Eromosele Abiodun writes that despite the creditable performance of the NPA and NIMASA in the last two years of the administration, unfavourable government policies and low patronage resulted in the exit of 20 shipping firms from Nigeria, resulting in thousands of job losses
There was a time when all players in the maritime sector were smiling to the bank. The numbers on all fronts were looking up and good despite the many challenges in the sector. It was the time when dockworkers, customs agents, and terminal operators had so much to do and they thought the trend would continue.
Their optimism was even higher when President Muhammadu Buhari became Nigeriaâ€™s president two years ago following his promise of change and reform. While it must be said that some agencies, like the Nigerian Ports Authority (NPA), Nigerian Maritime Security and Safety Agency (NIMASA) have performed creditably well, the federal government has failed in many respects.
While all the ills in the maritime sector cannot be blamed on the Buhari’s administration alone, the administration has, with a few bad policies, left the maritime sector worse than it met it. For instance, a recent report by top global accounting and audit firm, Deloitte 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 rising 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, â€œThe 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.â€
The report titled, â€˜Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study,â€™ noted that 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.
According to the report, which was released by Deloitte Nigeriaâ€™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.
â€œIn real economic terms, the operators are losing revenue by not adjusting their THC in line with market realities, â€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 operatorsâ€™ dollar denominated costs includes equipment acquisition and maintenance costs and payment of lease fees to the Nigerian Ports Authority (NPA).
â€œEighty three 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,â€ the firm said.
The firm further stated that terminal operators face huge challenges in the area of storage as the terminals are used as â€œcheap storage warehouse alternativesâ€ by cargo owners.
â€œThe 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,â€ the report added.
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.
Shipping Companies Desert Nigeria
Before the Deloitte report was released, 20 shipping firms had left Nigeria over low business and intense hardship imposed by poor government policies. Also, 1000 maritime workers lost their jobs with Maersk, the leading operator in the sector, reducing crew by 400. In the same vein, dockworkers have continued to groan under threats of $7 billion cash call and deficient import policies
This is just as Dockworkers Union of Nigeria (DUN) lamented that over 3,000 workers have already been laid off by various shipping companies, terminal operators and logistic companies, owing to lack of financing and poor import policies of the Federal Government of Nigeria.
The workers also blamed the massive retrenchment on the inability of the federal government to meet its joint venture obligation with the international oil companies which are major partners with the marine logistic companies.
Some of the companies that have already left the country are: Mitsui O.S.K Line; Nippon Yusen Kasha; Taiwanâ€™s Evergreen Line; Messina Line; Hapag-Lloyd and Gold Star Line (GSL). They were forced to withdraw from the West Africa route due to growing losses as a result of declining volumes.
At a recent news conference in Lagos, former President, Dockworkers Union of Nigeria (DUN), Anthony Emmanuel Nted, bemoaned the poor state of the ports, terminal and work environment in the maritime industry.
Nted revealed that about 20 shipping firms have left the shore of the country because of low traffic occasioned by government importation policy.
According to him, Nigeria as an import-dependent country cannot suddenly ban the importation of the principal goods being generally consumed in the country.
â€œHence, the current government policy on importation though with the best intention seems to be wreaking more havoc on the economy and ought to be reviewed urgently,â€ he said.
He, therefore, urged the federal government to review the ban on the importation of rice, wheat, vehicle spare parts and industrial machinery until the nation is able to produce for local consumption. He added that the failure to do this would encourage smuggling, diversion of ships to neighbouring countries, idle ports, retrenchment of workers, unemployment and general loss of revenue to government.
According to him, some of the employers of Intels and other logistic companies, which render services to the IOCs are being faced with financial challenges and therefore forced to retrench workers.
Non-payment of Cash Calls
Nted said: â€œThe non-payment of cash calls by government to these oil companies as per their joint venture agreements has been a major setback to the funding of the service of our employers (the logistic companies) and consequently responsible for the massive retrenchment of our members.â€
He decried the alleged moves by the NPA to sack a section of dockworkers, tally clerks and onboard security men.
He also lamented that the volume of vehicles imported into the country through ports has collapsed to an all-time-low, with the consequent loss of thousands of jobs in the industry.
This was attributed to the duty regime introduced since 2014 and the implication of the new exchange rate for duty calculation, which has made the importation of cars and trucks too expensive.
â€œIn the last two years the number of vehicles in Nigeria has shrunk by almost two-thirds, while the volume of cars smuggled through Cotonou continued unabated,â€ he said.
Also, the Maersk Supply Service, a part of Danish shipping and offshore energy conglomerate Maersk Group, has since adopted austerity measures as it moves to reduce its Offshore Supply Ship Vessel (OSV) fleet by 20 in the next 18 months, even as it plans to reduce its crew pool by 400 offshore positions.
The company said that the divestment plan was a response to vessels in lay-up, limited trading opportunities and the global over-supply of offshore supply vessels in the industry.
The Chief Executive Officer of Maersk Supply Service, Jorn Madsen, said: â€œWe are facing unprecedented market conditions, and regrettably we have to further adjust our crew pool. It is an unfortunate, but necessary step to safeguard the future of our companyâ€.
He said: â€œOne of Maersk Supply Serviceâ€™s prime objectives is to attempt to restore the supply demand balance in the offshore supply market. This is why the vast majority of the divested vessels will be recycled or modified by their new owners to compete outside their present segments.â€
Madsen said as a consequence of the fleet reduction and the flagging of existing project vessels to the Isle of Man registry, around 400 crew members would be made redundant as a â€œnecessary step to safeguard the futureâ€ of Maersk Supply Service.
â€œThe decision was taken in an attempt to improve the efficiency of the company and to stabilise the liquidity and cash flows. The redundancy process is expected to be completed by the end of September 2016,â€he stated.
Deplorable Port Access Road
While all stakeholders in the maritime sector are struggling with the challenging operating environment, licensed customs agents and amalgamation of trucking associations, shut down operations at Lagos ports two weeks ago to protest the failed port access road, which has hampered operations at the Apapa port. The associations were also protesting arbitrary charges and alleged extortions by some operators.
The shut-down prompted the Managing Director of the NPA, Ms. Hadiza Bala Usman and the Executive Secretary of the Nigerian Shippers Council (NSC), to pay an unscheduled visit to the Tin-Can Island port to placate the protesters.
Bala-Usman had appealed to them to go back to work while she met with other stakeholders in the maritime industry and leadership of the protesting groups with a view to finding a lasting solution to their grievances.
She assured them that the Authority would take over the construction of the failed portions of the access roads even though it is not the responsibility of NPA. The NPD boss however noted that the full construction of the road which includes proving full utility provision of drainage among others was placed at N4.3 billion, but promised the stakeholders that their demands shall be forwarded to the presidential committee on ease of doing business.
However, the stakeholders were not pleased with the NPA bossâ€™ assurances. They demanded that immediate and concrete steps be taken to embark on palliative measures on the roads.
Situations at the various ports in Lagos showed that all cargo delivery processes were put on hold pending the outcome of the meeting between the protesters and representatives of government.
Confirming the development, the Public Relations Officer of the Tin-can Customs Command, Mr. Uche Ejieseme, told THISDAY that Customs officers were waiting to attend to agents.