FIVE YEARS AFTER PORTS CONCESSIONING, STAKEHOLDERS RAISE FRESH CONCERNS
Omar Suleiman
It is now five years since the Nigerian ports were concessioned to private operators. Prior to the concessioning arrangement, the ports were characterized by high degree of centralization, high port charges, poor infrastructure, crippling bureaucracy and multiple governmental agencies which made it uncompetitive and unattractive in the West African sub-region. This no doubt was antithetical to achieving the much trumpeted federal government's vision 2020.
There is no gainsaying the fact that the gateway to the economic development of any nation is its seaport, where higher percentages of goods are moved. Many countries like the United Kingdom and the United Arab Emirates, among others, have developed their ports to become money spinning sectors to the extent of contributing huge revenues to their treasuries. They have been able to achieve this due to good infrastructural development and the reduction of corruption to the barest minimum inter alia.
For the Nigeria ports, it is a different kettle of fish. Although the sector with its flora and fauna has the potential of attracting huge revenue for the country, the story is entirely different. While a lot of business transactions take place at the ports, the major part of the money is used to line personal pockets. While the dream of the founding fathers was to make the ports globally competitive, most Nigerians saw this noble dream collapse by day like a pack of cards. The ports were faced with myriad of problems and this dug holes in the nation's economy. It was based on this that some people started clamouring for port concessioning.
Port concessioning, which is simply a lease for a specified tenure of time, ranging between five, ten, 15 to 25 years according to this school of thought will make the Nigerian Ports Authority focus more on its core function of keeping the channels safe for navigation, among other responsibilities as the technical regulator, so as to relieve it of other functions that do not fall within its purview. Nigeria currently has 26 ports. The first Nigerian port was inaugurated in the pre-independence period and its establishment dates back to the middle of the 19th century.
According to the United Nations Conference on Trade and Development report on port development, planning a seaport without considering the connecting road, rail and barge facilities may lead to serious faults in national communications and port development, as this is common to the developing countries where the freight traffic is rapidly growing and changing.
A balanced port development plan is needed for each class of maritime traffic, while the number of ports, their specialisation and their location, have to be considered, as smaller ports, which play a special local role may not be developed to the same extent as the main general cargo ports but they contribute to the country's trade and need to be included in the national plan.
A developed port should have coastal routes connecting it, a route between it and demand centres, existing coastal fleet, road vehicle availability, rail rolling stock plans and inland waterway fleet. Others include refineries, processing plants, mines and agricultural station, warehousing centres, provision for general cargo, specialised traffic and coastal transshipment. One of the roles of the ports is to serve the international trading needs of its hinterland in total for all needs and to assist in generating trade and regional industrial development.
Others include to capture an increased share of international traffic either by trans-shipment or by inland routing and to provide transit facilities for distant hinterlands not traditionally served or for neighbouring landlocked countries. All these arguments were bandied by proponents of port reforms. This group and others gave the government of president Obasanjo the impetus to embark on reforms although some analysts believe the government had this on the agenda before now.
Why Ports were concessioned
Defending the reforms recently, the transport Minister, Yusuf Suleiman said, 'Government's reform agenda for the sector was targeted at improving; enhancing management capability of enterprises; creating a conducive institutional; legal and regulatory framework; developing private sector participation in financing, management and operations of port facilities. 'Other related objective of the reform is to increase the efficiency of port operations, decrease the costs of ports services to the users, decrease the costs to the government for the support of a viable port sector, boost economic activity and accelerate development; and make Nigeria the hub for international freight and trade in West Africa.' He said the government decision to concession the ports as part of a reform programme was informed by the urgent need to address the declining performance of Nigerian ports which were adjudged to be inefficient and unattractive to shippers.
One of the concessionaires at the ports is APM Terminals. The terminal is the largest container terminal operator in West Africa.APM Terminals commenced operations in Nigeria in March, 2006. Chairman of APMT, Chief Ernest Shonekan said the company has spent about N28 billion on civil works, equipment and upgrade of terminal since it took over the facility in 2006. Shonekan made this disclosure in Lagos at a ceremony to mark APM Terminals' five years of operations at the Apapa Container Terminal, Lagos. The fifth year anniversary, which was celebrated at the company's facility in Apapa, coincided with the official commissioning of its newly-built administrative building.
The Chairman said that since it took over the facility in 2006, the company has so far spent about N28 billion ($180 million). He noted that the company has been able to increase the monthly throughput from 20,000 twenty equivalent units (TEUs) in 2006 when it took over operations to 42,000 TEUs, while vessels waiting time has been reduced from over seven days to 2.4 days. 'As a global leader in port terminal management, we have standards that we must maintain in our operations.
This is why we are always engaged in one activity or the other to improve our operations and make delivery of cargo easier for our customers. For example a few years ago, we installed new heavy duty Rubber Tyred Gantry cranes to improve on our service and give our customers more satisfaction and also improved the turnaround of vessels that are patronizing our terminal,' Shonekan said. The former Head of Interim National Government (ING) added that, despite the challenging operating environment, the company has continued to try its best in the circumstances not only to improve shipping and port terminal activities but to also set the pace in port management in the country.
'Today we are here to commission this new administrative office building as part of the expansion of the container terminal. The office will enable us to improve our operations. It will also enable us to have more space outside for temporary stacking of customers' containers'. Also speaking, Managing Director of APM Terminals Apapa Limited, Mr. Dallas Hampton, said that the feat was achieved through the collaborative efforts of all stakeholders of the company.
Spectre of high charges
Five years after the concessioning of the ports, most people still believe that the much expected reduction in the prices of cargo clearance has remained a mirage even as concessionaires keep on inventing new ways of collecting levies from importers. The increases, port operators say, is not in line with government's promise of lower rates few years after concession.
The concessionaires on their part are blaming the high charges on the rising prices of petroleum products to run their machines, the cost of acquiring cargo handling equipment and the need to make returns on their investments. But freight forwarders are of the view that an increase of over 100 percent higher than what importers used to pay before concession is a nonsequitor. According to them, the shipping lines, terminal operators and off-dock terminals have jacked up their prices, while demurrage on containers have also tripled far beyond what was charged pre-concessioning era.
Recently, Mike Osuofia, the Managing Director of Osyjack Shipping Limited, told Daily Sun of the high charges they face at the ports. According to him, for a 20-footer container, shipping companies charge N5,000 for document release, container cleaning N3,000, shipping line charges N28,000, telex release N5,000, amendment charges N15,000, as well as five percent Value Added Tax (VAT) of all the total charge. He explained that the shipping companies also collect N580 for NPA as Maritime Organisation of West and Central Africa (MOWCA) levy and demurrage on containers that were not returned on time.
Terminal operators also collect N3, 500 delivery charges, N25, 000 terminal handling charges, N400 vehicle entry permit, N2, 500 to position containers for examination and N1, 500 storage or rent charge for first three days after grace period and N3, 500 after 24 days. For the off-dock terminal, according to him, they collect N20,000 as transfer charge, N2,000 as release and documentation, N5,000 as royalty to terminal operators, N2,500 to position containers for customs examination, N3,500 as labour charges for examination, including N1,250 as terminal delivery charge and N400 for vehicle entry permit.
Before the concessioning, Osufia said the charges were N1, 204 as wharf age and N1, 294 for documentation and release, terminal delivery order including vehicle entry permit, stressing that importers also pay five percent VAT of the total charges. The NPA also charge N375 as demurrage after three days grace period and N750 for 40-footer, no matter the number of days.
Apart from the charges which importers pay to the shipping lines, terminal operators and bonded terminal operators, they also pay to the Nigeria Customs Service (NCS) seven percent port levy, five percent Value Added Tax, Negotiable Duty Credit Certificate, 0.5 percent ECOWAS Trade Liberalisation Scheme, one percent Comprehensive Import Supervision Scheme, 20 percent rice levy and 10 percent duty, including 10 percent textile levy as well as 30 percent surety and other levies.Last year, Lagos State Government came up with Wharf Landing fee in which cars are to pay N300, 20-footer container N500 and 40-footer containers N1,000.00 respectively.
As if this is not enough, the Federal Government also mandated the NPA since January 11, 2010 to start collecting container tracking levy which the Transport and Port Management Service, an agent that will collect the money on behalf of the Authority, said would not attract additional cost to importers.
President, National Council of Managing Director of Licensed Customs Agents, Lucky Amiwero, said the terminal operators are having field day because government has decided to run the port upside down.
According to him, There is nowhere in the world where the ports are concessioned to private companies without first having a law to back it up, adding 'in Nigeria, everybody does what is right in his own eyes because nobody is in-charge. Who is the commercial regulator? Who is in-charge of the port and what is the function of the Nigerian Ports Authority in the new era? He queried.
He observed that with the high charges at the ports, there is nobody to complain to, and that there is no law with which to sue the terminal operators for breaching the terms of contract. He insisted that even the terms of agreement which the Bureau of Public Enterprises (BPE) made with the terminal operators are being kept secret.
A stakeholder who believed the reform is a failure asked Daily Sun 'Has anything changed at the ports? He said 'Four years ago, it was easier to access the ports in Lagos, but now it has become near impossible to carry out any business successfully at the port without getting stuck. The traffic congestion is hellish, the infrastructures at the ports have depreciated, congestion is the order of the day at the terminals and importers are skillfully ripped off in the name of demurrage. To worsen matters nobody monitors anybody and sheer manipulation has become the other of the day.'
Recently, Eugene Nweke, the President of the National Association of Government approved Freight Forwarders, NAGAFF, attributed the importation of arms and ammunitions into the country to the port reform policy, which he said was ill-advised. He believed the government made a fundamental mistake in concessioning the nation's port. Nweke argued that the federal government should borrow a leaf from its Ghanaian neighbour which concessioned its two port terminals to different operators. He noted that Ghana concessioned one of its ports to a foreign investor and the other one to local investors. In his view, the Nigeria port reform policy has made it easy for the importation of anything into the country without government's knowledge, especially with the poor security situation at the nation's seaports and border areas.
It is longer news that despite opposing voices, the port was concessioned to foreign investors. While importers groan under the burden of increased charges in the ports in the post-concession era, concessionaires complain of increased operational costs. Analysts however believe that the crying of wolf by the terminal operators is a deliberate strategy to manipulate and rip off Nigerians.
Despite the claims made, a group, Save Nigeria Freight Forwarders, Importers and Exporters Coalition (SNFIFIEC) recently lambasted the operational activities of APMT, one of the terminal operators as a rip off strategy to sabotage the economy. The group said 'the rapid expected economic growth of the nation might be slowed down due to APM Terminal's inability to meet operational terms as contained in the port concessioning agreement.'
A statement signed by the National Co-ordinator and Secretary of the group, Chief Patrick Chukwu Osita and Hon. Emeka Chukwumalu respectively said that as agreed before the concessioning, COTECNA a major service provider for scan at the Apapa terminal should be given enough space to accommodate already scanned containers, but the terminal operator instead of doing this, has drastically reduced the space for scanning meant to contain over a 1,000 containers thereby making effective cargo clearance difficult and unachievable.
According to the organisation, after some members of the group visited the Apapa scan point recently, they were amazed at what they saw and therefore noted that 'the way business is carried out there is not seen in the other parts of the world 'where many of us have done business for several years and if allowed to continue, this kind of method might crumble the Nigerian economy.'
Co-ordinator of SNFIFIEC said while the terminal operators do not follow the concession agreement, the government is adding insult to injury by introducing more charges. He said the terminal operators should be called to order before they turn the port upside down. He like other port users claim that what they currently experience at the ports negate the government's promise of lower rates afterconcessioning.
No infrastructure development
The Chairman, Port Industry Anti-corruption Standing Committee, Alhaji Suleiman Hameen, said there is no meaningful infrastructural development at the nation's port despite the huge revenue collected by the government after the concessioning. He said that corruption is a major factor responsible for poor state of infrastructureattheports. 'Port development is an ongoing process, but what is happening in Nigeria is that the ports have realized a lot of revenues from the port concessionaires but they are not used for port development due to corruption.
Government is not putting back to the ports; the access roads to the ports are not in good condition. He charged the government to improve the infrastructure so as to facilitate economic development of the country, stressing that the sea port is critical to the growthofthenation. Amiwero, supports the view that the charges by the terminal operators still remained high despite the concessioning of the ports. He said, 'The port industry needs the proper intervention of the presidency, otherwise we will be losing our cargoes to the neighbouring countries, because anything that comes to the port, you will find out that 45 per cent of charges are imposed without being tied to services.
The essence of concession is to reduce charges but reverse has been the case.' He noted that the Nigeria's port charges are one of the highest in the world, explaining that most of the charges were not tied to any service rendered by the concessionaires. According to him, when a charge is not tied down to services, it becomes an illegal charge and consequently increases port charges. This militates against clearing of goods at the ports and leads to high rate of cargo diversion.
'When you look at the charges, they are really telling on the cost of doing business in the Nigerian ports and that is the reason people are looking for smart ways of bringing goods into the country, it is terribly high and it is not encouraging. The Senate Committee on Marine Transport had earlier disagreed over the concessioning of the seaports to private terminal operators. The committee then headed by Senator Gbemi Saraki condemned the process leading to the 2006 portconcessioning programme. She also said that the terminal operators had reneged on the part of the agreementastheyfailedtobringintheirinvestments.
Saraki therefore called for a review of the deal, alleging that there was insincerity inthewholearrangement.
Diversion of goods to neighbouring ports
Patrick Echejile, an importer, believes that unfriendly port charges have been the major factor contributing to the diversion of cargo to the neighbouring countries over the years. He pointed out that as long as government and service providers continue to impose more charges on the importers, it would continue to distort the revenue generation of the Nigeria Customs Service because some would prefer to take the risk by smuggling items into the country in order to evade duty. She pointed out that as long as these goods are smuggled into the country because of high port charges, it will never encourage genuine importers because they will sell at higher prices and would not be able to compete with the smugglers.
A Nagaff official captured the concessioning programme this way. You know the government of the day thinks and believes that port concessioning will bring efficiency to the ports and world best practices in our ports, in the area of infrastructure- having the modern port activities and equipment.
'Most of the goods you see passing through neighboring countries like Cotonu in Benin Republic, have no business going through there. We never had any transit agreement with them. Nigeria is a maritime country and it can never have any transit agreement with Benin Republic But we see many cargoes for Nigeria coming through Contonu; the border we have at Seme is for our West African land trade not for trade from outside West Africa.
You discover that most of our Nigerian importers now import through Cotonu. Eighty per cent of imports in Contou are Nigerian cargoes because we don't have good port operations and our charges are very high. The reason of having this port is to see that the cost of doing business is cheap and efficient. But that is not the case, so if you are bringing in your cargo here, somebody will determine for you when you are going to carry your cargo and when you are going to position for examination-physical inspection and he is still charging you for all these days that are not your fault. So many things are going wrong,' he charged.