▪︎Segun Ajayi-Kadir,  MAN Director-General

The Manufacturers Association of Nigeria (MAN), having consulted widely with its members across the country, expresses grave concern over the proposed 15% increase in port-related charges by the Nigerian Ports Authority (NPA).

In a position statement released by Segun Ajayi-Kadir,  MAN Director-General, on Sunday,  said that the proposed increment is coming up 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.

Port Operations and Their Impact on Manufacturing

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.

The Economic Realities and Global Competitiveness

Nigeria’s current economic climate is characterized by rising inflation, foreign exchange challenges, and declining industrial capacity utilization.

Many businesses are experiencing worrying downturn due to unsustainable operating costs. Increasing port tariffs is therefore ill-timed and could signal a departure from government’s avowed efforts and commitment to the ease of doing business.

It is inevitable that this additional strain on industrial activities will ultimately lead to reduce capacity utilization and possibly job losses.

Furthermore, Nigeria must remain competitive in regional trade. Neighboring countries with more efficient and cost-effective ports will become far more attractive alternatives, leading to increased cargo diversion.

This will not only reduce revenue for the Nigerian government but will encourage smuggling and other untoward trade practices that weaken our economy.

Alternative Approaches to Revenue Generation

While we acknowledge the need for revenue generation, increasing port tariffs could be counterproductive in the long run.

The real issues affecting port revenue include:

Port congestion and inefficiency:

Reducing turnaround time for vessels and improving cargo-clearing processes can significantly boost revenue.

High demurrage charges:

Addressing bureaucratic bottlenecks that delay cargo clearance will ensure faster throughput and more efficient revenue collection. Infrastructure investment: Improving port infrastructure will enhance operational efficiency and attract more business, leading to natural revenue growth.

Competitive pricing strategies:

Instead of raising tariffs, aligning Nigerian port charges with global best practices will encourage more trade volume and increase overall earnings.

Our Appeal to the Nigerian Ports Authority

The Manufacturers Association of Nigeria’s implores the NPA to shelve the proposed 15% tariff increase and instead, collaborate with stakeholders to explore sustainable alternatives for revenue generation.

Increasing tariffs in the current economic climate will have dire consequences, including:

1.      Increased cost of production, leading to higher prices of goods and fanning inflation.

2.      Reduced competitiveness of Nigerian manufacturers in local and international markets.

3.      Increased smuggling due to high costs at Nigerian ports compared to neighboring countries. 4.      Decline in government revenue due to lower cargo turn out and manufacturing downturn.

Rather than imposing additional financial burdens on businesses, we propose 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.

We earnestly advocate for caution and deep reflection on the part of the NPA, as a key stakeholder in Nigeria’s economic development.

NPA’s consultation with key economic actors after it has decided on the increase is tantamount to putting the cart before the horse and does not demonstrate goodwill.

We call on NPA to rescind the planned increase in order to avert a monumental downturn in the fortunes of businesses in Nigeria.

The manufacturing sector can ill-afford such an increase at this time; it runs against the present administration’s efforts at making Nigeria a trading hub in the West African sub-region, and would definitely constitute a drag in the efforts of government to stabilize the economy in the year 2025.