Eromosele Abiodun
A report by top global accounting and audit firm, Deloitte has revealed that Terminal Handling Charges (THC), which is the main revenue stream of terminal operators, declined by 22.4 per cent between 2006 and 2016 as a result of depreciation of the naira and inflation.
The report revealed that at the beginning of port concession in 2006, THC collected by the operators stood at $232 per TEU but declined to $180 per TEU by 2016.
According to Deloitte, “The THC is the main source of revenue for the terminal operators. This is the payment received from transferring cargo from ship/quay side to the yard for release to clearing agents/customers.”
According to the report titled, “Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study,” during the same period between 2006 and 2016, the terminal operators business was adversely impacted by the rise in Consumer Price Index(CPI)/Inflation, with the CPI Nigeria rising to over 177 per cent since 2006. It said foreign exchange (fx) fluctuation also impacted the value of the THC with over 224 per cent FX depreciation between 2006 and 2016.”
The report, which was released by Deloitte Nigeria’s Director of Strategy and Operations, Bola Asiru; Senior Manager, Oladotun Bamigbetan and two others, stated that if the terminal operators were to adjust the THC yearly in line with changes in foreign exchange and Nigerian CPI, the rate should have increased to N185,112 per TEU.
“In real economic terms, the operators are losing revenue by not adjusting their THC in line with market realities,”Deloitte stated.
The firm said the fx challenges that Nigeria faces as a result of the fall in global oil prices is further pronounced for terminal operators as a large part of their (capital expenditure(capex) and operational costs are in US Dollars. It said the operators’ dollar denominated costs includes equipment acquisition and maintenance costs and payment of lease fees to the Nigerian Ports Authority (NPA).
It said: “83 per cent of Terminal Operators revenues are received in Naira, 17 per cent is received in US dollars. Terminal Operators have to constantly source for US Dollars through the parallel market at very high rates in order to meet their statutory and operational cost obligations.”
The firm further stated that terminal operators face huge challenges in the area of storage as the terminals are used as “cheap storage warehouse alternatives” by cargo owners.
“The current policy provides for a free three days storage after which a charge of N900 is applied per day and regulated by the NPA. Importers take advantage of the low storage charges offered by the terminal operators to store their imported goods at the terminal as opposed to offsite warehousing facilities that charge as much as N60,000 per day. This leads to congestion at the terminal and hinders the productivity and storage capacity of the terminal,” the report said.
Deloitte further stated that during the 10-year period under review, terminal operators made huge investments on the acquisition of modern cargo handling equipment; development of port infrastructure such as buildings, quays and storage yard; lighting; automated tracking system; trainings and supply of electricity.
