The cost of doing business in Nigerian ports ranks amongst the highest in the world. Why? N5.34 trillion is required to clear the 822,868 containers annually, while shipping companies’ charges alone stand at N738.112 billion annually. This is aside from other charges by NIMASA and other government agencies, explaining why the Nigerian Ports Authority’s decision to dismantle the Secure Anchorage Area (SAA), operated on behalf of the Nigerian Navy by a private company, OMS Limited, which attracts another N50 billion ($133.24million) charges annually, is in Nigeria’s best interest, writes Eromosele Abiodun
While it is a known fact that international shipping is competitive and intricate, the confusion in the Nigerian maritime industry over shipping companies’ charges has over the years raised dust with stakeholders at daggers drawn as to who is right or wrong. Last year, customs brokers plying their trade at Lagos ports declared war on terminal operators and shipping companies over the N4billion demurrage accrued from the shelved strike by truck drivers. Also early last year, truckers shunned lifting of cargoes at the ports in protest over alleged extortion by security agencies. Resulting in over N4 billion accrued as demurrages and storage charges that importers had to clear.
THISDAY investigations revealed that N668million demurrage was incurred daily for the duration of the strike, which translated to N4billion. The humongous amount resulted in a running battle between clearing agents, importers on one hand and the service providers on the other. While the clearing agents were calling for waivers over the strike period, the terminal operators remained indifferent.
According to a manager in one of the container terminals in Lagos, the terminal operators collected demurrage accrued during the period.
The cost of doing business in Nigeria ports ranks amongst the highest in the world with the ports notorious for high demurrage charges as a result of a delay in cargo clearing process; High insurance premium of vessels coming to Nigeria and trucks conveying containers to and from the ports and higher shipping and terminal charges.
This is aside from the total annual freight cost estimated at between $5 billion and $6 billion annually, according to the Ministry of Transportation.
According to the World Bank in its 2017 Annual Ease of Doing Business Report, Nigeria ranks 145 among 185 countries with Mauritius ranking 32 as the best in Africa. From the report, Trading Across Borders, an indicator for measuring a country’s ports effectiveness ranked Nigeria very low at 183 out of 185 countries.
Numbers released by the Nigerian Ports Authority (NPA) showed that averagely, container traffic at the nation’s seaports across the country (Lagos Port Complex, Tincan Island Port, Delta Port, Onne Port, Rivers Port, and Calabar Port) stands at 822,868 annually.
THISDAY findings from customs agents revealed that it takes about N6.5 million to clear and transport a 20-foot container laden with cargo worth N36.42 million ($100,000) imported into Nigeria from China.
Of this amount, about N5.3 million (representing 82.1 per cent) is paid to the Nigeria Customs Service (NCS) as Import Duty, Comprehensive Import Supervision Scheme (CISS), ECOWAS Trade Liberalisation Scheme (ETLS), Port Development Surcharge and Value Added Tax (VAT), shipping companies are responsible for 13.8 per cent of the port cost (N897,000); terminal operators 1.8 per cent (N117,000); transporters 1.1 per cent (N71,500) and clearing agents (N78,000).
This means that N5.34 trillion is required to clear the 822,868 containers annually, while the shipping companies charges stands at N738.112 billion annually.
Alarmed by this development, the federal government engaged the shipping companies for almost two years, negotiating a reduction in port cost. Last month, the government, through its port economic regulator, the Nigerian Shippers Council (NSC), announced that it is to sign a landmark agreement with shipping companies that will see charges by shipping companies reduced by 35 per cent or N258.38 billion annually.
Ending Port Cost
Amidst the cheering news of the MoU signing came a bombshell revelation that the NPA has informed the Nigerian Navy of its decision to cancel what was hitherto unknown to many shippers, the Secured Anchorage Area where fees of over N50 billion is being charged by a private company, OMS Limited, to secure ships calling at the Nigerian ports. While stakeholders were alarmed the majority of the shipping companies, who were at the verge of lowering their cost, through the MoU with the government rejoiced when THISDAY broke the news.
Analysts and stakeholders have also applauded the NPA’s decision. They posited that the dismantling of the safe anchorage area is in national interest adding that the Nigerian economy will be the ultimate beneficiary. While OMS has taken steps to retain the lucrative business, the NPA has said there is no going back. The Managing Director, Ms. Hadiza Bala-Usman, while reacting to claims that the NPA intends to give the business to another company, stated categorically, “NPA believes that there is no need for privately managed SAA, the Nigerian government through NN, NIMASA and NPA should secure the waterways at zero cost to the shipowner. We need to consciously reduce the cost of doing business in Nigeria and such charges are what translates into an additional cost of calling in our ports. More so with the ongoing deployment of the maritime security project being implemented by NIMASA costing the government billions of USD why do we need anything called SAA run by a private company with a cost to vessel owners? The NIMASA project is to secure all our waterways, which includes any locations Vessels choose to anchor.”
NPA Exposes OMS
THISDAY investigation on why the SAA was dismantled revealed that a committee report showed that the Nigerian Navy in collaboration with the United Kingdom Hydrographic Office (UKHO) published the Secure Anchorage Area in its admiralty chart No.1381 of Lagos Ports, indicating that the anchorage being operated by the Nigerian Ports Authority is ill-equipped, thereby giving an impression that it is not secured, forced the NPA to amend the British Admiralty Chart 1381, nailing the SAA.
This was contained in a document in response to a petition presented before the National Assembly by a group named Association of Professionals for Safety in Shipping in Nigeria (APOSSIN) over NPA’s position on the SAA exclusively obtained by THISDAY.
The UKHO claim, according to the document, is contrary to the assessment of the same facility by the International Maritime Organisation (IMO), which commended NPA for the standard of facilities and security at the location.
The document noted, “Sequel to an investigation conducted, NPA found out that the said SAA was authorised by NIMASA who published a Marine Notice on the existence of the SAA as an Additional Security Service Facilities for the provision of dedicated 24/7 watch to vessels seeking extra protection while at the anchorage offshore Lagos. Furthermore, the authority found that the Nigerian Navy in collaboration with the UKHO published the SAA in its Admiralty chart No.1381 of Lagos Ports Limits & Approaches dated 10th March 2011.
“The authority also observed that some false information in the charts indicated that the Anchorage being operated by the authority is ill-equipped, thereby giving the impression that it is not secured. This is contrary to the assessment of the same facility by the IMO, which commended NPA for the standard of facilities and security at the location.
“It is pertinent to state that without prejudice to the powers of the Nigeria Navy, delineation of an anchorage area is the responsibility of the NPA. In addition, the publication of Notices to Mariners on vessels calling at the Nigerian Ports as regard the port limits and approaches is the responsibility of NPA and not NIMASA.
“It is in the light of the above observations, coupled with high cost for vessels coming to Nigeria arising from the exorbitant charges being collected by the OMSL that the NPA vide its letters reference dated 24th October 2017 and 25th October 2016 respectively sought the intervention of the Honorable Minister of Transportation to dismantle the facility.”
Responding to issues raised by APOSSIN in its petition, the NPA in the document said it did not in any way interfere with the functions of the Nigerian Navy.
“The mandate of the Nigerian Navy according to the law is to provide security in Nigeria’s Territorial Waters (including the Economic Exclusive Zone). The authority submits that the Anchorage is an integral part of a seaport and that by virtue of its enabling law; the Nigerian Ports Authority Act, it is the responsibility of the authority to chart, designate, own, operate and manage Ports Anchorage Areas except where such responsibility is entrusted to a third party in accordance with Section 9 of the Ports Act.
“It is pertinent to state that the Secure Anchorage Area lies within the Lagos Pilotage District of the NPA as entrenched in the Ports Act and as declared by the Honourable Minister of Transportation. The authority did not transfer that responsibility to the Nigerian Navy nor to the Private Security Outfit concerned-OMSL,” it stated.
The document explained further: “The authority reiterates that the Secured Anchorage Area falls within its Lagos Pilotage District. The authority submits further that even if the security of the nation’s maritime domain statutorily vested on the Nigerian Navy, which is denied, the activities being carried out by OMSL in collaboration with the Nigerian Navy, is port-related and falls within the functions of the authority.
“It is pertinent to state that by virtue of Section 7 (d) and (e) of the Nigerian Ports Authority Act, it is the responsibility of the authority to: (d) “provide for the approaches to all ports and the territorial waters of Nigeria such pilotage services and lights, marks and other navigational services and aids, including cleaning, deepening and improving of all waterways” (e) “provide facilities for berthing, towing, mooring or dry-docking of ships in entering or leaving a port or its approaches”.
“The authority submits that the Secured Anchorage Area is being operated by OMSL, a Private Sector Entity, but with logistical support from the Nigerian Navy. The authority wishes to state that sometime in 2014, it procured and handed over to the Nigerian Navy three (3) state-of-the-art brand new Patrol Boats for usage by the Nigerian Navy to safeguard the Lagos Anchorage and offshore waters within the Lagos Pilotage District.”
OMS Fights Back
But OMS is not going down without a fight; the company has insisted that it has done nothing wrong with the running of the SAA claiming that shipping companies are ‘happy’ to pay $2,500 per day.
Its owner, Capt Idahosa Wells Okunbo, in a published statement explained, “My attention has been drawn to various publications in the media on the issuance of Marine Notice (October 2019) by the Nigeria Ports Authority (NPA) to maritime stakeholders on the discontinuance of OMS operations in the Secure Anchorage Area (SAA). Before then, there have been other publications alleging a fraudulent “N263b” payment to OMS.
nbelievable given our impeccable record of patriotic services to our fatherland, reports in the media(obviously sponsored) of humongous payments are spurious, evil and fallacious. They do not in any way reflect the true position of the SAA transactions and our contractual engagement with the Nigerian Navy. The publications were certainly intended to malign, demean and impugn my hard-earned reputation, as well as that of OMS.”
He added, “For the purpose of setting the records straight, so that unwary members of the public are not fed with jaundiced and misleading views, I have found it expedient to present the facts as they are: 1. We are not, have NEVER been fraudulent in our operations since we entered into a contractual relationship with the Nigerian Navy on maritime security.
“The so-called N263b payment exists only in the warped imagination of those that cooked up the figures. 2. Contrary to the erroneous impressions created by NPA on SAA charges, we have actually saved our country more money that would have been lost to vandals and bandits by bearing risks on behalf of anchoring ships transiting or making port calls to Lagos. 3. OMS as an indigenous company has a broad objective of promoting local content in the maritime industry and has been collaborating with the Nigerian Navy in carrying out its statutory duty to promote, co-ordinate, enforce maritime laws and safety regulations in Nigerian waters.
“This collaboration for the past 12 years has significantly improved security in Nigeria’s maritime domain. 4. At the height of piracy, armed robbery at sea and the proliferation of illegal arms importation into Nigeria through the Gulf of Guinea, the Nigerian Navy invited OMS to the meetings of a Steering Committee composed of NPA, Nigerian Maritime Administration and Safety Agency (NIMASA) and other maritime stakeholders, for a discussion on how to improve security within the Lagos Harbour Approaches. 5.
The main decision at the end of the Steering Committee meetings was the creation of fresh demarcations for better governance of the sea area.
“These fresh demarcations are Traffic Separation Scheme, (TSS), Ship-To-Ship transfer operations (STS) Area and the SAA which were subsequently published as Marine Notice by both the NPA and NIMASA. 6. On the basis of these publications, OMS was then encouraged to undertake significant investment to procure platforms to be utilised within the SAA and went further to develop and submit a business plan of 20 years for a return on investment to the Nigerian Navy for OMS operations in the SAA. The business plan was approved by the Nigerian Navy and was described (by the Navy) as a “laudable initiative and highly commended as a positive contribution of the private sector in support of government efforts to make Lagos waters safe and secure for legitimate businesses to thrive.”
It continued: “The Nigerian Navy, subsequently, informed the NPA of its collaboration with OMS on the SAA project and stated that the project complements the Navy’s “efforts to secure our maritime space and gives added comfort to operators in the region”. 8. The advent of the SAA, in collaboration with the Nigerian Navy, on 27 February 2013, provided dedicated security patrol services for vessels that demanded extra protection while waiting for offshore Lagos for berth allocation or conducting STS transfer operations.
“This service is rendered purely on demand and was never made compulsory for vessels making port calls to Lagos, neither does its operation obstruct any agency of government from performing its statutory function or collection of levies that are due to the government. 10. It is noteworthy that by a Marine Notice of April 2014, the NPA, in approving the operations of the SAA, informed maritime stakeholders that SAA is one of the areas approved by the NPA for Ship-to-Ship (STS) and Ship-to-Rig (STR) operations offshore Lagos.”