Demurrage Waivers: Between COVID-19 Palliatives and Business Interests

At the height of the rampaging Coronavirus pandemic in March, 2020, the Nigerian ports Authority (NPA) directed terminal operators to give demurrage waivers to importers as a form of palliative to ease the pains of goods clearance at the ports occasioned by the scourge.

In two separate requests, the NPA sought for a combined 35 days of free rent for importers.

The first waivers of 21days took effect from March 23rd and extended for another 14 days, making a total of 35 days.

The gesture of the government agency is laudable and understandable.

It was meant to give relief to importers and their agents in the face of obvious difficulties they were facing to clear their consignments due to the lockdown engendered by the pandemic.

Since the ports must remain open irrespective of the scourge and lockdown, operations at the ports will be evidently encumbered.

So, in order to relieve and encourage the importers and their agents to take their boxes from the ports, the NPA came up with the palliative measures.

But despite the NPA assurances that it will compensate the obvious revenue loss by the terminal operators as it considers “a shift in our operational charges to ameliorate the situation”, the terminal operators seemed not to be impressed.

As at the time of this report, only one terminal operator, an indigenous operator at the Tin Can Island Ports, has taken steps to comply with the directive.

We are not surprised at the apathy displayed by the terminal operators to the demurrage waiver directive as it was a humanitarian gesture by the NPA that clashes with their business interests.

The lockdown occasioned by the Covid-19 pandemic has obviously presented untold hardship in cargo clearance procedures.

It has left little access for the importers and their agents to take their boxes out of the ports.

So, they are not the cause of the pandemic which created these unavoidable bottlenecks.

Likewise, the terminal operators who are in business to make money.

So, neither parties were the cause of the unfortunate situation.

Then how do we strike a delicate balance between giving the importers incentives to carry their goods and allowing the terminal operators who are in business to maximise their profits?

At the risk of being labelled as capitalists, we find the request for demurrage waivers as curious and inconsistent with the general desire to stave off possible congestion at the ports.

Already, the terminal operators have raised an alarm of possible congestion as about 80 to 90 percent of the terminals are already full.

They claimed the importers and their agents were not coming to clear their cargo.

We believe the demurrage waivers of combined 35 days could be a recipe for congestion as the offer could be abused.

But then, can we really blame the importers and their agents for not coming to take their boxes despite the Federal government directive that port operations are exempted from the lockdown?

Despite the directive, the Federal government simply went to sleep without enforcement.

Its directive to banks to open to treat payment for Customs clearance was obeyed in the breach.

We also learnt that only two shipping companies, MSC and Maerskline, have digital operations while the rest are still operating manually but refused to open for business.

Access to the ports by Freight Forwarders was limited as the free bus ride initiative of Nigerian Shippers’ Council, which we considered laudable, could not achieve the desired result.

So, the ports remain open with hampered operations. Some say with skeletal services.

Little wonder the terminal operators showed little enthusiasm towards the directive to give waiver palliatives to importers and their agents.

Firstly, each of them has supported the fight against the pandemic with cash and materials.

Asking them to make additional sacrifice may be too much for them more so when NPA gave them assurance to merely “compensate” them for the incurred financial loss and not to defray the total loss.

We believe this controversial directive is the derivative of government failure to put necessary measures and infrastructures in place for seamless cargo clearance procedures even at such an emergency period as Covid-19 pandemic.

In Ghana, the port authority said it would not and did not ask for a waiver on demurrage from terminal operators because, according to the official of Ghana Port Authority, they have put adequate infrastructures on ground to aid unhindered cargo documentation and delivery system during the Covid-19 pandemic.

So, they felt no importer nor his agent has any justification not to clear his boxes within a record time.

But the Nigerian importers have no such luxury of effective and efficient port operations.

We are accustomed to fire brigade approach such as the issue of demurrage waivers to tackle an emergency situation.

Even at that, what happens to the so called non-essential goods that are not supposed to be cleared during this period?

Since government said only essential goods such as food items, Medicare, ambulance and other materials needed in the fight against the pandemic should be given priority during this period.

We then ask, would the importers of such non-essentials be asked to pay demurrage on their goods whenever they wish to take them after the lockdown?

After all, they would have wanted to take their boxes but for the lockdown.

Does this directive affect those non essentials as well?

The whole situation seemed cloudier and more complicated as both the terminal operators and the importers, none of whom caused the crisis, would be fighting for their economic interests.

The NPA should be diplomatic and dexterous in handling this issue as some of the terminal operators may be adamant in complying with the directive.

It is not today the NPA’s order would be treated with ignominy.

The shipping companies had done it before when they spat on the order of the agency over holding bays.

And they got away with it.

We advise that rather than resort to threat of sanction against erring terminal operators, the NPA should use the stick and carrot approach to arrive at an amicable resolution of this avoidable controversy.

We want the government and port authority to be proactive in future by putting in place an efficient and robust documentation and cargo delivery system that will lead to seamless cargo clearance procedures at the ports.

A system that will effectively respond to any challenge in an emergency situation as we now find ourselves.