Lack of standard charging template, knell of port operations in Nigeria

Port ownership models can vary wildly in complexity. Most port privatisations precede by way of the grant of a concession by government to private entities, often, joint ventures between a mixture of financial investors, port operators, construction companies and local interests.

Alternatives are the outright sale of port estates, which are extremely rare, or some form of lease arrangement, which is a variation on the grant of a concession.

The form of legal structure is usually dictated by local legislation, whether the general legal system, privatisation law or specific legislation grants to privatise specific assets.

*** In the case of Nigerian ports, the legislation was not given credence neither was it emphasised.

Concessions are widely used in the port sector. A port concession is a contract in which a government transfers operating rights to private enterprise, which then engages in an activity conditional on government approval and subject to the terms of the contract.

The contract may include the rehabilitation or construction of infrastructure by the concessionaire.

These characteristics distinguish concessions from management contracts at one end of the reform spectrum, and comprehensive port privatisation at the other.

Concessions, by permitting governments to retain ultimate ownership of the port land and responsibility for licensing port operations and construction activities, further permit governments to safeguard public interests.

At the same time, they relieve governments of substantial operational risks and financial burdens.

Prior to the reform, the Nigerian Ports Authority (NPA) was subsidized by the

Government of Nigeria but after the port reform, private operators are expected to perform all terminal operations at no cost to government, improve efficiency and reduce cost through competition

It was also touted that concession would make the port friendlier, automated, avoid clogs of cargoes at the terminal as quick turn-around time was one of the reasons for the hasty concession arrangement in Nigeria.

Laudable as the idea is, nigeriamaritime360.com is however feeling concerned by the reality on ground.

Rather than usher in the expected lucrativeness and avoidance of long cargo dwell time, the scheme seems to have become a knell of the Nigerian ports system, twelve years after.

One major problem responsible for the anomaly that immediately greeted the port administration was lack of formidable legislation to drive the system.

In 2006, under the operate component that Nigeria employed, an operator is to assume responsibility for maintaining the facility’s assets and operating them on a basis that maximises profit or minimises cost on behalf of the concessionaire and, like the contractor undertaking construction of the project, the operator may provide funds to finance construction and be a shareholder in the project company.

For instance, apart from reports that AP Moller Terminal (APMT) won the bid for Apapa container terminal bidding, a record amount of more than US$ 1 billion, the bidding costs of other terminals were not explicitly stated.

Also, the lease period of the terminals vary from one to the other. Some have a lease period of ten years while others have fifteen years with the possibility of renewal consequent upon their performance rate.

The implicit nature of the bidding costs also obtains in the charging system but an unofficial report has it that private operators are to pay about US$ 5 billion to government as fees annually.

In US Dollar value, the Nigerian Ports reform is the biggest successful reform endeavour in Nigerian history.

The operator is often an independent company appointed under an arm’s length agreement. However, in some cases, the bid winner operates the facility directly through the concessionaire company.

However, in Nigeria, 25 terminals were concessioned to 18 different local and international terminal operators, notable among which are AP Moller, TICT, ENL, PTML among others both in Lagos and Eastern ports.

Pronto, it ushered in competition among various terminal operators leading to improved service and reduction in port costs as claimed by operators. But how true the assertion is, cannot be immediately determined because there is still diversion of cargoes to neighbouring countries.

The operators in a bid to remain in business and pay rents to NPA go extra miles to source funds including increasing charges in accordance to the reality of the day.

They argued that the exchange rate was N125 to a dollar when the scheme took off but the present exchange rate is N360. According to the operators, since they trade in dollars, there is need for review to keep up with present day reality.

Meanwhile nigeriamaritime360.com observes that the initiative, as laudable as it looks, lacks some basic legal inputs germane for port efficiency due to its hasty implementation.

The vacuum is ostensibly the cause of the present strain between the Nigerian Shippers’ Council and the concessionaires.

The reason for this is not farfetched. The operators detest to be bossed around since they have been enjoying a free hand to unilaterally impose charges on importers and their agents and make ungodly profits over ten years.

It was understandable why operators retorted the NSC call to revert to 2009 charge because they had unilaterally increased charges without the consent of government regulatory agencies.

They were already enjoying their new charge unhindered close to a decade before a regulator was named and if they had to go back to the 2009 peg, they would refund about N7 trillion excess charges collected from importers.

The operators had unilaterally jerked up their charges as they deemed necessary to meet up with economic dictate of the time.

However, one cannot expressly state if the charge as at the time of concession was at par with international standard or not. The hasty mode of implementation could have left another loophole in determining the storage costs and handling charges.

The incessant increment according to operators is that Nigeria Customs Service (NCS), NIMASA and the Nigerian Shippers’ Council have within between the periods, increased their charges. Why should the charges of the operators stagnate? They asked.

In all of this, it all looks like an open market operation where the terminal operators and government agencies trade on Nigerian masses because the interest of the masses is not considered in all the bickering.

It turns out to mean that the masses are the ones bearing the brunt of Government laxity from inception in putting in place the right policies that will ensure standard operation of the port.

The operators have latched on this monumental loophole of no definite template of charges or platform for its review, to increase charges at will albeit according to economic dictate of the country.

If the government agencies in the port have during the period under review upped their charges in view of economic dictate, then the government should as a matter of necessity help the operators to have a review of charges even if it is going to be under the watch of the relevant government agencies.

However, nigeriamaritime360.com in view of the imbroglio, suggests that for normalcy to return, all concerned parties should bury their hatchets, come to a round table and agree on a liberal charge good enough for a business owner to thrive and to avoid the masses being coerced unnecessarily.

Creating enabling environment for business to succeed is sacrosanct. For instance, NPA that is supposed to provide lighting and common user facilities in the port should not renege on its responsibilities.

Where NPA fails to provide its own side of the bargain will automatically lead to increase in the operational costs of the terminal operators and the consequence is crystal clear.

Concessionaires must submit themselves to government regulation and avoid taking laws into their hands in the name of profit maximisation without consideration for the masses.

In addition, operators must not be seen to be portfolio investors; they should try as much as possible to invest in modern handling equipment to facilitate ease of operations as envisaged before concession.