Port reforms: the unfilled vacuum

Stakeholders Push For Commercial Regulator To Stem High Cost Of Doing Business

The impact of a well-developed and properly managed port manifests in efficiency and contributes significantly to the growth and development of the national economy.

Conversely, poorly developed and badly managed ports often create supply chain bottlenecks, attract higher charges and operating cost to the detriment of local and international trade, thereby impacting negatively on the economy.

This was the case with Nigerian ports before the reforms that led to privatisation of port terminals and their operations in 2006.

Prior to reforms, Nigerian ports, according to a comprehensive study carried out by the Royal Haskoning consultants of Netherlands, were characterised by unusual degree of concentration of functions on the Nigerian Ports Authority (NPA), the absence of an independent industry regulator, and the existence of tool port system, inimical to sound competitive conditions and high cost of business.

Against this background, the consultants recommended the adoption of landlord model to separate port assets from operations. While the NPA was recommended to own assets as the landlord, it was suggested that private concerns should carry out port operations. Their activities, according to the consultants, should be moderated by an established commercial regulator to ensure sanity in the sector.

With this management structure as adopted by the Federal Government, it was hoped that the ports would be modernised; increase the efficiency of operations, reduce cost of port services, promote competition in the provision of port services, as well as make Nigerian ports a hub of international freighting and trade in the Central and West African sub-region.

To effect this, the consultant recommended the decentralisation of the Nigerian Ports Authority by restructuring it into Western Port Authority, comprising the Apapa, Tin-can Island and Kirikiri Ports, the Eastern Port Authority, comprising Onne, Port Harcourt, and Calabar Ports and the central ports authority to be made up of Warri, Sapele and Koko Ports.

The consultant believed that decentralisation of NPA into autonomous port authorities would enhance speedy decision making, closer supervision, as well as promote healthy competition that could lead to enhanced efficiency, which would eventually culminate in the reduction of the cost of doing business and increase revenue generation for the country.

The government keyed into the recommendation in 2006 by carrying out port reforms, which led to the concessioning of 26 port terminals among; Apapa Bulk Terminal Ltd, APM Terminal (APMT), Greenview Development Nigeria Ltd. (GDNL), Lilypond Container Depot Nigeria Ltd, Josephdam, Tin-Can Island Container Terminal, Port and Cargo Ltd., Five Star Logistics Ltd, Port and Terminal Operations Ltd, Bua Ltd., Integrated Logistics Services Nigeria Ltd. (INTELS), Brawal Ltd., Associated Marine Services Ltd., Julius Berger Nigeria Ltd., Greenleigh Services Ltd., Eco marine Terminal Ltd. and Shoreline Addax.

Since the port terminals were handed over to the concessionaries, a number of issues, some of them very complex, have surfaced.

The most problematic is high port charges, especially when compared with what obtains in other ports within the sub-region.

The high cost of doing business resulting from high port charges has also resulted in economic loss to the country, as Nigerian bound cargoes are now diverted to ports in Ghana, Togo and the Republic of Benin, where charges are comparatively lower.

The port reform evaluation committee set up by the government to among others look at the complaints of high port charges in 2010 recommended that the establishment of an industry regulator should be priority to ensure compliance with the provisions of the concession agreement and guarantee fair treatment of all port users.

It also urged government to decentralise NPA for more efficient port operations through quicker decision-making.

“For quicker decision-making, ownership of decision by local management teams, and greater commitment to set goals, the NPA should be immediately restructured for greater financial autonomy to the zones/ports, which should be responsible for capital investment and periodic reporting to the headquarters,” it said.

The committee, chaired by Lagos lawyer, Barrister L. Chidi Ilogu, had observed that, “from years of the commencement of the port reform programme, its legal and regulatory component is yet to be put in place. Though a new port bill and National Transport Commission bill were submitted by the Executive to the National Assembly long time ago, none has been passed into law.”

In the absence of a commercial regulatory agency, Federal Government, two years ago, through a presidential proclamation, which was later gazetted, appointed the Nigerian Shippers Council interim regulator, until the port and transport commission bills before the National Assembly are passed.

But the council’s attempt to carry out its function is being resisted by the terminal operators, when it tries to regulate the port and terminal charges. They dragged the council to court to challenge its powers.

And the ports have continued to be unfriendly, because of high charges and other factors leading to diversion of cargoes to ports in neighbouring countries, with severe economic consequence to the country. This has rekindled the clamour for a regulator for the port sector by giving the Nigerian Shippers Council the legal instrument to regulate the industry. Stakeholders argue that a legal instrument, rather than presidential proclamation will endow it with authority, commanding respect of all stakeholders, including terminal operators, now challenging its power of regulation at the court.

Maritime Lawyer and Senior Advocate of Nigeria (SAN), Olisa Agbakoba took a swipe at the 10-year-old port concession and performance, and concluded that it has failed in its original objective of making Nigerian ports cost effective.

According to him, the cost of doing business at Nigerian port is still the highest in the world adding that it had remained so 10 years after the ports were concessioned because of the absence of a regulator and appropriate laws.

The ports concession has not worked. It has only benefited the concessionaires, if you do the cost benefit analysis in the last 10 years. The fault is that of the government, which has failed to put in place a commercial regulator, and enabling laws to enhance development of the ports. The Nigerian Ports Authority Act is still in place. The new one that ought to transfer the port to private concerns is not in place. There are no rules, and no regulation standards. They are just making money. The Port and Harbour bill has been penciled down by the Bukola Saraki-led Senate for quick passage. Until that is done, the story will continue to be terrible, as confusion will continue to prevail.”

Continuing, Agbakoba said, “tariff by port concessionaires is the highest in the world. They have quadrupled what they paid to Bureau of Public Enterprise (BPE). The story of 10 years of port consessioning requires us to review it and find out if it has worked. That is why Cotonou port is now busier than Nigerian port because they have a regulator. Nobody wants to come to Nigerian Ports to do business.

“Like many others, the senior advocate urged the government to make Nigerian Shippers Council the substantive port regulator by transforming it to the proposed National Transport Commission, which bill is before the National Assembly to passage. The Nigerian shippers Council has the capacity to play the role of port regulator. Their original work is cargo protection and that is in line with regulation. They should be allowed to transform to the proposed National Transport Commission,” he said.

The National President, Council of Managing Directors of Customs Agents, Mr. Lucky Ehis Amiwero, said Nigeria missed it from the onset, when the ports were concessioned without requisite regulatory body.

According to him, one of the consequences of such omission is the loss of cargo to ports of neighbouring countries because the cost of doing business in our ports is high.

The Customs agent said the solution to the discrepancy now lies in the amendment of the NPA’s enabling Act and the creation of an independent regulator. He said the Nigerian Shippers Council (NSC) should be legally empowered to play the role well.

“There is nowhere in the world, where you concession the port without a regulator. That is why we have lost all the cargoes and cargo throughput. There is nobody monitoring the terminal operators and they have operated for 10 years. There should be a committee to look at their performance, because their lease agreement had lapsed and they should be preparing to hand over their terminals to the government. The Shippers Council should equip itself with the right knowledge and capacity. The NSC officials must be trained and be professionally inclined, if they must be the needed regulator,” he explained.

Amiwero, who has been in the forefront in the agitation for a commercial regulator in the port, said the NSC, which is acting as the regulator, should study international laws and sue terminal operators for breach of contract of carriage, which he said, has three components: loading, discharge, and delivery, all of which are paid for at the point of shipment.

He argued that terminal operators are still collecting from consignee’s terminal charges, which are not different from delivery charges already paid for by shippers.

“This is a contravention that must be challenged in the court by port regulator,” he said.

The founder of National Association of Government Approved Freight forwarders (NAGAF), Dr. Boniface Aniebulam, said the absence of a commercial regulator in the port sector is fueling corruption, which the current administration is battling.

Said he: “The essence of port reform is to achieve competitive cost of doing business, port administration and management. However, at the inception of the concession, it was expected that there would be a 30 percent reduction in the cost of doing business at the ports. But 10 years after, the cost of doing business is still unbearable. Presently, terminal operators are challenging the Nigerian Shippers Council at the court. We will not say concession has not added value, because infrastructure was developed. But we need to move further than that, because if infrastructure does not translate to reduction in the cost of doing business at the ports, then it is useless and we have not achieved our dream.

“I actually thought that in the first three months of this administration, an executive order would have been issued to give the NSC a legal backing as the legal regulator in the port sector, but it has not happened. The National Assembly should step in to legislate in this regard, and hasten the process; otherwise it will become an abuse of power. It is imperative to have a regulator with a stronger legal backing. The consequence is quite high, and what we have lost is enormous. We have bred corruption and the oversight function of supervising terminal operators has not been effective. The NSC is doing its job very well and should be encouraged to do it better by giving it legal backing.”

To Otunba Kunle Folarin, the objective of port concession is to reduce cost of doing business at the port, increase productivity, as well as conserve public fund.

In his view, although there has been increase in productivity and infrastructural development, the cost of doing business has not reduced, which is a sign that the objectives of the reforms have not been met.

Folarin, who is the chairman of Ports Consultative Forum, said: “Initially, there was no regulator. The NPA assumed the role of technical and economic regulator, but the NPA cannot be a performer and regulator at the same time, because it cannot regulate itself, while hiring cargoes and rendering harbour services, which prompted the need for a commercial regulator. That was why the Shippers Council was appointed in the interim.

Before then, he explained that there were issues of infrastructural collapse, excessive charges by shipping companies and terminal operators, and other service providers. “But now, they are trying to tackle these issues from all angles,” he said.

He said the Shippers Council is in the best position to act as a regulatory body, because it already has a structure that can deal with regulations.

“Antecedent suggests that the NSC is equipped to do the job. It just needs government’s will and an enabling act,” he explained.

Prince Olayiwola Shittu, President, Association of Nigerian Licensed Customs Agents, said there is need for a commercial regulator with legal backing, since aside regulation of charges, the regulator is needed o put an end to deliberate delay in the clearance of cargoes. And as a result of interference in the process, spurious excuses are offered, which extend cargo dwell time, because the shipping companies and terminal operators were benefiting from it.