Are Custom Fees Affecting Market Prices

“The current question at hand is whether customs fees are impacting market prices. According to the earlier analysis, it is clear that customs fees do indeed have an impact on market prices. This conclusion is based on feedback from business individuals who have indicated that they would raise prices in response to heavy customs clearance fees at the Port. This is evident in the daily price fluctuations of goods in the market. The price of an item may differ within the span of just an hour.”

I recently came across an alarming article online featuring a Nigerian businessman involved in clearing and forwarding at the Apapa Tin Can port in Lagos. In the article, the businessman mentioned that the cost of clearing a 40-foot container with Nigerian Customs had increased significantly over the past few years. He shared that he used to pay N5 million Naira for clearance, but he now pays between N45 and N50 million Naira due to various charges and levies imposed by the agency. This drastic cost increase has deeply affected his business operations, leading to significant financial strain. He stated that once he cleared the goods, he would need to double the selling price of his imported goods to cover the increased expenses, potentially impacting consumers and the general populace. This cynical attitude raises questions about the impact of such practices on the general populace and the reasons behind such exorbitant clearance costs in Nigeria. It also raises concerns about the potential adverse effects on trade, economic growth, and the overall cost of living for the people. Furthermore, it prompts us to question why the government has not taken any substantial steps to address these issues despite the evident impact on businesses and the economy.

A port is truly the lifeline of a nation, playing a pivotal role in its economy, security, and connectivity. Ports facilitate the movement of goods, raw materials, and resources for domestic consumption and international trade, serving as gateways to the global market. Efficient port operations ensure seamless supply chains, support industries, and bolster employment. Furthermore, ports often act as hubs for economic activities such as shipbuilding, logistics, and tourism, significantly contributing to a nation’s GDP. Additionally, ports play a critical role in national security, serving as strategic points for defense operations and checkpoints for monitoring imports and exports to uphold the country’s safety and sovereignty. The port holds significant importance for the Nigerian economy, especially as the oil sector faces the threat of collapse due to drastic drops in crude oil prices in the global market. Hence, a collapse of the port system would have severe repercussions on the maritime industry and economy, especially in import-dependent nations like Nigeria. Despite efforts to revive it, Nigeria’s Port Authority has failed to grow over the past two decades, highlighting the urgent need for reforms in its port system. It is essential to emphasize that the productivity and efficiency of ports depend on increased cargo throughput, as the significance and effectiveness of any port are directly linked to the volume of its cargo traffic.

The persistent friction between the Nigerian Customs and the Apapa Tin Can port importers has been a longstanding issue due to complex regulatory requirements, cumbersome bureaucratic procedures, and inconsistent valuation of goods. These challenges have led to prolonged clearance times, frequent disputes, and unnecessary cargo examinations, resulting in significant delays and increased costs for importers and exporters. The inefficiencies in customs clearance have also led to heightened demurrage costs, which occur when cargo is held at the port beyond the allowed free days, making it difficult for companies to plan and manage their inventory effectively. These issues significantly impact the competitiveness and overall profitability of businesses operating in the Nigerian market. Importers often encounter significant cost hikes due to prolonged waiting times and slow bureaucratic customs clearance processes. These challenges are compounded by incomplete or inaccurate documentation, intricate inspection procedures, and occasional manual interventions to resolve discrepancies. These increased costs also impede the seamless delivery of goods, leading to higher demurrage expenses for importers, potential disruptions to supply chains, and increased holding and storage costs. Additionally, the increased customs clearance costs lead to spoilage of perishable goods, decreased value of goods with a short shelf life, and missed market opportunities for importers. Furthermore, the hike also affects delivery schedules, diminishing the value of goods that depend on timely imports.

Corruption continues to be a significant and pervasive issue at Nigeria’s Apapa Tin Can ports. Importers have reported facing many challenges, including being coerced into paying unofficial “facilitation fees” to expedite the clearance of their goods. These fees, which are not officially documented or regulated, substantially inflate the overall expenses of importing goods. Importers are forced to incorporate these unanticipated costs into their financial planning, leading to economic strain on customers. In addition to the initial facilitation fees, importers have highlighted that further unofficial payments are often demanded at various stages of the clearance process. This layered and continuous demand for unofficial payments places a heavy financial burden on importers and significantly hampers the smooth flow of goods through the ports. Customs officials have been accused of abusing their discretionary powers by soliciting bribes in exchange for expediting or simplifying the clearance process for goods. The lack of transparency and oversight in the clearance process has created an environment conducive to these illicit activities, eroding the efficiency and integrity of the ports. The enduring presence of corrupt practices continues to impede the efficient clearance of goods from the ports. As a result, business owners remain unaffected by the rising expenses that ultimately impact the final cost of their products for consumers. In response, they frequently adjust prices to offset the losses incurred during the clearance process at the ports.

The Customs officers at Apapa Tin Can Port have faced allegations of inconsistent and sometimes arbitrary assessment of imported goods. Importers have expressed ongoing concerns about overstated valuations of goods, leading to higher duty payments. This practice not only creates uncertainty for importers but also results in unexpected cost increases, impacting businesses and consumers. The absence of a standardized valuation system further complicates the issue, increasing the likelihood of conflicts between customs officials and importers. These conflicts often cause delays in the clearance process and can even lead to legal disputes, adding complexity and costs to the importation process. The lack of transparency and consistency in the assessment of imported goods poses significant challenges for businesses in Nigeria and can impede trade efficiency.

The Apapa ports have been grappling with persistent congestion issues, intensifying the difficulties encountered by importers. The port infrastructure often proves insufficient to accommodate the high trade volume, and inefficient logistics further hinder cargo movement. The access roads to these ports, including the Apapa-Oshodi Expressway, are frequently clogged with traffic, posing significant challenges to the efficient transportation of goods by trucks. This congestion substantially prolongs turnaround times and results in substantial financial losses, particularly for importers dealing with perishable goods such as fruits, vegetables, and pharmaceuticals. The congestion has created a ripple effect, affecting importers, exporters, freight forwarders, and shipping lines, leading to delays and increased costs across the entire supply chain. Furthermore, the lack of adequate storage and warehousing facilities near the ports further exacerbates importers’ challenges as they struggle to find suitable storage space for their goods amidst the temporary congestion.

Despite governmental efforts to modernize customs processes by implementing digital technologies, such as electronic documentation submission and automated clearance systems, the lack of widespread adoption of these technologies remains a significant challenge for importers and customs authorities. While certain aspects of the customs process, such as electronic customs declarations and digital duty and tax payments, have been successfully digitized, many importers still encounter manual interventions, leading to delays and inefficiencies in the overall process. These manual interventions often stem from discrepancies or errors in digital documentation, such as inaccuracies in product descriptions, quantities, or values, which require human intervention to rectify. Consequently, importers frequently face delays in customs clearance, additional storage costs, and potential demurrage charges.

To move forward, we require a more integrated and automated system that can effectively minimize the need for manual interventions. This would significantly reduce human factors contributing to delays and potential corruption, ultimately streamlining the customs clearance process and lowering costs for importers. Despite the implementation of electronic documentation submission in some cases, discrepancies in product classifications or valuation may still arise, necessitating manual review by customs officials. This manual review process can lead to delays as officials work to resolve these discrepancies, causing ripple effects throughout the supply chain. The absence of standardized digital systems across customs authorities further complicates importers’ challenges. A universal platform for electronic submission recognized and accepted by all customs authorities would lead to a more cohesive landscape, reducing complexities and potential errors in the customs clearance process. Additionally, reliance on manual interventions leaves the process vulnerable to human error and possible corruption, as manual reviews and assessments can introduce subjective elements into the clearance process. An integrated and automated system would not only expedite the customs clearance process but also enhance transparency and reduce the potential for irregularities.

We urgently need to implement new policies to establish a transparent and efficient payment method for importers at the Port. The current outdated and intricate policies of the Customs present a significant challenge for importers, leading to unnecessary expenses and delays in clearing goods and services at the Tin Can Island Port. The new policies should streamline the process by introducing online payment options and simplifying documentation requirements, ultimately decreasing the financial burden on importers. We urgently need policies that will promote the importation of goods rather than discourage it. By addressing these challenges and creating a more favorable environment for importers, we can help stimulate trade and support local businesses that rely on imported goods and materials. This will also contribute to the nation’s overall economic growth and development. The allegation at the port implicated not only the Nigeria Customs Service but also other governmental bodies such as the Standards Organization of Nigeria (SON) and the National Agency for Food and Drug Administration and Control (NAFDAC). The SON is responsible for establishing standards and overseeing the quality of imported goods to ensure they meet specified requirements. On the other hand, NAFDAC is tasked with regulating the registration, importation, exportation, manufacture, advertisement, distribution, sale, and use of food, drugs, cosmetics, medical devices, chemicals, and packaged water. However, these agencies’ lack of effective coordination often results in additional delays and bureaucratic obstacles, burdening importers. This lack of harmonization can lead to redundant processes and inspections, ultimately prolonging clearance times and inflating import costs.

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There are several other challenges that the Apapa Port has significantly impacted on the cost of doing business in the country. Congestion at the ports delays unloading and loading cargo, leading to increased business operational costs due to longer vessel turnaround times and higher demurrage charges. Additionally, inadequate road and rail infrastructure around the ports contributes to further delays in transporting goods to and from the ports, adding to the overall cost of conducting business. Moreover, bureaucratic red tape and inefficient port clearance processes impose additional business costs. Delays in clearing goods not only result in storage and handling charges but also lead to higher prices for goods in the local market as businesses pass on these additional costs to consumers, impacting consumers’ purchasing power and overall standard of living. The inefficiencies at these ports also act as a deterrent to potential foreign investors. The complexities and delays in clearing goods may prompt businesses to seek alternative routes, undermining the potential for increased foreign investment in Nigeria. Furthermore, the lack of modernization and capacity expansion at the ports exacerbates these challenges, highlighting the urgent need for the Nigerian government and relevant stakeholders to comprehensively address these issues to enhance the business environment and attract more foreign investment.

In the past, the Nigerian government took steps to proactively address the challenges encountered in customs operations by implementing significant reforms. One of the key initiatives was the Nigeria Customs Service automation project, which aims to modernize and streamline customs processes. Efforts were also made to enhance port infrastructure to ensure efficient trade facilitation. While these initiatives represent significant progress, there is still work to improve the customs system. The introduction of the Nigeria Customs Integrated System (NICIS) is a positive step toward digitalizing processes within the customs framework. However, it’s important to note that the full implementation of NICIS is ongoing, focusing on ensuring its seamless integration into existing operations. A crucial aspect of these reforms is to minimize human intervention and enhance transparency through digital platforms, which is essential for addressing the various challenges faced in customs operations and aligning with the government’s commitment to modernize and optimize trade processes.

The current question at hand is whether customs fees are impacting market prices. According to the earlier analysis, it is clear that customs fees do indeed have an impact on market prices. This conclusion is based on feedback from business individuals who have indicated that they would raise prices in response to heavy customs clearance fees at the Port. This is evident in the daily price fluctuations of goods in the market. The price of an item may differ within the span of just an hour. Therefore, customs fees play a significant role in shaping market prices and influencing consumer expenses and overall market dynamics. These factors often lead to delays and increased costs, ultimately hindering trade opportunities in Nigeria. Therefore, to tackle incessant increase in custom fees, comprehensive institutional reform is necessary. This involves optimizing customs procedures to speed cargo clearance and implementing measures to combat corruption within port operations.

Additionally, improving the infrastructure connecting the ports, such as enhancing road and rail networks, is essential to facilitate the smooth movement of goods. Embracing cutting-edge technologies can further improve the efficiency of port operations. Automated cargo tracking systems utilizing RFID and GPS technology can provide real-time visibility into the location and status of shipments, thereby reducing delays and improving overall operational efficiency. Furthermore, adopting digital documentation through electronic data interchange (EDI) can streamline paperwork, resulting in faster processing times and reduced administrative burdens. Combating corruption effectively within the port environment requires a concerted effort. Strict enforcement of anti-corruption measures, establishing independent oversight bodies, and implementing transparent governance practices are crucial in promoting integrity and accountability within port operations. Implementing these measures can facilitate trade, reduce delays and costs, and stimulate economic activity in Nigeria. This, in turn, will attract foreign investment and contribute to the country’s overall growth and development.

Rev. Ma, S.J., is a Jesuit Catholic priest of the North West Africa Province of the Society of Jesus. He writes from Abuja, FCT.