• Monday, March 04, 2024
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The gains and challenges of port concession in Nigeria

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Eight years after the Nigerian port system was concessioned to private investors, there has been some tremendous improvement in port operations as evidenced in the high level of efficiency in the ports.

Before the terminal operators took over port operations in 2006, doing business at the ports used to be a nightmare, but much of that is now in the past as a high level of improvement has been recorded in port operations over the years. There have also been a lot of investments in terminal infrastructure and cargo handling equipment since 2006.

Industry close watchers attribute this port efficiency to the millions of dollars invested in terminal development by operators like ENL Consortium Limited, APM Terminals, Ports and Cargo Handling Services Limited, Tin-Can Island Container Terminals, Ports and Terminal Multi-Purpose Services (PTML), among others. Most of the terminals are still investing hugely in terminal upgrade.

This improvement can easily be seen in the volume of cargo and number of vessels the terminals have recorded in the last eight years. In 2013, cargo throughput grew by 13 percent compared to average growth of 10 percent that was recorded in the past. Most of the terminals have also grown their throughput by 250 percent in the last eight years.

The high level of efficiency in port operations has also succeeded in returning importers’ confidence to do business in Nigerian ports. Experience shows that if terminal operators are not getting things right, Nigerian importers would have no choice but to divert their cargoes to more user-friendly ports in the neighbouring countries.

Precisely, most terminals have been witnessing improved turnaround time and reduced waiting time of vessels at the ports. Vessels that formerly took average of two weeks to discharge inbound cargoes in Nigerian ports now spend less than two to one day to discharge cargo. This has also reduced the cost and loss previously caused by longer dwell time of vessels at ports.

“Concessionaires met seaport terminals that were completely run-out. There were lots of potholes that were big enough to swallow a trailer. The port was caught up with labour issues and lack of sound equipment to discharge ships,” said Vicky Haastrup, chairman, Seaport Terminal Operators Association of Nigeria (STOAN), in a chat with BusinessDay.

“But the terminal operators have invested hugely to overcome all these issues. And this has brought back a lot of business confidence in Nigerian ports and we are really proud of our achievements.”

Terminal operators, according to Haastrup, have recorded a milestone in terminal development, which has transformed not only port infrastructure but also the equipment left behind by the Nigerian Ports Authority (NPA), the former operator of the terminals.

BusinessDay check reveals that apart from achieving efficient port operations and reducing vessel waiting time, another aim of port concession was to reduce the cost at which Nigerian importers did business at the port.

However, in achieving this, a lot of factors such as Customs duties, shipping agents and clearing agents’ fees, government agencies’ levies, demurrage and storage charges have to be looked into. To a large extent, the cost of running the terminal also determines the amount importers are asked to pay as terminal charges.

“It is more expensive to run Nigerian ports compared to terminals in other countries. For instance, government of the Republic of Benin provides electricity to the terminal operators, but here terminal operators spend so much to generate power. This is why concessionaires are finding it difficult to recoup their investment capital because running the port is more expensive here,” Haastrup said.

The STOAN boss disclosed that some of the challenges that terminal operators face in business today include the issue of double taxation and demand for different kinds of levies from the government, which, she said, contributed to higher cost of doing business at the port.

“This is also the reason why Nigerian industries are not performing well because the cost of production is higher than the imported commodities,” she added.

Clearing the notion that terminal operators charged importers arbitrarily, she noted that they were collecting their statutory charges as contained in the concession agreement because the increment in the terminal charges recorded so far was not commensurate to the inflationary cost of running and developing the port.

“The truth of the matter is that a lot of people benefitted from a completely rundown system, but today, the terminal operators are the enemies of those people because it is not business as usual. Today, no shipping agent can bring a ship without anybody noticing, unlike what was done in the past. Presently, we get the right tonnage of cargoes as they berth. We also discover those that under-declare the tonnage of their cargoes and penalise,” she explained.

Erratic power supply is another challenge facing terminal operators such that power supply to the port stands at zero percent. The terminals operate with 90 percent self-generated electricity, which goes a long way to increase the cost of doing business at the port. This is because in 2006 when the port was concessioned, the cost of diesel stood at N65 per litre, but today a litre of diesel is about N160.

The bad and congested state of the port access road is the greatest problem that terminal operators have. Many trucks with containers queue on all Apapa major and inner roads, which shows the level of congestion at the port environment. This makes it difficult for trucks to come into the port to load and discharge containers.  For the STOAN boss, the congested state of the port access roads makes it difficult for terminal operators to discharge as much cargo as they are supposed to because the trucks do not easily have access to the terminals.

“The port environment is seriously congested because there are lots of businesses that are situated in Apapa, which are not supposed to be there. For example, the location of oil tank farms coupled with the fact that Apapa is an industrial city contributes to the congestion in Apapa axis,” she said.

Despite the beauty of port concession in Nigeria, operators have expressed worry in the last eight years over the non-existence of a legal framework that is supposed to give legal backing to the investment made and to be made by terminal operators. To give this legal backing is the drafted Ports and Harbour Bill that is currently before the floor of the National Assembly.

The Ports and Harbour Bill, Haastrup observed, is a bill that should not take more than a year to be passed into law. This is why STOAN believes that the Nigerian factor is acting as a cog in the wheel of the passage of the bill eight years down the line.

“We therefore appeal to the National Assembly and the Federal Government to see to it that the bill is passed and that the terminal operators have enough support to conduct their business,” Haastrup said.

By:  Uzoamaka Anagor