Eradicating Sleaze in Nigeria’s Maritime Sector

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Eromosele Abiodun writes on the need for the federal government to empower key agencies in the maritime sector to maintain effective oversight on all officials and officers to exterminate corruption at the nation’s seaports

Recent research suggests that corruption at ports raises the cost of trade. However, the absence of data on actual bribe payments has made it difficult to understand how corruption emerges and how it affects the economy more broadly. And yet ports provide fertile ground to analyse corrupt behaviour since opportunities for rent seeking abound.
A port represents an administrative monopoly over an essential public service with broad discretionary powers and scant institutional accountability. From a theoretical perspective, how bribes are set and the mechanisms through which corruption affects the economy are ambiguous.

For instance, the “corruption as grease” theory argues that if bribes are set according to the time-preferences of private agents, corruption can be efficiency-enhancing by reducing delays in slow-moving queues for public services. An alternative view suggests that bribes are set according to the strategic preferences of bureaucrats, representing a “distortionary trans-action tax” that leads to an inefficient allocation of public and private resources.

Other theories emphasise that bribe setting is shaped by different combinations of wage incentives and administrative sanctions. Different theories persist in the literature in part due to the challenge of obtaining micro-data on the dynamics of corrupt behaviour, and to the difficulty of measuring the impact of corruption on economic outcomes.
Corruption is a global phenomenon. For instance, the risk of corruption in major port around the world is high, and illicit facilitation payments are common, mainly in the form of in-kinds demands such as cigarettes and beverages.
Companies that refuse to pay are often penalised with delays or with fines for alleged non-compliance. In addition, laws and procedures are ambiguous and opaque, making it hard for stakeholders to report and seek solutions to alleged non-compliance.

Recently, the Maritime Anti-Corruption Network (MACN) launched a collective action aimed at improving container tracking IT systems; promoting an e-governance system for cashless export licences; integrating whistle blowing into existing procedures; establishing a stakeholder forum for discussion; and raising awareness about laws and regulations in the maritime sector.

The project resulted in improving transparency of the regulation for importing goods in selected ports around the world. As a result many of these institutions have improved the accountability of key government stakeholders towards the private sector. That is not all.

The shipping industry operating in Africa is facing specific challenges regarding the inspections of holds and tanks, custom declarations, and on board-practices. Data from shipping companies highlighted a systemic issue with demands for payment, including cases of extortion. As a result, experts have called on Nigeria to draft new regulations to improve specific areas: approval of a vessel’s holds or tanks for the loading of agricultural products, development of new IT system for processing and registering holds/tanks inspections.

“Specifically, the new regulations must limit the inspector’s discretion by having more precise definitions and objective criteria for holds or tanks rejection introduce inspectors’ rotation in ports and terminals to hinder collusion and development of proper arrangements in certain ports and client interactions increase the timeframe allowed for remedying hold’s deficiencies strengthen control mechanism by creating a new Technical Appeals Tribunal develops a risk matrix on the basis of which inspections will be supervised establishes a trustworthy whistle blowing hotline,” said maritime lawyer, Mr Godwin Omose.

Nigerian Ports and Corruption
Nigeria is considered one of the most challenging countries to do business due to systemic corruption. Recently, Maritime Anti-Corruption Network supported a pilot project implemented together with local authorities and the United Nations Development Programme. The aim was to identify and address vulnerable elements in vessel port call processes where corruption is prone to take place. Measures taken included improving and harmonizing public officials’ port clearance procedures, establishing a new complaint mechanism that enabled companies to file a complaint when faced with improper demands from government officials, conducting anti-corruption training of selected officials and developing anti-corruption policies for all relevant agencies.

This effort has not really change the reality on ground that much. Recently, a report by Integrity Organisation Limited GTE and its private sector facing arm, Convention on Business Integrity (CBi), revealed that corruption and exercise of discretionary powers by the Nigeria Customs Service (NCS) and port officials has had huge implications for ease of doing business in Nigerian seaports and terminals, leading to revenue loss of as much as about N2.5 trillion corporate revenue in the ports industry annually. Integrity Organisation Limited is an anti-corruption research, advocacy and consulting organisation concerned with issues of accountability and transparency in public and business life. It was founded in 1995 during the late Sanni Abacha’s regime as a direct reaction to the corruption and poor governance of Nigeria represented by that era.

The report, which was jointly funded by ActionAid and UK Aid, revealed that the negative operational elements have pushed many customers to now use ports and terminals of neighbouring countries thereby leading to loss of foreign exchange earnings for Nigeria.
The report said capacity utilisation stands at 38-40 per cent, adding that approximately 40 per cent of businesses located around the ports communities have either relocated to other areas, scaled down operations or completely closed down.

According to the report, “Customs officials have enormous discretionary power and this can easily be exploited for pecuniary gains including gratifications and bribes. Customs officials and port officers have influence on ports operations by law and function in the bureaucracy which they can manipulate as either enablers or disablers depending on interests per time. For custom officials for instance, the fact that they have full information on shipments, shippers and have the powers of assessments and valuation make them able to manipulate ports processes if they so desire.

“Custom officials and port operators function at the supply side of the system and are very influential in manipulating the system for and/or against the demand side of port users. Even though not as statutorily discretionary as customs officers, port officials like port gate officials, stevedores, document clerks, and scanner agents also have influence on the demand side and can manipulate the system in manners that trade-off efficiency.
“Ports and terminal officials enjoy exercise of wide discretionary powers even when these are in conflict with the legal procedures and processes. These discretionary powers are sometimes indiscriminate, bridge port processes, lead to bottlenecks and create fertile ground for corruption and graft and the procedures become convoluted. Often, such exercise of discretion creates opportunities for outright graft and extortion of port users. Poor infrastructures and inefficiency cause delay in port processes and create administrative and clearing bottlenecks which make the ports/terminals prohibitive to legitimate businesses.”
The report pointed out that grievance mechanisms are available at the ports but some customers are not aware of these mechanisms.

It stated: “For those who are aware of the availability, most of them have never used the mechanisms. Even in the case of grievances, customers often choose not to complain because they perceive the process as subjective. There is perceived weak enforcement and poor investigative structures and ineffectiveness in the case of complaints/feedbacks. Port users do not have total trust in the complaints/feedback mechanisms as they consider the mechanisms part of the problematic processes. There is also the belief that the mechanisms will always lead to backlashes.”

“The problem is not about relevant policies, frameworks or government order and pronouncement but compliance. Even when authorities put relevant policies in place, compliance and enforcement is poor. Port officers/officials appear too strategically and creatively powerful that they manipulate the system and port operations with unwavering exercise of discretions against the rules even when this makes doing business at the ports difficult,” it stated.
The report recommended that the government need to empower Nigerian Ports Authority (NPA) to be able to maintain effective oversight on all officials and officers at the port.

“The NPA should be able to sanction non-compliance and exercise of discretions directly and indirectly. There is also the need to empower customers to report corruption and inefficiency directly to the highest level beyond the ports in way that will prevent witch haunting and backlashes. Customers should become strategic partners in enforcement/compliance and driving anti-corruption. Officials still exercise discretionary powers and perpetrate corruptions without fear of consequences, “it stated.

Economic loss to corruption
In another report on the performance of Nigerian ports released recently, it was revealed that the country loses over one trillion naira every year to inefficiencies, process failures and corruption in the cargo clearing process.
“The report titled: Nigeria: Reforming the Maritime Ports,” which was inaugurated by the Centre for International Private Enterprises in collaboration with the Lagos Chamber of Commerce and Industry and Financial Derivatives Company, was publicly unveiled in Lagos at the LCCI public-private discussions on port reforms.
The report stated that while the efficiency of port processes is a major driver of trade and economic activities across countries, Nigeria’s case has been rather gloomy.

It said over the years, users and operators at the Nigerian ports have been facing lingering challenges and bottlenecks which include infrastructure shortcomings, policy and regulatory inconsistencies, overlapping functions and duplicity of roles among government agencies operating within ports across the country.
The report also pointed out that a lack of clear legislation, ports governance remains prone to inefficiency and corruption. It added that under such condition, companies in the Nigerian ports have to deal with bureaucratic red tape, constant delays; high costs, harassment, and demands for illegal charges by representatives of government agencies operating at the port.

These, according to the report, diminish the seaport’s potential to create about 10,000 new jobs annually and about 800,000 jobs on the long run. The reforming the Maritime Ports report claimed that Nigerian seaports remain the most expensive in the West African sub-region attributing this to the cumbersome Customs documentation requirements and double charges imposed on importers and exporters.

Using a semi-structured survey, respondents of the study listed the documentation processes, requiring 25-33 different papers from multiple agencies as the biggest issue contributing to time and cost delays.
About one-fourth of the respondents sampled by the report also complained about the duplication of functions of the multiple agencies within the ports while 29% of those surveyed in the report say multiple cargo inspections are the most critical of operational bottlenecks at the nation’s gateways.

It is, however, not all doom for the industry according to the report, as it stated that Nigeria’s ports continue to see substantial increment in gross tonnage by 3.3 per cent – Compounded Annual Growth Rate – to 144.2 million tons between 2010 and 2015. The annual growth rate of 1.8 per cent is expected to rise until 2021 despite the challenges in the sector.

However, the growth projections were premised on the assumption that the nation’s ports will continue to be the preferred means of transporting goods in and out of the ECOWAS sub-region.
In its recommendations, the report pointed out that authorities should embark on immediate port reforms.
These reforms are expected to lead to faster clearance of goods, shorter waiting times for ships awaiting berth, and eliminating redundancies in the functions of the several regulatory government agencies in the ports.
It also called for the adoption of an Integrated Advance Cargo and customs clearance system, with scanning, sealing and tracking capabilities; the establishment of a National Trade Data Centre and implementation of a Single Window platform.

The report also called for more private sector investment in Nigerian ports, reduction in the number of government agencies to 6 from 14. From the policy end, the report called for immediate passage of certain legislative bills that will aid port reforms and improve performance. These bills include the National Transport Commission Bill and the Port and Harbour Bill (PHB).

Finding solution
As part of its contribution to the effort to eliminate corruption in the ports, the Nigerian Shippers’ Council (NSC), which is the nation’s port economic regulator in partnership with agencies under the Federal Ministry of Transportation and in collaboration with the Economic and Financial Crimes Commission (EFCC) late last year organized this One-Day stakeholders’ summit on Anti-Corruption in the Nigerian Maritime and Transport Industry.

The theme of the summit, which is, “Zero tolerance for corruption in the maritime and transport industry, “ describes what the shippers council stands for and its desire to have transparent and efficient port system in Nigeria.
According to the Chairperson EFFC/NSC Joint Committee, Margaret Orakwusi, “The maritime sector is a strong catalyst for socio-economic development particularly as it concerns businesses, markets, countries and people through international trade. Despite government efforts on ease of doing business and fighting corruption at all sectors of the economy, the maritime sector has remained very vulnerable to unwholesome practices.

“The capital flights and leakages that have plagued the Nigerian Maritime Sector is worrisome, therefore there is need to enlighten stakeholders on the spate of corrupt practices and develop strategy capable of curbing the menace of corruption in the sector thus the reason for this joint summit.
“At the end of the summit, the presentation, discussions and contributions would be evaluated to form part of the road map needed to strengthen and eliminate corrupt practices in the sector for greater efficiency and transparency.”