Has Concessioned Ports Helped In Nigeria?

Over time, seaports have emerged as a major gateway to economic development of any nation. The United Nation Conference for Trade and Development (UNCTAD) in 2009 reported that “about 90% of the world’s trade is carried out via the sea.” For instance, in 2011, ports contribute 1.9, 1.3, 2.1 and 0.05% of the total Gross Domestic Product (GDP) in United Kingdom, South Africa, Singapore and Nigeria respectively. This is achieved on the back of efficient physical infrastructural and institutional development that eliminated bottlenecks and corruption to the barest minimum in these countries.

Planning and operating a seaport without standard connecting roads, rails and barge facilities is common place in developing countries. As international trade evolves driven by globalisation and comparative cost model, developing countries are confronted with increasing freight traffic leading to commercial and port reforms across several countries in the last decade. A developed port should have intra-model transport system connecting it to demand hubs such as coastal fleet, road (truck/vehicle) network, rail rolling stock and inland waterway fleet. Others include refineries, processing zones, mines and agricultural stations, warehouse centres, and proximity to dried ports for general cargo. Unfortunately, the above description remains an illusion in Nigerian ports.

Objectives Of The Port Reform
In an attempt to address the country’s inefficient port system and position the economy for sustainable growth and development, the Federal Government of Nigeria initiated port reform policy in 2004. Before the reform, port operations were characterised by centralisation, high port charges, poor infrastructure, crippling bureaucracy and multiple governmental agencies which made it uncompetitive and unattractive in the West African sub-region. The objective of the reform was to create an efficient port system that would grow the nation's economy, make it private sector-driven and boost local and global competitiveness. Specifics of the reform agenda includes:

  • Reduce turnaround time for vessels
  • Reduce cargo dwell time
  • Enhance security of ships at berth and cargoes at terminals
  • Attract private funds and freeing public resources for social services
  • Create efficient and user-friendly ports; with the  basic tenet being the public ownership of port infrastructure and the transfer of cargo operational responsibilities to the private sector as a means of improving efficiency
  • Security of persons in the ports

The Concessionaires
The port concession programme was completed in 2006 after an international competitive bidding process. This led to the emergence of 16 private terminal operators on the Build, Operate and Transfer (BOT) model. The reform brought about ceding of cargo handling operations at the port to private terminal operators, leaving the Nigerian Ports Authority (NPA) as the landlord.
Notable among the concessioners are:

  • AP Moller
  • Bremenports
  • Eurogate
  • Bollore
  • Fivestar Logistics Ltd
  • APM Apapa Terminals Ltd
  • Global Logistics
  • Grimaldi Lines
  • Ports and Terminal  Multiservices Limited

Has Concessioning Paid-Off?
Recent statistics from the NPA shows that there is a modest improvement in the fortunes of Nigerian ports (Onne, Calabar, Warri, Lagos, Koko, and Sapele) in the last few years. For instance, goods under storage are now safer after eliminating “wharf rats” and consolidating security operations. Foreign shipping lines such as MOL and “K” Line which left the country for other ports along the West Coast have since returned. New container shipping lines such as CSAV, Nile Dutch and UASC have concluded arrangements to commence operations in Nigeria. This is somewhat comforting as international perception of Nigerian ports seems to be improving. The NPA attributed its improved revenue profile over the last five years to concessioning of the ports. Its annual revenue rose from ₦80-₦100 billion to ₦400 billion between 2005 (pre-concessioning) and 2011 (five years after the reform).

The concession exercise has also led to the emergence of very large vessels with greater cost effectiveness, speed in delivery, improved cargo-handling technology and reduced unit freight cost. The initiative has brought on board international terminal operators with specialised technical efficiency in cargo handling. In addition, it has increased port competitiveness, fluid movement of goods across international borders, offshore manufacturing, electronic business transactions, amongst others.

Since the concession of the terminals, statistics have shown that while cargo throughput has soared, ship traffic has also increased tremendously. The improvement in cargo throughput saw turnaround time of vessels coming down to 72 hours on the average in most of the terminals.

Far From The Threshold
As heartwarming as the modest improvements have been, it is still far from fulfilling the objectives for which the concession was undertaken. Essentially, the concession was intended to make the ports efficient and capable of satisfying the needs of port users, such as taking delivery of their goods safely and promptly. It is also aimed at reducing the cost of clearing goods at the port and to attract private investors to the maritime sector. The overall objective was to modernise the ports and position the country as hub for maritime business in West and Central Africa.

In monetary terms, it was projected that while government will save over ₦100 billion per annum from overhead on terminal operations, the Nigerian shippers will record up to ₦80 billon per annum from the current ₦25 billion if the ports operate efficiently. This is targeted at discouraging the age long practice where some importers and ship owners divert ships lading with Nigerian–bound cargoes to neighbouring ports in Republic of Benin, Togo and Ghana.  Over ₦200 billion of potential revenue is still lost annually by the Nigerian government due to diversion of ship and cargo to neighbouring ports. The key objectives of the reforms are yet to be realised due to the failure of the Federal Government and the concessionaires to honour their obligations under the concession agreement.

“Give Us Infrastructure!”
The Federal Government through the NPA is expected to provide major port infrastructure such as rail lines, electricity, marine services, undertake the development and maintenance of the quay walls as well as smooth navigation of the water ways. The NPA also need to provide towage and pilotage services and bunkering facilities. The poor state of supporting infrastructure at the ports, particularly rail lines has continued to pose serious challenge. Although the NPA said it had in collaboration with the Nigerian Railway Corporation (NRC) commenced the rehabilitation of rail lines at the ports, not much has been achieved.

The concessionaires appear to have exploited the loopholes created by government’s failure in honouring agreement, as they also reneged on their own obligations. Some of them allegedly failed to invest in the acquisition of cargo-handling equipment, thus, impacting on the turnaround time at the ports. Port charges in Nigeria are believed to be one of the highest in the word, making the cheaper port in the neighbouring countries very attractive for importers. Sadly, about 25% of imported goods in Nigeria currently come into the country via the ports of neighbouring countries.    

We Remain Optimistic
Stakeholders remain very optimistic on the continued growth of ship and cargo traffic. With 82,763,384MT of cargo throughput recorded from 5,327 vessels that called at the ports in 2011, the NPA projects a growth of 25% in 2012 driven by the ongoing rehabilitation programme and upgrade of facilities by concessioners at different terminals. According to Michael Ajayi, the General Manager, Public Affairs of NPA, ship traffic will peak at between 6,000 and 6,500 vessels in 2012 and the port will likely attract bigger ocean liners with more than 5,000 containers in a single voyage.

Giving the record rise in shipping and cargo traffic over the last six years, one can give the port concessioning reform some “pat on the back”. Apart from the huge infrastructure rehabilitation and investment of about ₦200 billion since the reform, there has been a tremendous improvement in the way business is done at the ports than what it used to be prior concession.