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‘Nigeria is losing fortunes to shallow port channels’

By Sulaimon Salau
27 February 2017   |   3:40 am
Nigerian ports are faced with myriads of problems that have militated against trade facilitation agenda of the Federal Government.


Nigerian ports are faced with myriads of problems that have militated against trade facilitation agenda of the Federal Government. A renowned terminal operator and the Managing Director/Chief Executive Officer of Ecomarine Terminals Limited, Balogun Moruf Adedayo, in this interview with SULAIMON SALAU, examines some of the challenges and proffers solutions.

With the current realities at the ports, will you say Nigeria is ready to become the maritime hub of the West African region?
If I want to be very modest, I will say we are just aspiring to become a regional maritime hub. I see it as an aspiration because I have not seen the readiness. With the entire variables that are on the ground today, despite the benefits we have as being the most populated, it is yet to reflect. Today Nigeria is half the population of West Africa, so you can see how much volume we control in terms of import into the region and how strategic that could really be, but today if you look at what takes place in Lome and some other countries compared to what is happening in Nigeria, you will ask yourself some questions. So, I see it as an aspiration that we pray will be achieved.

Do you think Nigeria is comfortable with the draft level of the ports across the country?
Generally, I will say no, putting it in perspective of our aspiration to become the regional maritime hub. If you look at it also vis-a-vis the draft of some of our neighbouring countries, they have far deeper ones. Today, the port in Lome is naturally deep, it is way above 13 meters. Lome has become a hub for most of the major shipping lines. Even in Equitorial Guenea, they also have natural draft. The challenge to us as a country is to ensure that we have a programme in place to do maintenance dredging of the current draft of Lagos channels and also the capital dredging of some other ports at the Eastern part of the country, especially Calabar port.

Looking at the strategic importance of Calabar port to this country in terms of its proximity to the 16 Northern states; accessibility to the neighbouring countries of Cameroun and Equitorial Guinea and its potential of also becoming a trans-shipment hub for the land-locked countries such as Chad and Niger. Looking at those potential, it is only natural that such a port should be provided with the required infrastructure including dredging to be able to realize such enormous potential. It will also go along way to reduce over dependence on Lagos ports. For example, a lot of cocoa is taken from Ikom in Cross Rivers State, which is a major producer of cocoa in this country, but because of the limitation of the draft of Calabar port channel, there is no regular container vessel that calls Calabar port as we speak. So, it imposes a constraint on both the producer and exporter as they now have to truck the consignment to Lagos before they could take them out of the country.

That is an added cost of logistics and it is wrong. Today, Vietnam buys as much as $500 million worth of cashew nut from Nigeria. The major producer of cashew is Benue and the nearest port to Benue is Calabar port, you can also see the challenge imposed by that logistic inconveniency of trying to truck the cashew nuts to Lagos before being exported to Vietnam. A government that is serious about diversification, particularly agriculture and solid minerals, must also develop its port infrastructure to be able to complement the logistic challenge that is required to be able to realize their objectives. By implication, it also adds to the cost of doing business because most of the businesses especially in Calabar are looking for shipping solutions.

Most of the companies in Calabar Free Trade zone will appreciate the convenience of having to import direct into Calabar from any part of the world rather than having to take the consignment either through Lagos or Port Harcourt and face the the difficulty of trucking the consignment with the attendance risk of vehicle break down, accident and even community problems. These are avoidable challenges t that the government ordinarily could have provided as an incentive to encourage imports.

Most importantly, why Nigeria really needs to look at dredging of its ports very sincerely is that the dynamics in the shipping world today is in the direction of bigger tonnages. The global shipping industry is now in an era where we can do 7,000 – 14, 000 TEU capacity vessels and look at the correlation between the size of the vessel and the depth of the channel, it implies that Nigeria will need to have deeper channels to be able to accommodate these bigger vessels (bigger tonnages) because shipping is about economics of scale of size. Most of the shipping lines today are acquiring bigger tonnages in other to maximise the benefits that comes from the economics of scale of size. So, for us to continue to enjoy their patronage and make it more competitive it is important that we should have right depth of channel that can be able to also accommodate these modern vessels. Besides, it is also noteworthy to mention that the commitment of the government towards diversification into agriculture be complemented if the ports infrastructure support that aspiration and for them to be able to support that, they must also have the right parameter to be able to also compete with other ports in the region. This is quite a very big challenge.

What is the current draft of Calabar channel?
Calabar channel today is 5.4 meters at low tide and 6.4 meters at high tide, so you can imagine, it is more or less like a river port. That is a major limitation.

What should be the normal depth?
The agreement we signed when we took over the concession, which is entrenched in chapter 9.6 of the agreement, said that the lessor has the responsibility to maintain the draft of the channel at 9.4 meters. This year, precisely on August 1, 2017, will make 10 years that we took over the concession and we have had to live with this limitation. It is a material breach of the constitutional agreement, even beyond that, the economic benefits that would have accrued to this country if the dredging had been done as promised is enormous. Today, Calabar would naturally serve as a hub for Niger and Chad, so look at the imports that will come with that and how much revenue would have accrued to the government by way of duty. Even in terms of employment and the multiplier effect it will have on the economy of the Cross River State itself. It is unfortunate that even the companies in Calabar are operating at extremely high cost. Take Dangote for example, they have to lighter first in Lagos before coming to Calabar. Imaging they are bringing in a 30,000 tones capacity vessel but because the channel cannot take 30,000 tones vessel, they must first discharge about15,000 tones here in Lagos before taking the balance of 15,000 tones to Calabar.

This comes with its attendant cost implications and at the end, the consumers bears the overall cost. So it is a great pain that government has not fulfilled a material obligation not only in terms of the concession agreement but also in terms of driving the economy of the country itself.

What do you think is responsible for the delay in dredging of Calabar port?
That question can be answered by government alone, because it is their obligation. It is their commitment. It is a promise they made. I think government’s promise should be sacrosanct, especially when it is embellished in a document, a contractual obligation that was supervised by the World Bank. The sanctity of the concession agreement must be protected and maintained, especially by the parties involved. As at the time we were taking over the concession, the assurance we had was that by December 2007 the dredging would have been completed. But till date it has become a mirage, we are still living with 6.4 meters. The tragedy of the situation is that before we took over the concession when the port was under the management of NPA, as an incentive recognizing the limit imposed by the draft of the channel, NPA then introduced 30 per cent rebate to shipping lines as an incentive to help mitigate the risk of coming to Calabar because of the channel limitation.

The moment we took over on August 1st 2007, that rebate was suspended for no justifiable reason, despite the fact that the condition that was prevalent, which informed the introduction of that rebate was still existing. We have written various correspondences to NPA requesting that they reinstate that incentive. We have made efforts to attract some shipping lines to Calabar, but after one or two calls, they found it very unprofitable and they stopped. The most recent is AI FEEDER, it’s a Ghanaian feeder service, we met with them and encouraged them to come, we even gave them a lot of incentives from our own tariff but this was not complemented by NPA because the request for the 30 per cent rebate would have gone a long way to complement that discount we have given, and would have made economic sense, but after one or two calls they were unable to continue because while we were able to deliver on the rebate, we could not get NPA’s approval for the 30 per cent rebate. Today, as we speak, no container line makes regular call to Calabar.

The present administration of NPA is talking about reviewing the concession agreement, but what specific area do you want to be touched?
Basically, when you have contracts between parties, for so many reasons the document could be reviewed, either for passage of time or change in government policies or factors in the external environment that could render the agreement either no longer valid or needed improvement. The essence of the review is that it will update the agreement in line with the current realities and having gone 10 years into the concession period I believe both parties should be able to sit and review it. The landlord model that we adopted is very new to us in this country, probably the 10 years period of operating the concession has afforded the parties opportunities to actually be able to evaluate and understand the system better to be able to appreciate what should have been there or what should not be there. It is not a bad idea, but I always maintain that reviewing the concession agreement is not a substitute to proving the right infrastructure to make the port functional. It will not be a substitute for creating access roads that will ease the evacuation of goods from the ports. It will not be a substitute for putting Calabar on the national rail line to create greater access and mobility for goods, but it is desirable, because it is time we take stock and look at the areas that we need to improve upon for enhanced performance and better service delivery.

The decline in the volume of cargo at the port has been a source of concern. What do you think government should do to increase the cargo turnout at the ports?
If there is a decline in the volume of cargo, what factors are responsible for the decline? We must first address those fundamentals. One is the economy itself. Nigeria is undergoing recession and we know that the country is an import dependent economy. With the restrictions on foreign exchange, it is expected that one of the consequences will be a decline in the volume of imports. This is a profile we have kept for so long. Most of the businesses in this country import their raw materials, equipment to run the factories are imported, so when there is a restriction on access to forex, its a natural consequence that the volume of import will decline and because the port thrive on volume of cargo, obviously it will also affect activities at the port, so the decline is a consequence of factors that have affected the economy of this country. Government needs to address those fundamentals especially access to forex.