Balogun: Failure to respond to dynamics of shipping industry our biggest challenge

Maritime specialist and the Managing Director/Chief Executive Officer, Ecomarine Terminal Limited, Adedayo Moruf Balogun in this interview with SULAIMON SALAU traced the tactics adopted by neighbouring West African seaports to take the advantage of economics of scale of size in shipping and how Nigeria has missed out for deciding to take the back seat.

How was it possible that despite its huge population, proximity to landlocked nations and huge opportunities in the shipping industry, neighboring West African countries are attracting a significant number of foreign cargoes to the sub-region and we are not? Why have we lost out?
The truth of the matter is that the neighbouring countries have been able to respond positively to the dynamics of global shipping demand, by developing their port infrastructures to attract the presence of very big shipping line operators over the years.

Of all the cargoes that go through Togolese port, only 15 per cent of them are destined for that country while the remaining 85 per cent are going to the landlocked countries like Mali.

Similarly, the Port of Dakar does about 18 million twenty-foot equivalent unit (TEUs) per year, which is far above what the entire Nigerian ports do. Fifty per cent of the transit cargoes that go to Mali come through Dakar.

Senegal was able to attract big players by developing its port infrastructure, such that it became a hub for transshipment of goods by big shipping lines.

Similarly, the port of Tema, Ghana today services Burkina Faso, another landlocked country. The Cotonou Port close to us services Niger Republic.

So, now the question is, which of the landlocked country is Nigeria servicing? The answer is none, and the reason is very simple- it is because we have not developed the ports, and we have not invested heavily in required port infrastructure.

Today, the dynamics in the shipping world are tilting towards bigger vessels, which require deeper draught.

The port of Togo has about 17 metres draught and there is no Nigerian port that is close to that, even the Apapa Port that we have so much relied on is between 11 and 12 metres.

Such a draught cannot allow bigger vessels now that global shipping demands revolve around bigger vessels. Definitely, the shipping lines will look for ports that have the required draught to accommodate their vessels.

Unfortunately, none of these Nigerian ports has such a required draught. As a result of that, we cannot attract the type of bigger vessels that will make Nigerian ports a hub for any of the deep-sea lines.

If you go to Lome Port today, you will find MSC there, and they have massive infrastructural presence there. If you go to Dakar Port, Dubai World has a very significant presence there. China Shipping trans-ships to Lome, Togo. So, which of the Nigerian ports has the draught capacity to accommodate such bigger vessels?
So, the reason that we are now lagging behind in containerised goods shipment is very simple- we have not invested in the required infrastructure that would attract the type of vessels that the global demand for shipping requires for the benefit of economies of scale.

Besides, there is over concentration of activities at Lagos ports. Everything about the Nigerian economy has been over concentrated on Lagos ports, in spite of their limitations. You cannot believe that today, it is cheaper to ship container from China to Lagos than to take the same container by road from Lagos to Kano. That is the reality. Why have authorities refused to develop the eastern ports? These ports have the capacity to relief Lagos of the burden of congestion and the bottlenecks.

Calabar Port, for example, is strategically located to serve as a hub for the landlocked country of Niger because Calabar is closer to Niger than Cotonou that Niger is currently using as a hub.

Why can’t we develop Calabar port to serve as hub for Niger? Calabar Port is the nearest port to the 16 northern states, but today the port of Douala is servicing the North Eastern part of Nigeria, which is supposed to be a captive market for Nigeria, if Calabar Port was well developed.

The question is why have we not developed the Calabar Port to a level of draught that it can serve as a hub? No Nigerian port is now a transshipment hub.

What is the draught of Calabar Port as at today, and what is needed to attract bigger vessels?
We need between 10 – 13 metres to attract bigger vessels, but the draught of Calabar Port is currently 5.4 metres and 6.4 metres at high tide.

The concession agreement signed about 12 years ago required the Nigerian Ports Authority (NPA) to dredge Calabar channel to an advertised draught of 10 meters.

Today, no container line calls Calabar port in spite of the captive market, availability of opportunities, proximity, and inherent benefits and advantages that Calabar port enjoys. The critical factor that is affecting the port today is the shallow draught of the channel.

Imagine, if the port is dredged, even to 10 meters, it will be a big relief to importers from the entire northern states, and customers from the eastern market because of the proximity of Calabar to those regions. You can imagine the misfortune of paying more to move your container from Lagos to Kano than freighting the same container from China to Lagos. It is an aberration. Why would somebody take a cargo that is destined for the North East to Douala Port when the same cargo can be taken through Calabar to the North East, which is even closer? It is the same thing that is happening to Port Harcourt and Warri ports.

Basically, the government needs to do something urgently, and this is no rocket science. We must have a development plan for Nigerian ports, which must look at the potential opportunities of the ports, in terms of their captive markets, and the required draught. We must also be able to respond positively to the dynamics of the shipping industry.

Our inability to respond to the dynamics of the shipping industry has been our biggest challenge. The shipping industry has evolved into economies of scale. There are vessels today that can take about 18,000 TEUs. There is no Nigerian port that can take about 7,000 TEUs. Naturally, the ports of Lome, Cotonou, Tema, Dakar and others would be a natural attraction.

All these ports are now servicing landlocked countries, and there is no port in Nigeria that is currently servicing any of the neighboring countries.

Cargo handling by terminal operators is far from what it should be. Hasn’t that contributed to the loss of cargoes to neighbouring ports?
Your investment is meant to be driven by available opportunities. I’ll give you an example we had in Calabar. We took over the port on August 1, 2007 and we invested heavily on container handling equipment. We bought rig stackers, forklifts and pellet cranes.

The reality today is that some of those equipment have not lifted one container because of the absence of container liners. The container liners have not been coming because of the draught limitation and failure of government to dredge the channel to the advertised draught.

So, tell me what is the motivation for me to invest in cargo handling equipment when the ones I have already bought are idle? It is a natural law that cost must be driven by revenue.

Another factor that has been traced to the loss of cargo is the high cost of shipping and clearing cargoes in the country. What can we do to reduce this cost?
When you are talking of cost of shipping, don’t look at it from only the costs within the ports environment, look at the totality of costs incurred till the consignment get to destination, either the warehouse, the plant or the factory.

In the first instance, the major challenge is not freighting the consignment from Europe to Nigeria. It has to do with internal processes. Most of the operators have improved. In our own case, we are ISO certified, which means our freights are well documented, we operate on ERP, our system is fully automated.

So, getting information is at the tip of our fingers. We are IFRS compliant in terms of our accounting system; we have a well-documented statement of operating procedures (SOP), which are well known.

The first time we took over the terminal, the first container liner that came Baco Liner wrote us a letter to confirm that our operations are the fastest in their experience. It is on record because we have the required cargo handling equipment that were bought brand new, before Baco Liner stopped coming due to draught limitations.

When it comes to areas of government agencies, then there is a serious challenge. Why will a container that is already cleared by the Nigeria Customs Service leave the port and is stopped just outside the port again by another set of customs officers? These are part of the problems.

Besides, the importer himself would have preferred to take his container to another port, but because there is no container liner there, he is compelled to route it through Lagos.

Imagine that he now risks his life, vehicular breakdown and they will pay several tolls across communities. All these are part of the costs that make Nigerian ports very expensive.

If you talk about hinterland connectivity, which are the ports that are very close to the hinterland? What are their capacities to respond to the shipping demands of the hinterland? It is simply not there because those ports that are closer to the hinterland have not been developed to that level, where they support the need.

Look at a project of Tinapa’s magnitude, which has gone comatose today. If a port like Calabar Port is functional, it would be easier to get goods across. If you bring the goods through Lagos, you will have to truck them down to Calabar, so just imagine the huge cost involved.

Cross River State is majorly known for cocoa production, and exporters have to truck their cocoa from Calabar to Lagos before exporting them, which comes with additional logistic cost.

So, there must be a total overhaul of the entire system. We must invest in the right infrastructure; we must improve in the processes; and we must also develop the capacity of the other ports to be able to respond to the shipping demands of the Nigerian economy.

The proliferation of government agencies at the ports also plays a role in making the place less attractive. Even after being ordered out of the ports by the NPA as part of the presidential order on Ease of Doing Business, these agencies have remained adamant and still contribute to the clog today?
Our major problem in this country is not issuing of policy directives, it is the absence of the political will to implement those policies. That is what is lacking. You don’t wish away problems, you must work towards getting it solved.

So, we must show the political will to actually implement those directives, it is the absence of that political will that is responsible for the continuous presence of those agencies in the ports.

If today the government decides to implement those directives, I believe no agency of government is greater than the government itself. Until the government decides to exercise the political will, we will continue to have the same situation.

Government is currently reviewing ports concession agreements, will you say the review would increase productivity of terminal operators?

First, I will like to commend the management of NPA under the leadership of Hadiza Bala Usman for her good intention and summoning the courage to actually decide to take on this very big step.

Naturally, it is expected that every agreement should be subject to review periodically, especially in direct response to changing conditions. The prevailing situation under which the concession was consummated in 2006/2007 is different today.

The dynamics have changed even in the shipping industry. In order for us not to be carrying an obsolete document, it is important to carry out such a review, as a direct response to the demand and needs of the industry.

On the other hand, it was also a learning curve for both parties over the years, so it is important for us to take stock and see what has been done right and what has not been done right by both parties, with a view to mutually agreeing on how to improve the system collectively for the overall good of the Nigerian economy.

Secondly, the agreement imposes obligations on both parties and for some reasons or the other, some of the parties have not been able to meet up some of the obligations, so it is important to also take stock and ask the right questions. I hope that the process will midwife an agreement that will be able to respond to the demands of the industry.

At the conceptualisation of the concession, there ought to be a National Transport Commission, which will serve as the umpire to oversee the relationship between the lessor (NPA) and lessee (the concessionaires).

After over 10 years of the concession regime, that agency is yet to emerge. As a result, we are faced with a situation where the NPA that is an interested party in the transaction, who is also a lessor is saddled with the responsibility of the whole process.

So, where is the scale of balance and justice, and in whose direction will it tilt? This is the question that agitates the mind of concessionaires in terms of fairness.

The concession agreement gave responsibilities and obligations to both the lessor and the lessee, but its easier for the NPA as a lessor to have a monitoring and compliance unit to visit the ports and evaluate the extent of the compliance of concessionaires, but who monitor and evaluates the performance of NPA? Nobody.

So, the absence of that neutral umpire makes it difficult for concessionaires not to be agitated about fairness, equity and justice in the entire operation of the concession regime.

It is the duty of the authorities to ensure the emergence of the National Transport Commission to ensure the oversight function on the entire concession regime and ensure that it is properly implemented to the benefit of the national economy.

What are those things that you expect from the president-elect as a way of repositioning the maritime industry?
All we want is for them to realise that the maritime industry is a very important industry that can actually support the economic blueprint of this country.

The government should show the right political will. Nigeria should be aspiring to be the regional hub for West African market because her population is almost half of the entire West African population, so you can imagine how the large market is.

In addition to this, there are opportunities for regional export. We need a government that will promote exports as a way of bringing about foreign exchange inflows into the country.

The maritime industry is a critical component of that vision and as a result there must be a blueprint. We should be able to put in the required infrastructure to be able to support the realisation of that vision. We must be able to put in the right investment and develop the right processes; we should be able to improve on the clearing processes and procedures, and we must make institutions of government work, and also must give them the required empowerment to be able to also support the realisation of their objectives. The government should have a vision to make Nigeria a regional hub, that is what we deserve and that is where we belong.