Businesses incur billions in demurrage as customs processes drag on
Nigerian companies that depend on imports for their production inputs lose billions of naira every year due to demurrage charges paid to international shipping companies for delays in the delivery of imports from ports, stakeholders said. industry at BusinessDay.
Avoidable demurrage charges accrue on imported containerized cargo due to customs cargo inspection and clearance processes that cause containers to stay longer in port.
A recent study by the Nigerian Shippers’ Council (NSC), the port’s economic regulator, found that in Nigeria it takes an average of 20 days for a ship to turn around and 21 days for importers to get their containers out. port.
BusinessDay found that in neighboring Republic of Benin, ships visiting Cotonou Port unload containers in two days, and a container clears customs in seven days, with only three or four documents to complete.
In Nigeria, containers stay for 21 days and importers of containerized goods enjoy five days free of demurrage from the day the vessel docks, after which demurrage begins to count.
After the fifth day, the cargo owner should pay the shipping company for holding the container at the end of the days without demurrage.
Hassan Bello, the former executive secretary of the NSC, said importers paid over N50 billion in demurrage in 2020, describing the payment of demurrage as a sign of inefficiency and lack of competition among service providers .
According to him, Nigeria should have a digital and technology-driven contactless port.
Bello said automating port processes will not only reduce the time ships spend in port by improving turnaround times, but also reduce the number of days containers spend in port.
Citing an example, Bello said the Port of Singapore has no downtime for cargo as containers go out as soon as they arrive.
On the way forward, he highlighted the need to automate port processes to become digital and electronic to reduce demurrage payment in Nigerian ports.
“Nigerian ports need cargo inspection infrastructure such as electronic scanners, which have the capability to examine containers in five minutes rather than a physical examination which takes five hours,” he added. .
Afolabi Olowookere, Managing Director/CEO of Analysts’ Data Services and Resources, said a high bureaucratic clearance process, multiple agencies at the port and poor logistics infrastructure had put the Nigerian port among the most expensive ports to do Business.
He said there was a need to create a one-stop shop for cargo inspection and eliminate human contact at the port.
According to him, the consignee would not need to travel individually to Customs, Standards Organization of Nigeria, Quarantine and the National Agency for Food and Drug Administration and Control to go through the same process. whether there is a single interface for all agencies responsible for cargo inspection at the port.
Citing an example with the World Bank’s Logistics Performance Index (LPI) used to measure the efficiency of the customs clearance process, he said Nigerian ports lag behind their West African counterparts due to manual processes and bureaucratic bottlenecks.
The latest World Bank LPI ranking, he said, shows Nigeria ranks at 1.97, Ghana at 2.57, Togo at 2.45, South Africa at 3.38 , Egypt at 2.82, Benin Republic at 2.75 and Cameroon at 2.6.
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According to Olowookere, Nigerian ports can compete favorably with their peers only if cargo inspection processes are automated, bureaucratic bottlenecks are removed and more infrastructure is built.
“Nigeria must leverage technology to improve its efficiency and ease of doing business. Enable inland waterways to serve as an alternative mode of transport that is cheaper and can decongest seaports,” he added.
Using the eastern ports as an example, Isreal Oyina, president of the Shipping Trade Practitioners Association of Nigeria, Rivers Port Chapter, said the lack of joint boarding of vessels by all government agencies at the port has delayed the rotation of ships.
According to Oyina, the cost of doing business at Rivers Port is very high as charterers are forced to pay demurrage and risky freight due to security issues along the channel.
“It takes up to 5 hours to clear ships at Rivers Port, which significantly affects the turnaround time of the ship. It also takes about 14 to 21 days to turn the ship around, which leads to demurrage payments to shipping companies, as some ships take around $30,000 a day in maintenance costs, which must be taken care of,” a- he added.