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Haastrup: Inconsistencies in Govt Policies Destroying Maritime Sector
Vicky Haastrup is the Executive Vice Chairman/Chief Executive Officer of ENL Consortium Limited, operator of Terminals C and D of the Lagos Port Complex, Apapa. She is also the Chairman of Seaport Terminal Operators Association of Nigeria. She told Eromosele Abiodun how the foreign exchange crisis and inconsistencies in government policies are impacting the maritime sector negatively. Excerpts:
As a top player in the maritime industry tell us how the developments in the economy in the last one year have impacted your industry
That is a tricky question. I will not limit myself to the last one year because that will be indicting this present government. That will not be fair because some of the policies that are impacting the industry negatively were not made by this government. However, this is a very challenging period for the maritime industry. As you know, the volume of activities in the ports has reduced and it has been a very drastic reduction. For example in my company we have a cargo downturn of a least 57 per cent as at two weeks ago. When you compare today with this period two years ago we have a reduction in cargo output of a minimum of 57 per cent which means we are operating 43 per cent capacity. This month is even worse. Now we do only six or seven ships from for example 30. That is a huge challenge. The problem has also affected the container operators in the ports. Theirs may not be as bad as ours but they are also experiencing a downturn in their operational activities particularly as it relates to cargo troop out. Why is it like that? It is because of the inconsistencies in government policies. What we need now is a consistent policy regime to help the economy to grow. This will create confidence in the mind of business owners and importers of cargo. But a situation where you are not sure whether the policy may change or not you cannot do anything reasonable. Policies keep changing; government must look into that area. For example, the policies on the ban of import 42 items. They should also look at the foreign exchange policy. The present floating system is not helping matters and it is not good for the economy. Why? Because it is floating so high that it is becoming unaffordable to the ordinary Nigerian. It is a good thing to allow the naira to find its true value but the way it is been done now is making the dollar to skyrocket. Government need to look at these policies in the way that it should not go above certain level. As at yesterday (October 30th) one dollar was sold N473. That is way too high; can Nigeria as a country survive on that? It makes commodity prices very expensive. People can barely afford to eat three square meals a day. One very important thing that the government should do now is to collapse the gap between official rate and parallel market rate. The margin between both markets is too high. In other parts of the world, the disparity is very marginal. For example, if you go to the United Kingdom you can choose to go to the bank to conduct your foreign exchange transaction or go to the open market. When you go to the open market your profit is very minimal. The disparity is not very wide. In a situation where the Central Bank of Nigeria (CBN) is selling the dollar a little above N300 and then the parallel market is N473 is not acceptable. Government should urgently investigate to know why that is happening. Government should collapse the two to a level where the margin is not that wide, granted the fact that not everybody can get the dollar from the CBN. The fall-back position for most people is the black market but that market is somersaulting in a way that it is creating a big problem for the Nigerian people. This is very important because whatever happens to the dollar affects even our local food. Nigeria is running a dollarised economy.
Aside the foreign exchange problems, the high cost of doing business in the ports is also a problem, how do we resolve this?
Well, it is also a problem because exchange rate volatility impacts port operations a lot. For example, customs charges their tariff at the official exchange rate but importers do not get the foreign exchange at the official rate. This is what brings about the high cost of doing business at the ports. The way out is that government should apply the right policies by way of effective exchange rate policy that will support the maritime industry. This is very important because whatever happens in the port have direct impact on the economy. We are in a recession, people’s incomes are being eroded, states are not paying salaries, yet prices of food are skyrocketing. That to me is a big challenge to the Nigerian people.
All of the plants and equipment that you use in your operation are procured abroad and the dollar is selling at N473. How does this affect your ability to procure equipment to reduce turnaround time of ships?
Every segment of port operations is being affected by this exchange rate crisis. Ten years ago when the ports were consessioned, the naira was exchanging for N125 to a dollar. Today, the exchange rate is N473 or N490 in the parallel market. We just have to use the parallel market because government does not have the capacity to fulfil demands for the dollar so the fall-back position is the black market. For terminal operators, we don’t generate enough foreign exchange to sort ourselves out. Don’t forget we have the lease fees to pay, we pay royalties in dollars and at the end of the day we do not generate enough income to be able to pay those dollar obligations to the government. What do we do? We go to the black market and at what exchange rate? Our equipment are procured in dollars, there are so many things we do that require the green back. Even our customers whose services are done in dollars, there fall-back position is the black market. Everybody is bleeding, the ports operators, importers, the Nigerian Ports Authority (NPA) is also bleeding because it is difficult for us to meet our obligation to the NPA now. We have to go to the black market to exchange dollars to be able to pay the NPA. Government indirectly is also bleeding. Government needs to invite all stakeholders for discussions, we need to talk about this and make suggestions to government how it can work. We should be allowed to make suggestions to government before policies are made. Some people just seat somewhere and advise government on the way to go. That is not good enough, you need people who are operating within that sector to tell you their experience on day to day basis that is where you can hear the truth. They need to make adjustment to all these inconsistencies in policy making. Government needs to make adjustment on customs duties and tariff, they need to make adjustment on the disparity between the official and parallel markets. I believe that if the official and parallel markets are streamlined, it will not be of a major concern.
These are fiscal and monetary policies that affect operations at the ports but there are also man made problems like the issue of monopoly. Some of your members have, in recent time, complained about the monopoly of oil and gas logistics. How do you want this monopoly matter resolved?
What is oil and gas logistics? Is there any terminology like that in the maritime sector anywhere in the world? It does not exist. General cargo is general cargo, containerised cargo is containerised cargo. Why are people bringing these ambiguities and trying to apply it to the system? As at the time that my concession agreement was signed there was nothing like oil and gas logistics. Our concession agreements clearly states that we can handle general cargo. What is general cargo? They are cargoes like the so called oil and gas logistics. The terminology all over the world is general cargo. When did they come up with this oil and gas logistics? After we signed our agreement? The Lagos Deep Offshore Logistics base (LADOL) has a huge investment sitting there. They have invested well over $500 million and then someone is tying their hands and saying you cannot do this. What we are creating in the mind of foreign investors is that Nigeria is not conducive for business. When we do that we are killing this country. We need the involvement of foreign investors to inject funds into our economy to flourish. We do not have such capacity, we need the foreign investors. If at the end of the day people come and do good things like LADOL is doing and they are frustrated, how do they get funds from abroad? What message are we sending to the global financial market? I think that policy is evil in every ramification. At a time they even said common pipe that they use for drainage is oil and gas. There should not be monopoly; competition is good for business because ultimately it brings down the rice of goods and services. As it is today, all terminal operators are competing against each other and that helps to reduce prices and cost of doing business at the ports. Again monopoly negates the spirit of concession; the ports were concessioned to create a competitive environment, which will ultimately bring down price. But if government on its own is saying sorry we are giving it to just one party, then we are not serious. Not in anyway.
There was this argument between the concessionaires and the NPA over fees payment in dollar, has that matter been resolved?
That is exactly what I was saying about inconsistencies in government policy. When we started naira was N125 to a dollar. Today, it is N473 or even more. Even if we go to the CBN now and ask for dollars they will tell us we not part of their responsibilities. Who can survive on that? This has been the subject of our argument with the NPA. It is not that we don’t want to pay our lease fees; the fact of the market is that we are not making enough dollars to pay them. This sudden jump in the rate of the dollar was not envisaged when the agreement was signed. Nobody thought that the naira will crash or suffer 300 per cent devaluation. It is a major problem, but I believe the present managing director of the NPA will look into the matter in an unbiased position.
The NPA has said it will soon review the concession agreement, as someone who has been there all along what specific things do you want done in the new agreement and how will you like to respond to the allegation that terminal operators have reneged on the concession agreement in terms of port development?
Some of the things we will like to see are; one the issue of this foreign exchange and how it applies to us if there is a sudden devaluation. The NPA needs to determine what rate will be applied. Two, the guaranty minimum tonnage (GMT) needs to be reviewed downward because most of the cargo that we handle that were inserted in the technical paper that we sent go government that we thought we could achieve has changed. We were handling the cargos 10 years ago and some of them are among the 42 items banned by the CBN. For example, cement. At ENL for example, I was doing about 1.5MT of cement cargo at inception, which has been taken away, rice also has been taken away. Even to some extent fertilizer has been taken off the list. The other one is fish and it is subjected to quotas. A lot of the cargo that we use to handle has been banned by government. What are we left with of all the several things we could handle are very little. Most of the cargos that used to come through our terminal have been banned. This means that the progression that I expected to happen in my cargo throughput cannot happen anymore. It is not because we don’t have the capacity but government policy has changed so the GMT has to be reviewed. If government is banning the cargo that I had envisaged will form part of the cargos that will come through my terminal, they have to review the GMT because it is not our fault. As regards the port development, I don’t know what they are talking about. I don’t think there is any argument whether we have developed the ports or not because we have an agreement. We had things that we specifically said that we would do in our agreement. I don’t know of any terminal operator that has not done that. In fact, we have done more than was expected of us, much more than we said we will do.
Can that be said of the NPA?
As much as I don’t want to talk about them, I think the bureaucracy is too much and it is telling on their ability to do their work effectively. I am not giving excuses for them. Government should give them some level of freedom to do certain things without waiting for approval from Abuja. They should be granted some kind of semi autonomy. NPA needs that kind of policy to operate optimally. There are so many things that the NPA has not brought to the table as contained in the concession agreement.
Can one truly say that it is because of government policy that you are running on less than your installed capacity?
Definitely! As at two weeks ago ENL terminal was operating at 57 per cent downturn. That is huge. It is even more now because as we talk I have only one ship at the port, five days ago I had just one out of 10 baths. Two weeks ago there was a period of five days that we didn’t have any ship at all. That is the order of the day now. This is peculiar to us operating general cargo terminal. It is a very serious matter.
You talked about the government policy that has changed since the concession agreement. For example the GMT that has gone down as a result of the ban of 42 items. Is there a way you can reverse the trend with export rather than import?
Yes. But Nigeria is yet to become an export based nation, but I think we are getting there gradually. I can see farmers planting a lot of cashew. Cashew very soon will constitute a lot of export cargo for Nigeria. In another three years there will be a lot of cashew export. With the encouragement that government is giving to farmers who say we cannot eventually export rice? So, I see that there is a lot of attention in the agricultural sector, this is good and I support it. But what I am saying is that even though we are encouraging agriculture, banning some of the food that ordinary Nigerians eat is not right. It has to be a gradual thing. You don’t just ban things out rightly because doing so will increase the price of those commodities.
There is this talk about terminal operators and the Nigerian Shippers Council (NSC) making effort to settle the tariff rift out of court what is the update on the matter?
Well, the terminal operators are not opposed to peaceful resolution of conflict with anybody, as it is now the court process still continues. I will be lying if I say we are settling out of court. Efforts were made to settle out of court, which I was not opposed to but there is issues that bothers on trust. That is where we are, nothing has changed. We are not saying there can’t be a peaceful resolution of the conflict, but we are still in court. I particularly was working towards it. Trust is the key to out of court resolution, as it is now, there is no trust. We can’t see it happening now.
You talked about the NPA MD earlier, for her to succeed, she needs direction which can only come from seasoned operators like you. What specific advice do you have for her?
I have checked her record and she is an exceptionally intelligent woman right from when she was at the Bureau of Public Enterprises (BPE). I have asked people who had working relationship with her and they have all spoken well of her. From what she has done within the short time she has spent and from what I have heard her said, I think she will do well. She is a woman of due process, she believes in the rule of law, in doing things well and she is not biased. I want to give her the benefit of doubt. I went somewhere to lobby about the ban on certain items and I was told she has been there to do the same thing. I never met her, we never compared records but she is making the same effort to turn around our sector. What I want her to do is ensure that the NPA fulfils its own part of the concession agreement. Pilottage is key to our operation, enabling environment is key. All the things that the NPA needs to do as our counterpart in the concession; she should see to it that the NPA does them. I was told she has informed them in house to seat up and stop blaming the operators for everything, comments like that gladdens my heart. I think she wants to come and make an impact. Men have done it in the past but we have a woman now and I can tell you that she will do well.
If you check around you will see that so many Greenfield ports are springing up, this has fuelled speculations that existing operators are scared. Are you scared?
We are not scared. Don’t forget that Nigeria is over 170 million people. I believe we are more than that. That is what makes us thick as a nation. Nigeria is critical to the economy of the world, if there is one nation that the world is looking at as a bride of economic hub in the world, not just Africa, it is Nigeria. Why do you think all these expatriates are coming to Nigeria to do business? Nigeria is special. We have people, resources and brains. We are very different from other parts of the world. Even if we have 50 or 100 ports it is not a problem, we have the number all we need to pray is for our economy to be buoyant. When that happens, all the ports will always have cargo and people will have work to do. For me, it is a positive development, we need to develop Greenfield terminals and I am happy that some state governments are investing in Greenfield ports. Durban port in South Africa is a hub port but Nigerian port is not like that. That is why government needs to get serious particularly inconsistence in government policy. It is not making Nigeria become a hub; no country in Africa should be competing with Nigeria because we have all it takes to become hub port. Government needs to listen and take advice from stakeholders before making policies.