Nigerian ports: In search of economic regulator

Transport is a basic activity of civilised existence that binds a society together, to which transport infrastructure is often a barometer used to judge a nation’s prosperity. Hence, developed economies have great obsession with it and build and maintain a variety of transport facilities; across all modes: from road to rail to sea and air. Transport, therefore, is intricately woven into the living pattern, of people and nations and influences the health and vitality of the economy.

Government therefore has a responsibility to ensure that transport is available, accessible, affordable and operated without unfair discrimination against its users. It is on this premise that historically, governments have intervened to regulate transport for reasons of equity, safety and environmental standards, and to ensure that market forces do not produce undesirable goals. The goals of regulation, hence, are not primarily for the protection of public interest, balancing the interest of all stakeholders but also in the promotion of best possible system.

In this globalised world, the competitiveness of a nation’s economy is dependent on among other things, the role of its transportation sector. There is therefore a strong public interest to ensure that the transportation sector operates efficiently, safely and to ensure that fair competitiveness is guaranteed.

In the transportation sector, there are four broad areas of concern that require oversight or regulation – economic, technical, environmental and social/administrative. However, the current version of the National Transport Commission (NTC) Bill under consideration seeks to deal with economic regulation of the transport sector in Nigeria. It is therefore important to have a clear understanding of what economic regulation entails.

Economic regulation typically involves intervention in the functioning of markets in terms of setting or controlling tariffs, revenues or profits, controlling market entries or exits; overseeing that fair and competitive behaviour and practices are maintained within the sector.

In the absence of economic regulatory oversight in the sector, anti-competitive practices are encouraged which increase costs to users and the economy at large. These may include but are not limited to the use of dominant power to charge excessive tariffs for service (price gouging), service bunding, predatory pricing, and price discrimination. It also brings about lack of level playing field in the sector which discourages investment and growth.

The pertinent question one may ask is whether there is any economic regulation in the transport sector in Nigeria. To answer this question, there is need to look at the constituent elements of economic regulation as enumerated above.

In the maritime sector, the Nigeria Ports Authority, the seaport/off dock terminal operators, shipping companies and freight forwarders all set their own tariffs and charges. There is no agency that regulates them to ensure that their charges and tariffs are competitive. The only attempt at regulating tariff within the maritime sector is through the Nigerian Shippers’ Council in 1997, between providers and users of shipping, port and related services.

This, however, has not been quite effective because the role of NSC in this regard is mainly based on consultations and persuasion. In the rail sector, the Nigerian Railway Corporation also sets its own tariffs but there is no regulator. The situation is even worse in the road sector because there is no central authority tariffs. The various associations and unions in that sector set tariffs.

However, the Shippers’ Council from time to time does meet, negotiate and agree on such tariffs with some individual associations and unions, especially some truck owners and workers.

Good service delivery entails reliability, availability, accessibility and adequacy of services rendered to a user. In practice, there is no agency in Nigeria that liaises with transport services providers to monitor or ensure that the services rendered in the sector meet best practices. It is simply left to the services providers to decide what quality of service to provide.

In the maritime sector in Nigeria, each agency sets its own standards for entry and exit, but there is no one agency that plays the role of an umpire between these agencies and their customers.

As indicated above, there is indeed an economy regulatory vacuum in the transport sector in Nigeria and there is need to fill that vacuum for the country. The National Transport Commission (NTC) is meant to fill this vacuum.

For setting up the Commission, the Federal Government has two options. It could either build up the new Commission from the scratch or it can transform one of its existing agencies to perform the intended functions of the commissions. A cursory look at existing Federal Government agencies would show that the Nigerian Shippers’ Council is best suited to perform the much needed economic regulatory functions in the transport sector due to its experience in the area of regulation of local shipping charges, negotiation and confirmation of freight rates and other relevant economic regulatory functions under its extant law. The option of setting up an economic regulator from the scratch would amount to a duplication of functions of the NSC and constitute an unnecessary cost burden on the government.

There are two ways to transform the NSC into the economic regulator agency. One way is to do it through the National Transport Commission Bill before the National Assembly. The other way is to pursue the amendment of the extant NSC Act to give it express economic regulatory functions.

One may want to ask how Nigerian Shippers’ interest (importers and exporters) will be protected if the NSC transforms into an economic regulator. The simple answer would be that shippers would in fact be better protected. This is because: The economic regulator will monitor and enforce standard of service delivery, ensure stability, accessibility and adequacy of services; provide guidelines on tariffs (setting minimum and maximum levels), in order to guard against arbitrariness, reduce high cost of doing business and prevent inflationary effect on the economy; encourage competition and guard against abuse of monopoly or dominant market position; establish accessible and modern dispute resolution mechanisms; co-ordinate inter-modal transportation; promote free market entry and exit.

Moreover, the NSC has already created Shippers Associations to contribute remarkably in solving shippers’ problems. It has also set up an appropriate vehicle for the additional strengthening and protection of shippers cargo interests, including the cargo protection and indemnity outfit, i.e. the Cargo Defence Fund. And assuring the role of an economic regulator in the industry will be high significance for the transport sector in particular and the economy in general. 

Ogunlana, a maritime analyst, writes from Abuja

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