The Manufacturers Association of Nigeria (MAN), has condemned the proposed 15% increase in port-related charges, saying it will increase production costs and drive up inflation in the country.
Nairametrics reported that the Nigeria Port Authority, last week, announced a 15% upward review of port charges, citing the need for competitiveness and infrastructural development.
In a statement released on Sunday by its Director General, Segun Ajayi-Kadir, MAN argued that the increment of port charges is untimely as businesses are currently battling a harsh economic climate.
“At a time when businesses are struggling with the rising cost of operations, high rate of foreign exchange, astronomical energy costs, and general economic uncertainties, imposing additional financial burdens on manufacturers through increased port tariffs will exacerbate the challenges faced by the real sector,” Ajayi-Kadir noted.
He also warned that the increased tariff would increase smuggling and reduce government port revenues.
80% of Nigeria’s traded goods are transported by sea
The DG stated that 80% of Nigeria’s traded goods are transported by sea, and 70% of total imports and exports in West and Central Africa are destined for Nigeria.
He argued that the proposed increase in port charges would raise the cost of production and reduce the competitiveness of local manufacturers who depend on imported raw materials and industrial machinery.
“Ports are the gateway to international trade and play a crucial role in the efficiency and cost-effectiveness of business operations. According to the United Nations Conference on Trade and Development (UNCTAD) 80% of Nigeria’s traded goods are transported by sea, with 70% of total imports and exports in West and Central Africa destined for Nigeria. This underscores the critical role Nigerian ports play in facilitating trade and industrial productivity.
“For manufacturers, port-related charges constitute significant indirect costs, as most raw materials and industrial machinery are imported through these ports. Any increase in charges will have a ripple effect, leading to higher production costs, increased inflationary pressures, and reduced competitiveness of locally manufactured goods.
“Many manufacturers who operate as tenants in NPA facilities will also face escalated costs, which could significantly disrupt the slight moderation in the mounting challenges that has bedeviled the manufacturing sector in recent times.”
Main issues affecting port revenue
The MAN DG said the association acknowledges the need for revenue generation by the NPA, but increasing port tariffs could be counterproductive in the long run. He listed the following as the major issues affecting port revenue in Nigeria and proposed solutions:
- Port congestion and inefficiency: He suggested that reducing turnaround time for vessels and improving cargo clearing processes can significantly boost revenue.
- High demurrage charges: The association believes addressing bureaucratic bottlenecks that delay cargo clearance will ensure more efficient revenue collection.
- Infrastructure investment: Improving port infrastructure will enhance operational efficiency and attract more business, leading to natural revenue growth, MAN advises.
- Competitive pricing strategies: Instead of raising tariffs, MAN advises aligning Nigerian port charges with global best practices as that will encourage more trade volume and increase overall earnings.
MAN implores NPA to shelve proposed 15% tariff increase
MAN implored the NPA to shelve the proposed 15% tariff increase and proposed a “stakeholder dialogue to explore strategies for enhancing port efficiency, reducing operational bottlenecks, and creating a more business-friendly environment that will ultimately lead to increased revenue without undermining industrial growth and competitiveness.”
- The association argued that the NPA’s proposed consultation with stakeholders after it had already decided to increase tariffs does not demonstrate goodwill.
- It stressed that manufacturers would face a monumental downturn if the planned tariff increase were not rescinded.
- MAN noted that the NPA’s planned tariff increase does not align with the present administration’s efforts at making Nigeria a trading hub in the West African sub-region.
