Why the Monopoly Game Must Be Stopped

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Eromosele Abiodun urges the Managing Director of Nigerian Ports Authority, Ms. Hadiza Bala Usman to hear the terminal operators’ cries and put an end to monopoly in the provision of oil and gas logistics

The Managing Director of the Nigerian Ports Authority (NPA), Ms. Hadiza Bala Usman’s familiarisation visit to Nigerdock’s Snake Island Free Zone, was calm and seamless until the Chairman of Jagal Group, owners of Nigerdock, opened a can of warms on the monopoly in the provision of oil and gas logistics.

The shocked crowd, which included, journalists and top officials of the NPA watched as the Nigerdock boss, who was almost moved to tears related how his company that had operated in Nigeria for over 35 years was almost destroyed by a few government agencies in collaboration with INTELS Limited.

His words: “We as a small company bring many benefits to the nation. I am 68 years old and I have spent 58 years of my life in this great country, it is home. Our effort here is not about the money, it is about legacy, about what you do proper and well. Since 2003, INTELS directly fought this company using the NPA, the Nigerian Customs Service (NCS), the Ministry of Transport and every possible government department to absolutely harass us. We had worn a project of logistics from Shell, Chevron and Exxon Mobil. It followed a two year process, we were awarded the project, in order to reduce their production cost.

“INTELS raised hell on earth, sabotaged the project and killed it. They did this with every possible accusation and brought Nigerdock to a standstill. That is history. We bought and paid the Federal Government of Nigeria and have developed this property. Our auditors are KPMG, we have sunk in $500 million into this place. We are not saying we are going to invest, we have invested. We have produced here and proved to every oil company that we will serve them and serve them will. You cannot buy a 10 house and be told you can only use two rooms, the remaining eight, just keep them close, why?, it is not your business.

“I was called and told, Mr John Jarmakani, you are a shipyard company just continue to do that business and don’t bring the topic of logistics. Madam, we are in logistics, ship repairs, fabrication, we should be allowed to do our business. We want to tick every box of compliance with the federal government, we want to abide by the law, we will do nothing wrong that is not in alignment with the law of the Federal Government of Nigeria.”

That was not all. Continuing he added, “This company is determined to support the federal government because the country is in a serious recession. Currently, logistics in Nigeria add between a minimum of $2 to $4 of extra cost of very barrel of oil produced in Nigeria because of monopoly. The monopoly has created a law that does not exist anywhere. We have researched and we have been doing to for 10 years. We have not been able to find the law that says only INTELS can receive oil and gas logistics business before it can go to any other facility.

“This facility has been receiving cargo since 1986. Since the concessioning , competition created monopoly that is destroying our business. I will tell you a story of a recent development. In a letter dated 16th of March this year, INTELS wrote to a government agency to demand for a circular that states some facilities are prohibited from handling oil and gas logistics. A very senior person in government took his pen not minding others, signed a certified true copy and INTELS circulated the letter among oil and gas companies, some of them were negotiating business with us. INTELS clearly warned them not to do business with Nigerdock.

“We are in the 21st century, we are under a government which is fighting corruption that is why we have hope and have decided to take certain action. We can no longer sit down and allow people destroy what we have built over the years. We truly offer world class services in every aspect of our business. We have invested so much, therefore we need your support, and we don’t want to do not want to do anything that is outside the law. We want to support the government and we want to do the right thing. We will be grateful for your support only in the areas we deserve to be supported. Every player must follow processes and procedures.”

Others Cry for Help
It was not just Jarmakani that sought Bala Usman’s intervention. While receiving the NPA boss at Lagos Deep Offshore Logistics base (LADOL) in Lagos, its Managing Director, Dr. Amy Jadesimi, urged government to urgently address the lingering issue and ensure a level playing ground for operators in the industry, if the dream of making Nigeria a hub station is to be achieved.
Jadesimi stated that all industry stakeholders including the Seaport Terminal Operators Association of Nigeria (STOAN) and all the terminal operators in Nigeria have made it clear that INTELS has no such entitlement.

According to her, “INTELS is a concessionaire, what that means is that the government gave them their facilities to run on behalf of government. INTELS has been so privilege as a concessionaire others because government pays for their facilities. No other concessionaire has that privilege. So the whole maritime industry has accepted that government is paying for INTELS facilities whereas the rest of us have to pay for ourselves. What we will not accept is this monopoly; we won’t accept it because in 2007 and 2008 when that monopoly was there before it killed the industry.

“We would not accept it because many of us have invested hundreds of millions of Dollars in the intervening 10 years and there is no way you can tell people to invest and have a level playing field, give them licence to operate and again tell them they have to handle their business with INTELS. INTELS will be killing themselves if they insist on it. Despite their pronouncements, INTELS is not bigger than Nigeria, if they kill Nigeria they will be killing themselves. Our position is that there must be no monopoly and that we have no issue with INTELS,”she said.

She added: “Our position is that their needs to be collaboration among industry stakeholders and we strongly encourage government, the private sector and even INTELS that we need to seat round the table and decide how we need to move forward. We need to recognise that there is no future for Nigeria without all of us coming to work together. All the issues that have happened in the past, all the lies that INTELS have told, we are not interested is focusing or getting bulged down with that. They did what they did because that was their business model. They need to understand that that business model is dead. The new business model is that they need to seat round the table with their neighbours like PTOL, other terminal operators and private investors like LADOL and chat a way forward together under the NPA, our landlord.”

NPA, NSC Kick
The immediate past Managing Director of NPA, Habib Abdullahi had, before his removal from office, said the $3.8billion Floating Production Storage and Offloading (FPSO) project is responsible for the on-going face-off between INTELS and other operators.
He stressed that the dispute, if not handled properly, is capable of diverting foreign investments recorded in the maritime sector to other countries.

Recently, the Director, Commercial Shipping Services, Nigeria Shippers’ Council, (NCS) Mrs. Dabney Shall-Homa asked the federal government not to grant monopoly for handling certain types of cargoes, which some have classified as oil and gas cargo, to INTELS Nigeria Limited, which operates primarily in Onne, Delta and Calabar ports.

Shall-Homa gave the advice at an industry stakeholders meeting with the Minister of Transportation, Rotimi Amaechi in Lagos.
She said: “If there is any agreement which has been signed as a contract between parties, there is need for government to tinker with the contract because the intendment of that contract is to create a cartel and not to create a level playing field which is the spirit for concessioning.

“The concession agreement that were made has certain critical pillars. One of those critical pillars is to ensure that there is no evidence of monopoly and abuse of dominant position and to create a level playing field and in doing so competition will be promoted between the players.”

She also argued that there is no cargo classification known as oil and gas in any part of the world. She said seaport terminals are classified as multipurpose, container, bulk or general cargo terminals.
“We have been in this shipping industry for 32 years going forward. There has never been any classification as oil and gas. When we put that on our gazette as shippers’ council seeking to identify cargo coming into Nigeria and we distinguish oil and gas, we were asked by our colleagues internationally from which index did you get oil and gas?

“Is there any cargo or terminal called oil and gas cargo? Multipurpose they call it, which could handle anything. We have the general cargo terminals, bond cargo terminals and containerised terminals. That is how terminals are classified internationally and Nigeria cannot be an island because we are trading with others,” she said.

On his part, former Minister of Interior, Capt. Emmanuel Iheanacho advised Amaechi to concentrate on opening up the market for different players adding that it would not be fair to restrict the market to a number of people.
According to him, the market should be opened to pave way for competition so that people can have a choice.

“If we say because there are agreements made in the past and we can’t speak beyond the agreement, we are never going to make progress. What we want is a market where people can openly compete on the basis of the quality of service that they can render.
“Supposing an operator was located in Lagos and prefers to receive his oil cargo in Lagos but there is a law which says the cargo has to be delivered in Port Harcourt or Warri; is that fair? That will introduce extraordinary cost that will ultimately be borne by Nigerians who need the services,” the former Interior Minister said.

Bala Usman’s Pledge
While assuring terminal operators of her commitment to transforming the maritime sector, Ms. Bala Usman vowed to ensure that no organisation operating in the sector enjoys monopoly in the provision of oil and gas logistics.
Bala Usman, said that the NPA will in the coming weeks take a critical look at existing legislation to determine whether any monopoly currently exist, stressed that she will ensure a level playing field for all operators and promote a healthy competition.

According to her, “We will look to determine the area we will provide support for all. Within the next few months we will look at all the enabling legislation as it were to determine whether any monopoly exist or not. We will ensure that there is effective regulation that is transparent, that we all can understand. We will ensure that no organisation entrench monopoly that can affect the development of Nigeria as a whole.

“Our plan is to ensure a regulatory environment that promotes the industry. We are looking at ensuring that there is competition, we have visited most of the terminals at the various ports we feel the need for the government to ensure that local content for example is adhered to. Businesses are coming into the country, we will do our best to encourage them to ensure that the utilisation of their operations are domiciled in Nigeria, we also encourage for operators to ensure that they have Nigerians within their ranks, employment for Nigerians is very important. We also believe that wherever enabling environment is required we will provide. In instances where note lack of competition we will work towards ensuring there is provided because that is where we will get the best for the country and improvement in revenue.”

She promised to bring all operators to the table to fashion out ways to improve the sector and make sure Nigeria gets the maximum benefit that it can attract for itself within this environment

“We believe in stakeholders’ consultation, we are going to bring everyone to the table for us to seat down and ensure that there is a need for us to work together. As an authority we are going to lead and ensure that local content is provided. We will step beyond the things that we historically used to do so that whatever is required for the operators to work together for Nigeria to have the maximum benefit that it can attract for itself within this environment. We will reach out to the respective ministries and work together in ensuring that this is achieved.

“We are looking at making Nigeria the hub for West Africa, working to ensure that there is operational efficiencies and make effort to improve the ease of doing business and the competitiveness of our port operations, we will work with the operators and look at areas where there is overlapping among the operators and agencies within the Ministry of Transportation and ensure that we work together to ensure that there is synergy. There is the need for us to understand the current economic situation and define methods and mechanisms to improve on our revenue drive. We are working to have new trade routes defined; we are also going to look at internal trade whereby we define mechanisms for removing cargo from our ports to the hinterland in a more efficient manner,” she said.

In the Beginning
Following the calamitous multi-year port congestion that gripped the nation’s ports and arrested Nigeria’s development for much of the oil boom years of the 70s, the federal government made efforts to reform the system. The efforts never yielded any reasonable fruits as corruption and inefficiency reigned, denying government the needed revenue from the sector.
As a result of the painful experiences of congestion in the 70’s, the federal government made again made efforts to reform the NPA in the 1980s.

Consequently, the NPA management was restructured into four zones: Western, Central, Eastern and Headquarters, The government also created Nigerian Ports Plc. However, the policy failed abysmally due to rear-guard action from the die-hard culture of centralisation. Government’s interference was rife and patronage and self-enrichment by some government officials overseeing chunks of the maritime sector went to a new level. Foreign exchange earnings from Nigerian Ports Plc disappeared into private pockets and port infrastructure were allowed to rot.
In a bid to arrest the situation, the federal government in 2001 came up with the idea of concessioning the ports to qualified private operators.

Dutch firm Royal Haskoning BV was commissioned to study Nigerian ports preparatory to the reform.
The resulting report, called Haskoning Study was submitted to the federal government and was accepted as a cogent x-ray of the Nigerian seaport system. The report criticised the over-centralisation of administration that saw NPA function as both regulator and operator; the overlap of authority in the system and the duplication of efforts. It recommended a “Landlord” port administration model where government’s role would be restricted to policy formulation while private operators undertake the day to day running of terminal operations, stevedoring, warehousing; and investments in port equipment and infrastructure, among other activities. The report called for NPA to be unbundled into three zones and for concessions by open bidding.

After examining the report, the National Council on Privatisation (NCP), endorsed the “landlord” model, and under a new transport policy NPA was given the role of technical regulator to manage the ports for which there were no bids. The National Transport Commission (NTC) was to become commercial regulator while National Ports Commission would become overall coordinating agency for the ports sector. Five landlord port authorities were slated for Lagos; the Niger Delta; Port Harcourt; Calabar; and the inland ports. A total of 25 concessions were identified in 11 ports and there were bids from 110 companies to manage eight ports: Bonny, Calabar, Koko, Port Harcourt, Sapele, Apapa, Tin Can & RORO.

With bids submitted by March 2005, concession commenced in 2006 with 20 concessions concluded. In March 2006 the concessionaires commenced operations.

The flagship concession, Apapa Container Terminal was signed in March 2006 with APM Terminals, which had taken over P&O Nedlloyd earlier in the year. The Danish shipping firm, A.P. Moller (APM Terminals’ parent company beat 25 other bidders to the 25-year concession.

Doing Business in the Ports
Prior to the concessioning of ports to private operators in 2006, doing business in the nation’s ports was a hellish experience laced with a myriad of problems.
Some of which were turnaround time for ships which took too long making businesses to brace themselves for weeks if not months of endless waiting before their cargo could be loaded or discharged.

“Most of the few cargo-handling facilities owned by the NPA were moribund, so shipping companies had to hire such facilities from private sector sources, leading to extra costs. Dwell time for goods in port was so long that overtime cargo filled the most active seaports and led to massive port congestion. Labour for ship work was in the hands of a mafia that controlled dockworker unions and had no scruples supplying less than the manpower paid for. Many port premises that could have been put to good use were abandoned, giving maritime businesses less options.

“In the road sections of the ports, massive portholes were the norm, rather than the exception, and this did nothing to reduce waste of man hours brought about by snail-like movement of goods to and from the ports. The resulting congestion led to consignments becoming untraceable as if they suddenly disappeared into thin air, and in such cases, NPA often seemed helpless in effecting the return of such absconded cargoes, to the chagrin of hardworking businesspeople. As a result of porous entry points, dangerous miscreants also known as wharf rats swarmed the ports to also eke out their daily bread, leading to predictable tales of woe on the part of responsible business people,” said a leading operator.