change rose as high as N172 to the dollar, and at a point hit N175. This had some impact on prices.
Lagos Chamber of Commerce and Industry (LCCI) Director General, Muda Yusuf, told TheNiche in an exclusive interview that production cost has risen, coupled with outrageous exchange rates at the parallel market.
He warned that the effect could create high inflation and result in job losses at a time when other countries are stimulating their economies and creating jobs.
Yusuf lamented that the upsurge in smuggling had a profound impact on the real sector in the first quarter of the year, January to March.
Said he: “The government wanting to boost domestic rice production imposed a duty of 110 per cent on rice. Quite a number of investors invested in rice plantation hoping that because of the new fiscal policy regime, there would be a bigger market for their product.
“But it didn’t quite work out because we witnessed an upsurge in the smuggling of rice. That made nonsense of the entire fiscal policy of protecting the local rice producers.”
The NCS has met stakeholders at the instance of the Lagos Chamber of Commerce and Industry (LCCI) to find ways to ameliorate the impact of PAAR on manufacturing.
Those present at the meeting included Customs Comptroller General, Inde Abdullahi, manufacturers, importers, freight agents and representatives of banks.
Abdullahi promised improvement but nothing has changed.
A representative of a first generation bank in Lagos, who did not want his name in print, said the NCS cannot handle destination assessment.
A freight agent who identified himself simply as Charles added that Abuja should not have made the NCS the sole processor of PAAR.
Demurrage is at three levels – shipping company, terminal operators, hired vessel. The person who hires a vessel pays more demurrage when cargo discharge is delayed.
“The Customs have control over all these and terminal operators said they are not responsible for the delay,” the clearing agent explained.
“In any case the banks are still there waiting for you because you borrowed money to import the items. So the longer it takes for you to sort out yourself and clear the cargo, the more interest you pay and the happier the banks.”
Customs Comptroller General, Inde Abdullahi and Finance and Economy Coordinating Minister, Ngozi Okonjo-Iweala
PAAR was introduced last year to replace risk assessment report (RAR) regulated by three service providers which had a seven-year contract on the destination inspection (DI) scheme.
The contract expired in 2012. A few months to its expiration, the government sacked the service providers, which included Global Scan, Destination Inspection and SGS Nigeria Scanning.
In January this year, Finance and Economy Coordinating Minister, Ngozi Okonjo-Iweala, who is also the Chairman of the Customs Board, expressed satisfaction with the implementation of PAAR by the NCS, saying its takeover of destination inspection had been the dream of Nigerians made possible by the government.
She promised that the reform would be monitored to meet the objectives and yearnings of the private sector.
But one year into the operation of PAAR, industry operators are warning that the economy is under threat of shutdown as the ports, borders and airports are littered with consignments waiting to be cleared.
Abdullahi once described PAAR as “a once-and-for-all document for clearing of goods in the ports, clearance of which will not be subject to any contest or validation as it will have the supreme authority.”
It is left to be seen how quickly he will resolve the congestion at the ports and borders.