Oditah: Categorising Ports According to Cargo Will Create Monopoly, Kill Business

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Professor Fidelis Oditah, SAN, is a counsel to one of the members of the Seaport Terminals Operators Association of Nigerian, which has been protesting the attempt to designate particular ports in the country for oil and gas cargo. Oditah talks about the dangers of such categorisation, in this interview with Nseobong Okon-Ekong. Excerpts:

As counsel to a member of the Seaport Terminals Operators Association of Nigerian, STOAN, would you say the recent directive of the federal government to de-categorise terminals on the basis of cargo has pacified agitation by those who were aggrieved?

 The presidential directive said many things. First of all, that general practice is to categorise ports and terminals into bulk cargo and multi-purpose. There is no such thing as categorisation according to cargo, to say, this is the cocoa port or oil and gas port. That is what President Jonathan tried to do. I think he was misled by trying to designate particular ports for oil and gas. By doing that you are trying to designate ports and terminals according to the cargoes that arrive there, which can only distort competition.

In 2006, the federal government entered into 25 concessions on the basis that some were going to be bulk terminals, others were going to be cargo terminals and there will be multi-purpose terminals. There was no provision for oil and gas or cocoa or Arabic gum or cashew nut; there was simply no categorisation based on the type of cargo arriving. What that meant was that it enabled concessionaires to invest monies in developing infrastructure along the coastal belt, and also allowed them to make projections as to the type of returns. It wasn’t based on a particular type of cargo. They signed agreements which were binding. If you are a multi-purpose terminal, for example, you could receive every cargo. For someone to turn round in 2015 and say, all oil and gas cargo must go to Onne, Calabar or Warri, creates many problems. I suppose that is why people talk about monopoly.

The attempt to monopolise oil and gas cargo is wrong. It goes against all the principles underpinning procurement law. The whole essence of public procurement is that you procure your services on a competitive and transparent basis to promote competition on a level playing field. That is the only way that users of the facilities or services will get value for money. If you are a monopoly, you can charge whatever you like. That is the first problem.

The second problem is that while distorting competition in that way, it means that some of those who had invested and borrowed money to invest (because people don’t have all these monies sitting idle waiting to be deployed), will not be able to repay their loan and then they become insolvent just because of one person’s desire to monopolise the entire business, especially in an oil and gas dependent economy like Nigeria. If the economy was diversified, perhaps, people will not be too hung-on.

Thirdly, the attempt (to monopolise) also impacts on job creation. These terminal operators and concessionaires all have employees and they generate direct and indirect employment. When you kill them by concentrating all the business in one person, it simply means that the local economy suffers because people who were employed will be laid off; whereas by allowing competition people are able to plan. That is part of the problem in Nigeria and many developing countries-the inability to plan because governments keep changing their policies. This is something that is capital intensive. You need to take a five-year view and you borrow money and invest on the basis of five to 10 years. Then one government comes two years along the line and says we don’t want it, XYZ company should now be the only one doing it, how do you repay your loan?

Then, when you are talking to government officials, it is like you are talking to a wall. They say, “I am directed to.” That is the language of the civil service. Nobody takes responsibility. They are always directed to and they cause a lot of difficulties.

In 2015, we went to court to challenge President Jonathan because we thought that policy couldn’t possibly be in the interest of Nigeria. How could it be in the interest of a nation for you to say only one person should monopolise oil and gas business, even if it is logistics or importation, why? If you have many people, there will be some competition.

 

Do you think there was any political undertone to that? 

Whatever interest it tried to protect, he was very misguided because when you are president; you are president of the whole nation. You cannot be president of a section or a political party or of your region. For example, the fact that these ports are eastern ports-Onne, Warri and Calabar-and they are all controlled by the same company, when you say everyone must go there, you give room for political insinuations because the ports are in the Niger Delta and he being from that region wants to do some kind of good service to that region. The simplest thing he would have done would have been the East-West Road, which he did not do and, therefore, he cannot even go to his village now. Why should he be concerned about the location of oil and gas terminals when he has not worried about the basic infrastructure, which is the road that he and everyone uses? It wasn’t strategic. I believe that President Jonathan was entirely misguided and to do it in the twilight of his administration was terrible. Having lost the election on the 20th of April, 2015, he came up with change of policy. He was behaving as if the country belonged to him.

 

How did that decision affect the economy?

 Of course, that meant that there could not be further investment in the country. Why would you borrow money to invest in a sector which is monopolised by one person? To make it worse, it led to double handling. It meant every person must go to these three ports first to pay dues. Even for the consumer and the importer, it was increasing the operational cost unnecessarily. These costs were going to pass to the final consumer of the goods. You ask yourself, how could this happen in the interest of anybody? Consider the delivery time, because you are going up and down. You are increasing cost in every possible way and then you are killing competition. It was just designed to benefit one person only. That is what has characterised politics in Nigeria- people fail to rule for the benefit of the masses. They rule for the benefit of a few people. It is impossible to see how a rational person could think that it is in the interest of any Nigerian to create a monopoly in any sector.

You can see that we don’t have the framework for monopoly laws. Various monopolies have lobbied the government to ensure that the people continue to suffer.

 

What is the current position of the matter you took to court? 

We took President Jonathan to court and it was interesting because he had four weeks to go, but since he had time to issue this policy directive; we also felt that we had time to quickly stop him in his tracks. The directive of Jonathan was conveyed in an NPA letter of 27th of April, 2015; so we went to the Federal High Court to get injunction against the implementation of the Jonathan directive. We joined President Jonathan, the Attorney General, the Ministry of Transport and the National Assembly; because the National Assembly was also at that time trying to amend the law, so as to create the monopoly, which itself was sickening. Imagine the National Assembly trying to make laws that every cargo must go to a particular port. That is what happens when a country is in the grip of a certain interest that is trying to feather its own nest. We got the injunction, because we were trying to prosecute the case as quickly as possible, but then the people who were beneficiaries of the monopoly applied to join in our case. We didn’t sue them. Our dispute was with the government, but they applied to join and the court joined them.

The government was not very interested in the case because the government was going to review what was happening, but these interested parties, who were the beneficiary of monopoly, kept making submissions and filed all sorts of claims. Following the government’s new directive, we then took steps to discontinue litigation. One of the things that the government said to us was that we should withdraw the pending suit against the federal government in order to ensure a litigation free environment in the maritime sector. We filed a notice to discontinue and the government said they were happy with the application we filed, but these same interested characters said they don’t want us to discontinue. Have you ever seen that? They are contesting our application to discontinue the case that we issued, which we did not join them. They were the people who gate-crashed into our case, we did not make them defendants. And now we want to discontinue, they say we can’t terminate.