Concession: Anxiety in ports as terminal operators await new rules

When the Federal Government, through the Nigerian Ports Authority (NPA) began the process of concessioning the country’s seaports, the exercise was aimed at enthroning efficiency, ensuring ease of doing business, and bolstering revenue-yielding activities, among others. Within a couple of years, about 24 terminals were concessioned to private players, in a process that was not without its fair share of absurdities, principal among them being transparency concerns and questionable corporate governance components.

Nearly 15 years after the exercise was completed, opinions are varied whether the exercise was worth it, not only because of the terminal operators lack of capacity, but largely as a result of the Federal Government’s failure to faithfully implement its part of the bargain among other issues.

Currently, stakeholders are eager to see the new provisions in the concession agreement, which is being reviewed, a development, which in itself has continued to drag due to varying interests and seeming disagreements between regulators and operators.

The new document, was expected to be signed in December 2019, but the current situation suggests that the 24 terminal operators may have to wait a bit more before the birth of a new concession regime.When the agreement was signed about 14 years ago, the estimated revenue for the period was pegged at $6.54b.

THE Federal Government’s drive towards improving efficiency at the ports actually began in 2003, and the landlord model was adopted for all the ports. This model adopted for port operations gave exclusive rights to the terminal operators (the concessionaires) to operate, maintain and carry out investments on port facilities, within designated terminals, while the NPA retains ownership of the terminals.The model equally reduced the financial burden on the Federal Government, as the terminal operators were made responsible for both infrastructure development and annual concession fees in the form of lease fees and throughput fees.

This totality of arrangement gave rise to the concession of over 20 terminals to private terminal operators with lease agreement ranging from 10-25 years, according to the Infrastructure Concession Regulatory Commission. One of the concessions modules was a Build, Operate and Transfer (BOT) arrangement.

Also, in the process of re-organising the ports, the former eight ports were reduced to six major ports, with two ports in Lagos (Lagos Port Complex, Tin Can-Island Port Complex) and four in the east namely; Calabar Port, Rivers Ports, Onne Ports Complex, and Delta Ports Complex respectively.According to the NPA, concessionaires at the Lagos Ports Complex include: Apapa Bulk Terminals Ltd; ENL Consortium; APM Terminal Ltd; Greenview Dev. Nig. Ltd, and APM Terminal Ltd

Those at the Tin Can Island Port Complex are Josepdam Port Service Ltd; TCI Container Ltd; Port & Cargo Handling Services; Five Star Logistics, and Ports & Terminal Multiservice Ltd Operating at Rivers Port are Port & Terminal Operators Ltd, and BUA Ports & Terminal Ltd, while Onne Port has Intels Nig Ltd; Brawal Oil Services Ltd; WACT, and Atlas Cement.

Holding sway at the Calabar Ports Complex are Intels Nig Ltd; Ecomarine Nigeria Ltd, and Addax Logistics Nig Ltd.Operating at Delta Port are Intels Nig Ltd; Intels Nig Ltd; Terminal B; Julius Berger Nig. Ltd; Associated Marine Services, and Green Leigh Nigeria Limited.

BEFORE the first set of concessions were done, most ports in the country as at 2005, faced major challenges, which made them some of the most inefficient ports globally. The average ship waiting time before berthing was 21 days, vessel turnaround time was five days, while dwell time for cargo was as high as over 30 days.

The ports had horrible infrastructure (roads, quay, buildings, equipment, and yard) and were heavily congested leading to insecurity and pilferage, delays in cargo clearance and inefficiencies in cargo handling, largely due to manual processes. Terminal operators are also battling with extremely poor power supply, which constitute a major challenge to their operations. The terminals operate with 90 per cent self-generated electricity, which goes a long way to increase their cost of doing business. In 2006 when the ports were concessioned, the cost of diesel stood at N65 per litre, but today a litre of diesel is about N160.

However, as the wait for the review continues, the NPA, which is spearheading it alongside other stakeholders, like the Bureau of Public Enterprises (BPE) among others, recently informed that the process was at an advanced stage, while consultation is ongoing.The Managing Director of NPA, Hadiza Bala Usman who had earlier hinted that the review would be more definite on sanctions for operators and regulator in the event of default, redefining the Guarantee Minimum Tonnage (GMT), as well as address issues of smuggling of vehicles and rice into the country.

The MD, who added that the plan was also to attract private investors to Nigerian ports, assured of government’s determination to continue to provide necessary infrastructure at the ports.Usman stressed that with the review of concession agreements to address existing loopholes and prescribe strict sanctions against defaulters, a new regime that would further enhance efficiency at the nation’s ports’ was in the offing,

The current concession agreement authorises terminal operators to handle cargoes and allied businesses, but operators believe that there is need for a review in view of identified lapses in the existing regime.Indeed, some operators have accused the NPA of not living up to its contractual obligations, especially in dredging of water channels.

But the NPA boss, who said the review would benefit all parties and boost the national economy, described the concession exercise as a huge success for Nigeria, and the maritime industry, even as she stressed that the review was an opportunity to check areas of non-compliance by either the concessionaires, or the NPA.

“We are looking at obligations of the respective parties, including the Nigerian Ports Authority, and the concessionaires. Some of the key takeaways from the review would be that there would be sanctioning on both sides, meaning sanctioning for non-compliance by the concessionaires, and also by government.

“If government, for example, is required to maintain a particular depth of draught, but it fails to do that, there will be a clear penalty that government has to pay for not meeting its obligations. This is the new consideration that we are looking at reflecting in the concession agreement. These were recommended to us by a consultant engaged by the World Bank to support us, and we are working with the terminal operators on what needs to be done to conclude this review process,” she said.

Shedding more light on the review exercise, the General Manager, Corporate Affairs of the NPA, Jato Adams, in a chat with The Guardian said: “We have gone far in the process, and are about to wrap up negotiations that we have been having with the concessionaires. But there are still some grey areas that we need to agree on.

“We have not been able to reach an agreement on those grey areas, and we will equally require the intervention of the World Bank. We are also waiting to know what they will come out with, but the review is on course. The World Bank is acting as our advisor in the whole process, and we are actually optimistic that this New Year, we should be able to conclude the review,” he said.

The Guardian gathered that many of the terminal operators whose concession agreement have lapsed, or are about to, have seized making new investments at the ports for fear of the unknown. Only a few concessionaires have continued to invest massively.Some of those that have continued to invest are Sifax Group, operating at the TinCan Island Ports; Ecomarine Terminal, which is at the Calabar Port, and West Africa Container Terminal (WACT), which operates at the Onne Port. They all believe that the future is bright for Nigerian ports hence more investment is the way to go.

For instance, Sifax said it just commissioned a cargo equipment worth about $20m in December; WACT invested over $24m on cargo handling equipment at Onne Port, while Ecomarine is also investing in safety metering facility and terminal expansion programme.The commitment displayed by the trio recently caught the attention of the licensed Customs agents.

According to the President, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero: “I have not seen any of such investments in recent times. So, this part of the concession has to be looked into because the agreement actually embodied most of these things, and the government is supposed to monitor them to ensure compliance. Some people whose concessions have just two years to lapse are still investing, while others are not. So, there is need for the government to have a rethink about such people.

While also assessing the concession exercise, he said: “It has not been too good because there are still many areas that we have to look into. We should be able to design the process and have a law for concession. Right now, we don’t have a law for concession. So, we are still picking law from the NPA, ICRC and the BPE. So, we have three laws midwifing the whole thing. There is need for the government to really look at how we can pin down a Port Act and have a concession law. The law should embody the operations of the existing concession agreement.”

Not long ago, the Chairman, Seaport Terminal Operators Association of Nigeria (STOAN), Princess Vicky Haastrup, told The Guardian that private terminal operators have invested over $2b (about N720b as at 2018) in modernising and upgrading their various terminals, cargo handling equipment, as well as in manpower development.

However, as operators and regulators are yearning for a review of the concession agreement in order to address inherent lapses in the existing regime, key players under the auspice of Seaports Terminal Operators Association of Nigeria (STOAN), have thrown their weight behind the exercise. Spokespersons, STOAN, Bolaji Akinola, told The Guardian that the ports concession has brought about unprecedented growth in the country’s port system, and assured that operators are ready to embrace the new regime for improved efficiency.

Akinola described the concession as one of the most enduring privatisation models in the country, which has also been emulated by other countries. According to him, the review of the concession agreement would increase efficiency, and terminal operators are wholly in support of the move.
He said: “We are working with the NPA to ensure a successful review. The agreement places some responsibilities on the government and the operators. So, we have to respect the sanctity of contract. Everyone has to play his/her role, and we support the fact that anyone, who refuses to play his/her role should make up for it, or be sanctioned.

“As it is being done on the side of the operators, the same force should be applied on the government. We are ready to play our roles as we have been doing. However, we will not protect any operator that doesn’t play its role.“We also expect the Federal Government to continue to play its part because we are interested in ensuring efficiency at seaports as that is the way to grow Nigeria’s economy. We expect that sanctions should be balanced hence our happiness with the way that the NPA is going about it. We believe that the review would benefit Nigeria and Nigerians.

ACCORDING to Delloite Nigeria, the Nigerian concession agreement is in alignment with the standard concession elements, but partially aligned when considering the risks aspects of the agreement.The terminal operators started assuming ownership of the ports in 2006 and within 10 years made significant investments estimated at N200b. The estimated investment by major operators is said to have exceeded the N50b planned in the concession agreement for the entire period of the concession,” Delloite said. This represents a multiple of about 400 per cent of the planned investments.

Stakeholders are of the view that as a direct impact of these investments, the ports have witnessed increased ship traffic and throughput, which has led to a 400 per cent rise in container throughput. Besides, an estimated one million jobs according to Deloitte Nigeria have been created directly and indirectly in communities across the country both for skilled and unskilled workers, including local businesses, manufacturing firms, trucks drivers, among others, This has made the ports a vibrant sector that stimulates the economy and acts as a diversified source of revenue for the government and an alternative to oil.

According to Infrastructure Concession Regulatory Commission (ICRC), Ahmed Abdulrazaq, the NPA is expected to, “engage in capital and maintenance dredging at channels and berths; provide navigational aids to help in navigating the vessels; supply pilots to bring in vessels to ports.It is also expected to supply tug boats; provide security and general security of the ports outside the security fence of the terminals and security of all land and sea entrances to the port areas to ensure peaceful and quiet enjoyment of the terminals, and to make them free from encumbrances, as well as cooperate with port terminal operators to conduct their businesses.

It should, however, be stated that the regulator has defaulted in some of its obligations such as the capital dredging of ports, particularly the Calabar Port, while it has done fairly well in maintenance dredging, provision of tug boats, maintaining peace and security around the port area.

Apart from carrying out their contractual obligations, including the payment of commencement fee, lease fee, throughput fees, taxes and levies, terminal operators are to also execute development plans, including infrastructure buildings, provision of performance bond & insurance policy, publication of operational rates (tariffs) market development and promotion of cargo throughput to terminals.

Despite the gains and improvements in the ports sector, the port terminal operators are still faced with numerous headaches such as evacuation challenges, common facilities challenges, channel management issues, and ports access road problem, while foreign exchange challenge has increased, cost of capex and operational cost are in United States dollars etc.