Maritime Sector: 56 Years of Corruption, Bad Government Policies

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Eromosele Abiodun posits that despite the gains of ports concession, the Nigerian maritime sector has been held back by corruption, policy inconsistencies and lack of safety and security of funds invested by promoters

Few days ago, Nigeria celebrated its 56th independence anniversary, a yearly ritual to mark years of self-rule. Like many sectors of the economy, the maritime sector is as old as the country itself. Like many issues facing the country, the maritime sector is also bedeviled by challenges that look impossible to resolve.

Oil was discovered in commercial quantities in Nigeria in 1956, four years before independence from Britain. Before then, maritime activities in Nigeria had largely been stimulated and sustained by export of agricultural products and solid minerals for earning of foreign exchange. The leading agricultural exports then were groundnuts, cocoa, palm produce and rubber. With the discovery of oil in commercial quantity in 1956 at Oloibiri by Anglo-Dutch consortium, Shell D’Arcy, the oil and gas sector become the main driver of the economy and of maritime activities in Nigeria.

Establishment of NPA
However, the state of the ports is a critical factor for efficient maritime operations. Hence the establishment of the Nigerian Ports Authority (NPA) by Ports Acts (Cap 155 LFN 1954) to create a structural framework for the management and regulation of port operations. The authority executed its first wharf extension project between 1956 and 1961 in Lagos and Port Harcourt ports. Further expansion of Lagos Ports were done between 1970 and 1975 and, in 1977, the Tin-Can Island Port Complex was inaugurated to ease the pressure of heavy imports (mostly government cargoes) on Apapa Port. In 1979, the new Warri and newCalabar ports followed. Port construction and expansion continued between 1981 and 1985. The new Sapele port was constructed in 1982. In 1996, Federal Ocean Terminal Onne Phase 1 was constructed. Financing was done through agreement with the International Bank of Reconstruction and Development and the World Bank.

Statistics in the mid-1980s showed that the public ports operated at 47 per cent of their capacity at the best and cargo throughput dropped down to 28.7 per cent of previous years. To increase efficiency, enhance capacity and introduce healthy competition in government enterprise, the government in 1988 promulgated the Privatisation and Commercialisation Decree. In 1993, the implementation of the commercialisationprogramme of the NPA was partially carried out and it became Nigerian Ports Plc. This was reversed in 1996 as a result of inherent weakness of the policy and government, through the National Council on Privatisation (NCP), upgraded the state of NPA from full commercialisation to partial privatisation called concession, to make room for private sector involvement in port operations.

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 again made efforts to reform the Nigerian Ports Authority (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 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.

Concessioning plans
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 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 Harcut; 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 was 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 controlled by 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.

Effort to Develop New Ports
Since the concession, efforts have been made to develop Greenfield deep sea ports without success. Despite the yearly allocation of several billions of naira for the construction of a proposed Greenfield deep seaport at Ibaka in AkwaIbom State by both the State Government and the NPA since 2011, the project has remained elusive, with no evidence of a port being built at the proposed site. This is also the same situation with the $1.65 billion Lekki Deep Seaport, which is slated to be completed in 2019. Work is currently on-going at the Ibaka deep seaport in AkwaIbom and the Lekki deep seaport in Lagos. Similarly, construction work is on at the Olokola deep seaport and Free Trade Zone between Ondo and Ogun, with a deep seaport being proposed for Badagry in Lagos. The Deep Seaports were conceived to improve the overall cargo handling capacity of Nigerian ports and thereby increase Nigeria’s gross domestic product (GDP).
The handling capacity of ports in Nigeria is put at 60 million metric tonnes, while demand and usage is about 100 million metric tonnes, and they are expected to rise with the increasing population, urban expansion and attendant demand for more markets.

The cargo throughput handled in the ports in 2010 increased from 66,908,322 metric tonnes in 2009 to 74,910,282 metric tons in 2010, indicating a 12 per cent increase. According to global trends in port development, out of a total of 100 plus seaport developments being executed the world over, approximately 60 to 75 per cent of these are deep sea ports or terminals. The balance is mostly inland water way ports and Jetties.

This clearly indicates that Nigeria needs better designed port facilities in tune with increased cargo traffic, for the global competition. Also, emphasis is shifting to larger more economical vessels that require deeper harbour drafts. Global logistics trends have made the need for deep seaports more imperative.

The last two decades have witnessed a major shift in the exploration and production focus of international oil companies (IOCs), with deep offshore frontiers becoming more attractive and widespread. This has naturally affected the dynamics of crude oil carriage, just as more efficient means of petroleum products and LNG supply and distribution are sought from the downstream segment of the industry.

Crucially, logistics services for these new frontier developments define the core of operations, costs and efficiency, with bigger vessels infinitely more able to leverage on scales and further thereto, on costs. The foregoing defines today’s shipping and oil and gas reality in Nigeria, and paints the canvass for deepwater ports in bold relief.

Greenfield Development and GDP
The federal government has been inundated with calls to embark on policy measures that will encourage Greenfield port development in the country.
Doing so, experts said, will impact positively in the overall cargo handling capacity of the Nigerian ports and thus increase the country’s gross domestic product (GDP).
Experts believe Nigeria need new better designed port facilities in line with increased cargo traffic nationally and globally, new and bigger marine vessels that need deeper harbor drafts.
Global logistics trends and practices, they stressed, have made the need for deep sea port more imperative.

“Nigeria should also have at least one port that can berth a Super Panamax Vessel”, said, Bello Ibrahim Gwandu, a former managing director, NPA, while giving reasons why Nigeria must develop Greenfield deep sea ports.

He added that as the largest importer and exporter of cargo in the West African sub-region, one of Nigeria’s deep sea ports should become a hub for west and central Africa because of increased maritime and general trade volumes of the country.

“The benefits of attaining a regional hub status include the potential to create directly and indirectly, approximately three to four million jobs over a five year period and a 70 per cent cut in vessel turnaround time as well as guaranteeing increased revenue from berthing charges to handling charges for the trans-shipment of cargoes.A deep sea port of draft not less than 35 Meters will almost guarantee Nigeria the regional hub status, which by volume of cargo alone sent or received from our ports, gives her the right to that status,” Gwandu stated.

He said Nigeria need a deep sea facility that load and offload finished, refine liquid, powder and containerized cargo adding that bigger ships move cargo more efficiently than smaller vessels, so the economies of scale make it imperative that shippers will buy new bigger vessels, which have to dock somewhere, a deep sea port.
In a paper entitled, “Greenfield Port Development: Which Approach,” Gwandu urged the federal government to also consider reducing the approval process for public, private partnership (PPP) proposals.

He said PPP is best suited for port development because of capital layout required to develop ports and equip same and the broad range of engineering, engineering management and operational management expertise needed.
The government, he said, should promote the use of bi-lateral agreements from the private sector as a vehicle for infrastructure development and Nigeria achieving the regional hub status and assist willing investors where necessary to access loans locally and internationally to finance this type of developments.

Dominance of foreign companies
It is important to point out that after years of back and forth, the dominance of Nigerian maritime sector by foreigners does not look like abating soon.
Although some stakeholders are happy with the various reforms in the sector, they, however, want the implementing agencies to enforce the provisions of the law.
Recently, the Indigenous Ship owners Association of Nigeria (ISAN) decried the dominance of their foreign counterpart stating that while their foreign counterparts are in business, their members are going through difficult times.
The Chairman of ISAN, Chief Isaac Jolapamo, said that while indigenous ship owners could only move cargoes within the nation’s waters once in a month, the foreign ship owners could move cargoes up to three times in a week.
According to Jolapamo, indigenous vessels are idle and huge costs are being incurred as the engines keep running.

Besides, he said that foreign ships were entering the nation’s waters at will despite the Cabotage law, while the relevant agencies watch the ships helplessly.
However, in the last two months, ISAN had obtained court orders and arrested six foreign ships alleged to be trading in Nigerian waters in defiance of the Coastal and Inland Shipping Act, otherwise known as the Cabotage Act, which was enacted in 2003.

Jolapamo blamed the development on the inability of the implementing agency to enforce the provisions of the law.
According to the ship owner, six years after the Cabotage law came into effect, the law has not achieved its intended objectives.
“Because of this, we (Nigerians) have not done well and there is nothing to roll out the drums for in respect of the 49th independent anniversary,” he said.
Jolapamo urged the federal government to support the ISAN Shipping Company with cargoes and grant the company the status of a national carrier.

The ship owner said that with the liquidation of the Nigerian National Shipping Line (NNSL), Nigeria had gone down from 20 ships in the 1990s to nil today.
He, however, advised that those calling for the return of the NNSL were yet to learn from the bitter lessons of the past.

NNSL was liquidated in 1995 and all the vessels in its fleet were sold.
The former President of the Nigerian Association of Master Mariners (NAMM), Capt.AdewaleIshola, said that the nation’s indigenous ship owners should be able to transport more of Nigeria’s crude oil than the foreign ship owners, but the reverse had been the case.

A member of ISAN, Capt. OlaniyiLabinjo, urged the federal government to reverse this trend because in some oil producing countries, the indigenous ship owners dominate the trade.
Labinjo said that this was the only way to build a good future for all Nigerians and generations yet unborn.
The Chairman, Shipping Association of Nigeria (SAN), Mr. Val Usifo, said that he would not support the revival of the NNSL.

Usifo said that if the shipping line must be revived, it should be private sector driven with government support in the areas of cargoes.
The ship operator suggested that the federal government should rather support ISAN in developing a national fleet of vessels.

The Deputy National President of the National Association of Government Approved Freight Forwarders (NAGAFF), Mr. Eugene Nweke, said that it was unfortunate that 56 years after independence, Nigeria was yet to be ranked among the big maritime nations.
Nweke faulted the concession exercise, adding that the NPA Act 1990 ought to have been amended before the concession and not after.

He said that it was a shame that the Customs and Excise Management Act (CEMA), the NPA Act and Nigerian Shippers’ Council Act were undergoing review now 56 years after the country gained independence.

The Secretary to the Senior Staff Association of Communication, Transport and Corporations (SSACTAC), NPA branch, Mr Akin Leoso, said that with port concession, there should be 24-hour cargo clearance at the nation’s ports.
Leoso believes that the target is difficult to achieve despite all the reforms carried out at the port.

He, however, did not support the move to revive the liquidated NNSL.
He expressed doubt if the proposed company would be well managed and whether it would not go the way of the liquidated NNSL.

Bad Government Policies
Another major setback for the maritime sector, according to top players in the sector, has been policy inconsistencies of the federal government.
Chairman of Seaports Terminal Operators Association of Nigeria (STOAN), VickyHaastrup believes inconsistent government policies have held the maritime industry down.
‘‘Government need to ensure that consistency in policy is applied to the economy because there are lot of inconsistencies in policies that they keep changing from time to time and these does not augur well for business owners. The maritime industry has a huge potential if right policies are made.

“The port industry doesn’t need inconsistent policies. We don’t need policy summersault. The manufacturers are bleeding right now because they cannot plan, it may be N400 to a dollar today and in another one week, it is N450. That makes it very difficult for business owners to plan. That is quite scary and that is why investors are moving out of the country, investors do not have confidence in injecting finances into business in Nigeria and the reason was due to inconsistent government policies,” she said.

Haastrup, who is also the Executive Vice Chairman of ENL Consortium, operator of terminal C&D, Apapa Port, Lagos, further stated that private investors need government confidence which can only be achieved through consistent policies. According to her, the maritime industry is second to oil with huge potentials only if the right policies are made.

She said: “Businesses owners need consistent government policies before they can open letter of credit or source for foreign exchange from the black market to bring goods into the country.
“For instance, Customs tariff keeps changing from time to time and before it changes for instance an importer of goods will have shipped his cargo from wherever it is and before the cargo lands, Customs has increased the tariff on such cargo then that business owner is already messed up and got into trouble financially so this are all the fortunes we need to sync.

“The port industry has a huge potential but like I said only if the right policies are applied. We know the port industry is second to oil it is such a huge industry because it comprised of big operators such as – Terminal operators, Truck Operators, Shipping Companies, Clearing Agents – that is a huge industry, it is an industry that can provide jobs for youths, provide jobs for families, it is an industry that has potentials to generate huge revenue for the government but only if we have consistency in policies.

“Just a couple of weeks ago, the Nigeria Customs Service said it generated over N50 billion but they can do more than that because of the capacity that is available in the port industry if the right policies are made and applied. The service can earn more than that if there is an enabling environment for business to thrive but even with what was declared, it showed that the capacity within the maritime sector is so huge.”