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Nigeria's leading finance and market intelligence news report.

How $400 million BUA investment set to rot under Usman’s watch

In civilise climes the government create an enabling environment for businesses to thrive because companies are pivotal to economic growth, as they produce goods and services while contemporaneously creating employment. 

In 2016, United States President Donald Trump, through the approval of congress, reduced corporate taxes, in fulfillment of his campaign promises. That decision saw corporate profit surged, while shareholders were rewarded in form of bumper dividend and share buybacks. The stock exchange rallied and the economic got a boost.

 

However, the reverse is the case in Nigeria, where government either knowingly or inadvertently stifles businesses with obnoxious laws and outright impulsive actions. Little wonder the vast majority of people are living in penury.

The Nigerian Ports Authority (NPA) has decommissioned Terminal B, operated by BUA Ports and Terminal, in Rivers State. It claimed the action was taken for security reasons and that BUA Ports reneged in the concession agreement, an allegation that has not been substantiated.

NPA stated that the Terminal was handed over to BUA for use with effect from August 10, 2006, and that a part of the agreement for the concession, the company was required to commence full reconstruction of berths 5-8 within 90 DAYS of hand over of the facility.

The Agency added that as of February 2016, 10 after the handover, the BUA Ports and Terminal had failed to commence the reconstruction as required by the agreement. The Authority said it issued a default notice dated, 2016 dated February 11, 2016 and another one dated July 27, 2016 on the Terminal operators.

Read also: BUA says NPA failed to follow due process during decommissioning

But experts are of the view that NPA chairman, Hajia Hadiza Bala Usman, may be reading from a script, as she’d only visited the Terminal once (in 2016), before she took the decision.

BUA Group had on different occasions written the NPA seeking approval to perform remedial works on the terminal and wondered why the NPA refused to grant approval, but rather hurriedly decommissioned the terminal despite the repair works required for the part of the Jetty in question.

The company also accused the Agency of failing to meet with its obligations regarding the lease agreement and of disregarding the Federal High Court, Lagos Division injunction restraining NPA from terminating or giving effect to the Notice of Termination pending the referral of the issues in dispute to arbitration as provided under the lease Agreement.

BUA said that under the agreement between the parties, NPA has an obligation, among others, to dredge the port and repair the quay apron of the Terminal which responsibility it has failed to perform till date.

 

But the NPA has failed to carry out any of its own obligations under the Lease Agreement which are necessary and required for any meaningful reconstruction to take place. Neither has it responded to BUA’s several requests for approval to perform remedial action on the berth.

Despite these challenges, BUA had contacted a renowned construction company to carry out the needed repairs at the terminal and thereafter paid the sum of 4.7 million euros.  But the construction was impossible because NPA had failed to reply to letters written by BUA for work to commence.

BUA also said the failure of the NPA to provide security for the terminal as required in the lease agreement has given way for nefarious activities of hoodlums and vandals who over a period of time cut the pipes and steel beams of the berths thereby affecting their stability and consequently making remedial works imperative.

For instance, a notorious criminal was arrested by the Police and charged to court but NPA refused to press charges and, consequently, the criminal was discharged and acquitted.

“It was the failure of the NPA to provide the required security that led to the nefarious activities of hoodlums and vandals who over a period of time cut the pipes and steel beams of the berths thereby affecting their stability and consequently making remedial works imperative,” said BUA.

Hajia Hadiza Bala Usman must be high on something to think that matters like this are resolved on twitter accounts, facebook, instagram and other media. A stakeholder meeting will help resolve the issue without resulting in public theatrics or without stoking public emotions.

By decommissioning the Terminal, government and BUA will lose copious revenue, a double whammy for a country whose economy has been growing sluggishly.

The decommissioning of Terminal B will threaten BUA’s newly constructed $400 million dollar flour, pasta and sugar plants in Port-Harcourt; the plant has a capacity of 1.2 million tonnes per annum, making it one of the biggest refineries in the country.

The terminal is right behind the sugar drums, so when the ship berths there, the raw materials will be covered via conveyance belt into the factory, which reduces the cost of transporting raw materials from the Port to the factory.

Tank farm owners and those engage in fish farm business also rely on these Berths are losing money, as oil and gas are transported from ships at the jetties into the drums.

 

“Crown Flour Mills take their product from BUA Terminal, we have so many customers that bring in fish through our terminal, all of them now are in big problem because the four berths available can only take four ships at a time and when one berthes cargo vessel, the one you saw has been at the port terminal for more than 10 days, which means that that berth  cannot take any other ship until this one leaves.”

 

Hadiza Usman’s hurriedly taken decision is tantamount to crippling a multi dollar investment, shattering the hopes of millions of jobless Nigerian youth, and posterity will never forgive her if she refuse to reverse the draconian decision.

The ongoing dispute between the NPA and BUA Ports and Terminals Limited is gradually having a negative impact on the Nigerian economy.

 

The contract disagreement, which has gone through a handful of courts, will affect 1000 jobs as it continues to linger, and BUA Group is losing more than $500,000 monthly revenue.

 

If companies continue to struggle, government will be losing tax revenue, and the latest gross domestic product report released by the National Bureau of Statistics (NBS) showed the manufacturing sector floundered.

 

The report showed the economy grew at a slower pace of 1.94 percent in the second quarter (Q2-2019) from the revised first quarter (Q1-2019) print of 2.10 percent, the previous year.

More worrying, manufacturing sector contracted by 0.13 percent from the 0.81 percent from expansion in the first quarter (Q1-2019). The contraction contradicts evidence from manufacturing PMI data published by the CBN in the period which suggested that activities continued to expand, albeit at a weaker pace.

With over 50 percent of a population of 200 million living below $1.20 a day, government should be creating an enabling environment that will enable manufactures create more jobs.

President Muhammdu Buhars’ led administration is notorious for impulsively enacting law that stifles businesses, and it will recalled that the refusal of the central bank to let the dollar float and the ban on 41 items stoked a severe dollar scarcity that tipped the county into its first recession in 25 years.

Recently, decision to close the county’s border with neighboring countries has brought pang on millions of Nigerians.  Companies are unable to ship products in and out of the country, while the price of food has skyrocketed.

Apart from frozen rice and foods, Nigerians may also have to pay premium to buy vegetable oil that are locally manufactured as the smuggled oil that formerly compete with the local brands, hardly find their way into the Nigeria.

Consequently, the price of rice has skyrocketed as one bag of 50kg of imported parboiled rice, which formerly goes for N15,000 while a cartoon , which of Nigerian chicken, which people rarely due to poor quality, now goes for N12,000.

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