Many project cargoes currently litter the ports in Lagos following Nigeria’s unstable foreign exchange (FX) regime which has forced many importers to abandon these cargoes, thereby leading to many of the projects remaining uncompleted or abandoned by contractors handling them, checks by the Nigerian Tribune has revealed.
According to data made available to the Nigerian Tribune by a source very close to the Sea Empowerment Research Center, many of these projects approved towards the end of 2023, have been abandoned because the exchange rate when the contracts were negotiated had changed significantly by the time the contractors began importation of raw materials for these projects.
Some of the projects include the N7.3 million dredging of the Ehie River in Abia State; N68.2 million Aba-Owerri road rehabilitation and the N40 million project for the reclamation of Ikot Ntung Irrigation Project in Akwa Ibom State.
According to the source, “In December 2023, N40.1 million was paid by the Akwa Ibom State Government to Ijo Maritime Services Ltd for the Reclamation of Ikot Ntung Irrigation Project, Nsit Ubium LGA, Akwa Ibom State.
“This job has been abandoned because the exchange rate as at when the payment was made in 2023 is no longer what it is as at today. The contractor couldn’t raise additional funds to balance the difference when he based it on current realities.
“The cost of bringing in raw materials for this project had changed significantly, thereby leading to the abandonment of these project. I even learnt that the consignments had arrived the ports but clearance became an issue because what the contractor was being asked to pay was very much higher than what he factored into the contract details during negotiation.
“This is what many project cargoes being handled by clearing agents onbehalf of many contractors are facing. When exchange rate changes, Customs duty changes and the rate that was inputted for importation of raw materials for the project becomes affected, thus making it difficult for the contractor to go ahead with the project except he can raise funds elsewhere.
“So many projects have been abandoned due to this issue. In some cases, some raw materials have arrived inside the ports in Lagos but have been abandoned by the importers (who is the contractor) because the cost of clearing has tripled from what he was given.
“Goods meant to service projects like the N7.3 million dredging of the Ehie River from Awomukwu to Obuohia in Anambra State; N68.2 million rehabilitation of Aba-Owerri Road, NNPC Depot Expressway, Abia State; N188.4 million rehabilitation of Farm Roads/Drainage in Uke Karu LGA, Nasarawa state; N254.9 million electrification project at Mayo Lope Town, Apawa Phase I, Lau LGA in Taraba State, amongst many others currently litter the ports in Lagos.
“I know about some of the projects because the clearing agents handling the clearance of raw materials for this jobs are known to me.”
Recall that Nigerian’s have had to grapple with distortions to the country’s foreign exchange regime following incessant adjustments of the nations exchange rate by the Central Bank of Nigeria (CBN).
In the first quarter of 2024, a total of 28 exchange rates were directed by the Central Bank of Nigeria, ranging from NGN 951.94 per USD 1 in January 2024 to a peak of NGN 1,662.35 per USD 1 in February 2024. While a singular exchange rate of NGN951.94 per USD 1 was maintained in January, February witnessed 15 different spot rates ranging from NGN 951.94 per USD 1 to NGN 1,662.35 per USD 1.
March saw a total of 13 different spot rates applied, ranging from NGN1,303.84 to NGN1,630.16. These fluctuations resulted in an average applied exchange rate of NGN1,314.03 per USD 1 in the clearance of Customs goods during the quarter.
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