Achieving Appropriate Air Cargo Tariff Increase by NAHCO, ANCLA
The recent agreement between the Nigerian Aviation Handling Company PLC, (NAHCO Aviance) and the Association of Nigeria Customs Licensed Agents on the need to increase tariff has been described as first of its kind, reports Kunle Aderinokun
On Monday, May 11 2015, the Nigerian Aviation Handling Company PLC (nahco aviance) effected a review of its tariffs in what has been a widely expected move in the industry. The journey to the increase started early in the year when the company called on all stakeholders to a meeting to discuss on the way forward. The value of the naira was falling fast. Ground handling equipment which is denominated in dollars had to be acquired. Yet, for a Company like NAHCO with global alliances, standards just had to be met.
The foregoing formed the basis of discussions at the Air Cargo Summit which held at the Lagos Sheraton on May 2, 2015. The all-day event provided a forum for all shades of opinions in the industry. At the event were stakeholders in the industry including the regulator, NCAA, represented by directors, FAAN, also represented by directors and the top echelon of the Association of Nigeria Customs Licensed Agents (ANLCA) and National Association of Government Approved Freight Forwarders (NAGAFF) were present.
It was at the session that the NAHCO management first informed the stakeholders of its intention to review tariffs upwards in order to be able to maintain the high standards it has been known for. Tariff increase was not the only issue discussed at the summit though. There were three break-out groups with the first being : Appropriate Pricing and Incentives; the second group, Air Cargo Safety & Access Control and Stakeholders’ Facilitation & Coordination.
However of all three, the first group had the most attention. It was where the fireworks were expected. It was resolved at the end of the meeting that although it was NAHCO’s right to increase its tariffs, it should nonetheless consult more before implementing the increment. According to representatives of ANCLA and NAGAFF who were at the event, NAHCO should not implement the proposed changes immediately but should consult more. They also said the 70 percent percentage increase is in on the high side.
Based on the feedback from this meeting, NAHCO was said to have gone into went into wide – ranging consultations with officials of both ANCLA and NAGAFF. The chief driver of the move for NAHCO and the company’s Chief Commercial Officer, Mr. Seyi Adewale, was said to always be on the road to one meeting or the other called by either ANCLA or NAGAFF. As far as this issue goes, working on Saturdays was for Mr. Adewale part of the assignment.
The company also consulted with NAGAFF. According to Adewale, everybody was important and everybody would be consulted. The radicals as well as the conservatives among the agents were fully consulted.
Notices were said to have also been placed at strategic location within the cargo terminal so that agents and other importers would be abreast of the coming development. The agents themselves continue to discuss the matter in groups within the complex. Basically, they were concerned about how much the increase would come to. But more importantly, they brainstorm on how they would use the new rates to get more money from their clients.
The required days for notification according to the law having passed, NAHCO was said to have given a few more weeks of grace before implementing a 30 percent tariff increase on Monday, May 11, 2015. The implementation was received with mixed feelings. There were those who thought that the adjustment was long foretold. The exchange rate of the naira to the dollar is enough to force price adjustment for businesses which had a thing or two to do with foreign exchange.
There were however, also, the other group who thought that importation into the country is at its low ebb now as a result of the crash of the naira against the dollar; and as a result, further increase in the cost of cargo clearance may further affect the industry negatively.
But the arguments Seyi Adewale put out for the tariff hike remains convincing. According to the NAHCO CCO, the cost of purchasing new equipment has sky – rocketed as a result of the fall of the naira. Unfortunately 95 percent of the equipment used by ground handling companies of international repute is imported. Also, spare parts for the equipment that are currently in service are also imported; meaning operators would still need to spend more dollars.
As if that is not enough, FAAN charges are hiked every year. Apron passes are increased by as much as 300 percent or 500 percent in some cases. Yet, concessionaires like NAHCO still pay about five percent of its gross turnover to the same FAAN. Again, FAAN bills NAHCO excessively for power; yet the electricity is not therefore the company to use. Company sources said there are times when NAHCO would be on generators for two weeks non-stop. That would however not reduce the electricity bill from FAAN.
But equally importantly is the fact that the last time tariff was increased was about three years ago; since then a lot of things, including the inflation rate, had changed in the economy. During this time, Nigeria’s economy had become the largest in Africa; yet our rates are lower than in South Africa. Adewale believes that increase in rates is the only way to remain competitive and to be able to render superlative services.
He also explained that as the only Public Limited Company (PLC) operating in the sub-sector, nahco aviance’ shareholders want return on investment. “Look, the shareholders did not invest in the company so that they could dump their money somewhere. No, they invested here so that they could get return on investment. As a management, we owe it a duty to them to give them returns on their investment, Adewale was said to have told a stakeholders’ group during a presentation.
Adewale also put a lie to claims by propagandists going around to say that the increase would affect the country’s export drive. “Let me state emphatically for the avoidance of doubt, that export handling tariffs remain the same. They are not affected in any way by the tariff adjustment, ” he said.
When the tariffs finally took effect at midnight on May 11, 2015; there was nothing particularly strange at the Cargo terminal. Those who thought there was going to be any kind of uproar were surprised. Although the ANCLA task force officials were able to prevent one or two of their members from paying for cargo handling based on the new tariff; even that process itself was peaceful. ANCLA members knew they would lose a lot should they go on a misguided war path with NAHCO.
ANLCA would however request for a meeting with NAHCO’s management on the issue. The meeting which held around 3PM at NAHCO’s headquarters on Monday May 11 reached no consensus. ANCLA wanted 10 per cent increase and for such an increase to take effect in September. But NAHCO held its ground. It said 30 per cent is the realistic rate and that should be effective immediately.
The second round of meeting took place also at NAHCO’s headquarters on Thursday, May 14, 2015 where a consensus was reached. ANCLA agreed to an increment of 20 percent while NAHCO moved down from 30 to 20 percent.
The two sides at the meeting were said to be full of respect for each other. NAHCO’s Managing Director/CEO, Norbert Bielderman, praised the ANCLA’s team led to the meeting by the Vice Chairman, Hon. Bola Ashiru – Balogun for its professionalism. Bielderman said, “This is a matter of give and take. I would like to thank all of you for the professionalism you brought into play. You guys have been very professional. I appreciated that.”
On his part, Ashiru – Balogun who was supported by the ANCLA’s Treasurer, Mr. Afolabi Azeez and its Financial Secretary, Obanla Alex, said, “This is the first time that NAHCO has been so organised. Your CCO, Seyi Adewale got his acts right.”
Ashiru-Balogun said although it is a win – win situation for NAHCO, it is more of win – lose situation for ANCLA. He said he congratulated NAHCO on its win, while concedidng that noody can win all the time. He is however sure that ANCLA would win next time.
He also appealed to NAHCO to ensure that ANCLA is carried along whenever issues relating to them and the industry are concerned. “Before taking decisions that affects us, try to bring us in before the implementation,” he further stated. Norbert who said a lot of consultation was done before the implementation of the increment told the ANCLA chiefs to always bring to NAHCO’s management, any issue that concerns both party so they could resolve it together. “We are in this tough time together,” the NAHCO’s MD said. The amicable resolution of the tariff increased had put paid to suggestions that it may lead to disruption in the clearance of cargoes.
Also, the speculations that by refusing to go along with NAHCO on the price adjustment, the other ground handler, SAHCOL, might win more customers by its strategy seems now to be academic. This is because some of the agents don’t see why the smaller ground handler would be their next point of call. One of them, Joel Osunbor who spoke to this THISDAY said, “Didn’t I see those people there before I came to NAHCO. I beg leave that thing. This NAHCO guys have the best equipment. Just forget all the noise from that side.”
When asked how NAHCO was able to get the job done without protests by the agents, without any placards or pelting of sachets water as was always the case, Manager, Communication and Corporate Services of the Company, Tayo Ajakaye, said: “You know, we did all we were required to do. We consulted everyone , body, agency and stakeholder that needed to be consulted. But of course you will agree with me that no one wants a price increase. Nonetheless, we thank God for everything.”
He further added that the 20 percent eventually agreed to by both parties had shown that ANCLA realised that there was need for the increase in the first place. As to why it is only NAHCO that is increasing tariff while the other handlers seem to be contented with what it was before now, Ajakaye said: “Like they say, it is not the bicycle. It is the rider. The difference is in the handling. The agents know the difference. Ask any of them.” “Now that ANCLA had agreed on the need to increase to 20 percent, is that competitor also going to increase or stay with the current price? I think you better watch out!” Ajakaye said.