Sunday, 10th December 2023

Decongesting Lagos ports: Cash crunch, investors’ apathy stall $8.5b deep seaport projects  

By Adaku Onyenucheya
17 July 2023   |   4:35 am
Despite the Federal Executive Council’s (FEC) approval on construction, lack of funding, investors’ apathy, and promoters’ inability to articulate the commercial viability of relevant projects have stalled the development of three proposed deep seaports projects in Akwa Ibom, Badagry and Ondo.

• FEC fails to deliver Bonny project May deadline  
• China’s review of participation in Nigeria’s infrastructure major setback
• Promoters struggle with hazy route-to-market approaches
• Pressure on Lagos infrastructure may continue longer than expected, says expert 

Despite the Federal Executive Council’s (FEC) approval on construction, lack of funding, investors’ apathy, and promoters’ inability to articulate the commercial viability of relevant projects have stalled the development of three proposed deep seaports projects in Akwa Ibom, Badagry and Ondo.

The Guardian learnt that state governments promoting the cumulative $8.5 billion worth of projects, apparently to ease congestion in Lagos seaport hubs and reduce pressure on its infrastructure, are largely counting on private-sector funding. 
But poor commercial viability of the projects as conceptualised or poor marketing strategies are major setbacks to attracting the required funding to transform the dreams to realities.
Earlier, some Chinese companies gave assurance of partnering on some of the flagship projects but became hesitant when the Asian power started pulling back on its commitment to Nigeria’s infrastructure funding. 
Investors’ lack of confidence also poses a challenge as feasibility studies do not suggest that the market is ready to shift from Lagos soon. Proximity to other West African countries, sources have argued, is the major reason importers choose Apapa, Tin Can and Onne ports for berthing their containers.
Interestingly, the Lekki Seaport’s entry is another game changer in the mix. Its natural drought gives it an advantage ahead of other ports in the country even as Lagos is considered the centre of commerce not only in Nigeria but also across West and East Africa.  
The Guardian also found out that the state governments began the journey for deep seaports for political reasons, just to have their states among those with deep seaports achievement, not minding the business feasibility. This, stakeholders, say has hampered the projects across the board despite the millions of revenue generation projections from said ports.
Sadly, Nigeria’s lack of competitive seaports has cost it its status as Africa’s maritime hub, which is why the government commenced the deep seaport projects in different locations in the country. It is believed that building deep seaports will bring more economic value to the country and eventually make it a maritime hub in Africa or the West African sub-region.
Meanwhile, the Nigerian Ports Authority (NPA) and state governments have secured some major approvals from the Federal Executive Council to develop the port facilities, which are now struggling to attract investors’ interests.
Ibom Deep Seaport (Akwa Ibom State), Badagry Deep Seaport (Lagos) and Ondo Deep Seaport (Ondo state) have secured the approval of FEC and received issuance of the Full Business Case Certificate by the Infrastructure Concession Regulatory Commission (ICRC) while Bonny Deep Seaport in Rivers State hopes to get approval this 2023.
For those that have obtained approvals, they are yet to begin real-time construction due to the mentioned challenges, which according to stakeholders, may not be addressed anytime soon.
The $4.6 billion Ibom Deep Seaport project, which received FEC’s approval in 2020, same time as the Lekki Deep Seaport has suffered serial setbacks. The Federal Government approved $2.016 billion for the project three years ago.
Although, the port project received the Federal Government’s approval in May 2015, with a Request for Qualification (RFQ) issued in January 2018 and to be built through a 40:60 per cent public-private participation (PPP) framework; the State government is expected to fund 40 per cent of the project, while the private sector funds 60 per cent. Funding has however stalled the construction of the port.
The state government had set up a technical committee for the realisation of the deep seaport by shopping for investors. Bollore Africa Logistics, now Africa Global Logistics (AGL), emerged as the preferred bidder and along with the state government, jointly paid for the onsite geotechnical and geophysical studies. The state government said investors dropped out along the line, leaving just the state’s Ministry of Special Duties and the technical committee to drive the port project.
This is even as the state government is looking towards China Harbour Engineering Company (CHEC) for the actualisation of the project, which is designed to berth New Panamax Class vessels with a channel depth of 18.24metres, turning basin and berth depth 16.72 metres and quay length of about 7.5 kilometers upon completion.
For the $1.3 billion Ondo deep seaport project, the state government is sourcing for investors to fund the construction, which is yet to begin. The State Governor, Oluwarotimi Akeredolu, had said that the state is seeking investors to fund and commence construction, stating that he spoke to Dubai Port and China Harbour to finance the project. He claims Dubai Port has indicated interest, although it is not clear yet if this deal will see the light of day.
Meanwhile, despite FEC’s approval for the development of the $2.59 billion Badagry Deep Seaport, the state government and the promoters are yet to begin construction work, also due to funding.
Although, the port is expected to generate about $53.6billion in revenue, create about 250,000 jobs, and be operated by the private sector for 45 years under a Build, Operate and Transfer (BOT) concession agreement; it is however not certain that the project’s concessionaire, Badagry Port Development Limited (BPDL), owned by Quinn McGrath Marine & Environmental Services Limited (QMMESL), an indigenous maritime investment subsidiary of the Quinn McGrath Group, can actualise financing the project alone, as they have put out calls for investors to come on board.
The $462 million Bonny Deep Seaport is yet to secure FEC approval despite assurances by the Ministry of Transportation of getting the approval to commence its establishment by May 2023 after submitting proposals. The Bonny port project is to be developed through direct investment by Messrs China Civil Engineering Construction Corporation (CCECC), Nigeria Limited, on a Design, Build, Finance, Operate and Transfer (DBFOT) basis.
It would be recalled that the former minister of transportation, Rotimi Amaechi, told journalists in Lagos during his visit to the Lekki port, that the Federal Government was looking for investors and funds to finance the port. Also, the immediate former minister of transportation, Muazu Sambo, confirmed that the inability of the Chinese Export-Import Bank to provide 85 per cent of its counterpart funding for the seaport project, stalled its commencement. Sambo said although the project is still on course, only the 15 per cent appropriation funding by the government is being used on the project so far.
He said the port project is to be funded by 85 per cent of the Chinese concessionary loan from China Exim Bank, which has not materialised, while the balance of 15 per cent is to be provided by the government.
The former minister said CCECC is presently looking for an alternative funding mechanism based on commercial laws, which will be subject to review by both the Federal Ministry of Finance, Budget and National Planning, the Debt Management Office (DMO) and the National Assembly.
The Bonny Deep Seaport, located in the South-South region, would hopefully help reduce the pressure in Lagos and open new investment opportunities in both the South-South and South-East regions.
A maritime expert who did not want his name mentioned, said construction of deep seaports and getting approvals from the Federal Government is not the issue, noting that the major issue is for the promoters to get investors and funds to construct the ports.
He said the Ibom Deep Seaport received government approval years ago but has not commenced construction despite the $2 billion approved by the Federal Government, noting that the state government must source for investors, bearing in mind the port’s commercial feasibility.  
He said most investors are discouraged by the port’s location and the cargo volume that would be received at the ports. Adding that they are worried about return on investment, especially as importers choose to receive their containers in Lagos, he said the Lekki port became a reality because it had the full commitment of investors and partners of CMA CGM, a French shipping company that directs its vessels to berth there.
“For the Lekki port, the Lagos State and Federal Governments through the NPA, CMA CGM and the Chinese concessionaires are the investors. The main reason the other deep seaports may not come up anytime soon is that first, after getting approval from the Federal Government, before investors can invest and bring in their money, they will look at the possibility of cargo coming into that port after building.  
“Why Lekki was easier is that investors looked at the volume of cargo coming into Lagos and there was the possibility that ships may easily divert from Apapa and Tincan there. A critical point is that they aligned with the shipping giants. So, if you don’t have a shipping company involved in your project and you spend your money to build it, it will become a white elephant project,” he explained.
He revealed that the Akwa Ibom government had considered a partnership with a smaller Korean shipping company, which did not have a positive outcome as the company looked at the feasibility of cargo volumes to the port and withdrew their interests.
Vice Chairman of the Business Action Against Corruption (BAAC) Integrity Alliance, Lagos, Jonathan Nicol, said many governors build seaports based on politics, just to have that recorded as part of their achievement during their tenure in office. Nicol said most of the already existing ports are only operational because of their concessionaires, who align with shipping companies that bring and attract their vessels into the ports, just like Apapa, Tin Can and Onne ports.
Chairman/Managing Director of Lamsam Intercontinental Company Nigeria Limited, Port Harcourt, Samuel Njoku, said importers prefer using the Lagos ports rather than the eastern ports because of the high cost of clearing containers. He said in the eastern ports, duties are paid on containers rather than the goods, as stated by the World Customs Organisation (WCO).
According to him, clearing a 20ft container in the eastern port costs N1.8 million, while a 40ft container is N4 million, unlike what is obtainable in Lagos ports. He also pointed out that the market is in Lagos as the state has a large population to market goods and is closer to other West African countries, like Ghana, Togo and Benin Republic. He said only a few manufacturers of fabrics operate in the east and Nigerians prefer imported items rather than locally made items; hence importers choose to use Lagos ports to sell to the large population there.
According to him, the Lagos government has also put infrastructure in place to make ease of doing business workable, unlike in the eastern part of the country where businesses don’t thrive due to the harsh policies of the government to generate revenue for the state with a smaller population.