Shippers’ Council as Economic Regulator Reforming Maritime Industry

Segun Oladipupo |

The Nigerian Shippers’ Council as the Economic Regulator of Ports in Nigeria has the mandate of creating enabling business environment for investors and financiers in Nigeria’s emerging private sector driven.

This responsibility given the Council is germane especially now that the Federal Government of Nigeria is shopping for private investors to partner with it to develop critical infrastructure in Nigeria.

Nigeria is un-arguably a maritime nation whose maritime potentials are yet to be fully developed to the benefits of her economy.

Nigeria is endowed with vast coastline of about 853km to the Atlantic Ocean, her EEZ (Exclusive Economic Zone) covers about 315,950sqm with enormous natural resources such as Oil and Gas, Solid minerals , fishing

Others are; mining, manufacturing and service industries, Navigable inland waterways of about 3,000km and resourceful human population who engage in import and export trade.

The Federal Government has been taking a lot of initiatives to promote investment in maritime sector through: Promulgation of Laws, Decrees, Reforms and Executive Orders

The recent reforms have witnessed a subtle, but profoundly progressive revolution in the Nigeria’s maritime sector. It has changed and continued to change the way business is done within the sector.

The Cabotage policy of government, Port reform policy which led to the concession of cargo handling services to Private Terminal Operators, the 2006 and appointment of NSC Port Economic Regulator among others, served to influence the contents and directions of investment in maritime sector in Nigeria.

The period before the reform of Nigerian seaports witnessed a situation where the government operates and manages ports like public monopoly. The Nigerian Ports Authority (NPA) performs numerous functions, including those that can be efficiently performed by the private sector.

However, due to obvious reasons, NPA could not sustain the service, hence, the need for reform to:
1. Improve the efficiency of port operations
2. Encourage private sector participation in the provision of services and injection of direct investment in port facilities and equipment
3. Reduce huge financial burden on government for the provision and maintenance of services that can best be provided by private sector and
4. Make Nigerian seaport the hub for port for international trade and shipping within the West and Central African sub-region.

2. INVESTMENT OPPORTUNITIES IN MARITIME SECTOR IN NIGERIA

i The reforms of maritime sectors have thrown up quite a vast opportunity for investment in maritime sector. The upsurge in the volume of general cargo handled from 54,473,850 mt in 2007 to 84,951,927mt in 2014 and 71,535,635mt in 2017, has created investment opportunities in the area of:

 Development of green field seaport facility
 Development of Container depots / yards, Inland Container Depots (ICDs), Inland Dry Ports (IDPs), Off- Dock Bonded warehouses/Freight stations
 Investment in logistics / haulage transportation service (including rail, roads and inland water transportation services), truck yards / parks.
 Nigeria has a large reserve of LNG (Liquefied Natural Gas) which created activities in the maritime sector, thereby provided investments opportunities in the supply of marine equipment for storage and transportation of oil products, supply of tug boat services, security patrol boats, supply vessels (for bunkering and chandelling services), Waste collection boats, vessel repair yards, Independent power generation, transmission and distribution, residential, tourisms and free zones for oil and gas etc.

3. ECONOMIC REGULATION IN MARITIME SECTOR BY NSC

Regulation is a system by which the Government monitors to correct any disorder in the working of a free economy to address anti-competitive behaviors.
In the transportation sector, there are basically four broad areas of concern requiring oversight or regulation namely: Economic, Technical, Environmental and Social/administrative.

4. ECONOMIC REGULATION
Economic regulation typically involves intervention in the functioning of markets in terms of setting or controlling tariffs, revenue or profits, controlling market entries or exits and ensuring that fair and competitive behavior and practices are maintained within the sector.
Economic regulation therefore, focuses on:

• Market rules
• Tariffs
• Quality of service
• Access to and exit from market
• Incentives regulation etc.

The vacuum created by the absence of regulatory framework before the concession of port to private sector resulted to situation where various service providers namely: NPA, Private terminal Operators (Seaport and off-dock bonded terminals), Shipping Companies, Freight Forwarders, Truck haulers and Groupage operators all set their tariffs and also determined their standard of service deliveries regardless of whether it meet the industry quality standard or not. Consequently, the Federal Government of Nigeria (FGN) appointed the Nigerian Shippers Council (NSC), a tentative port economic regulator.

THE ROLES OF NIGERIAN SHIPPERS COUNCIL (NSC) AS ECONOMIC REGULATOR OF PORTS INDUSTRY.

By virtue of its appointment, the NSC is expected to in addition to its statutory functions monitor the implementation of the commercial components of the lease agreements between the government and the private terminal operators.
Specifically, the NSC was required to:
 Monitor the tariffs and charges of all the Port service providers to prevent arbitrariness, and ensure conformity to industry best practices.
 Monitor the quality of service delivery to ensure that the costs burden arising from poor services by the operators are not passed to the consumers.
 Issue guidelines and control to create a forum for healthy competition amongst the operators, prevent use of dominant power, service bundling and discrimination etc.

These responsibility were however, clearly highlighted in Section 3 of the Nigerian Shippers Council (NSC) Port regulation order 2015, which stressed that in the performance if its regulatory roles, the Council shall:
i. Provide guidelines on tariff setting in order to guard against arbitrariness,
ii. Monitor and enforce standard of service delivery to ensure availability, accessibility, affordability, stability, predictability and adequacy of service
iii. Encourage competition and guard against the abuse of monopoly and dominant market position
iv. Perform mediatory role amongst stakeholders
v. Establish accessible and modern dispute resolution mechanism
vi. Regulate market entry and exit
vii. Promote efficiency in the provision of port services
viii. Minimize the cost of doing business and prevent inflationary effect on the Nigerian economy
ix. Encourage private sector investment in port sector and
x. Monitor and ensure compliance by all parties with the provision of port concession agreements.

COUNCIL’S ROLES IN THE CREATION OF CONDUCIVE ENVIRONMENT FOR INVESTORS/FINANCIERS IN MARITIME INDUSTRY

The role of NSC in encouraging private sector investment in the port sector was highlighted in section 3 (i) of its regulations, 2015. As a matter of fact, the regulation of an economic system seeks to achieve five (5) key objectives, namely:

i. The protection of investors / Consumers of services
ii. Ensure that the markets are fair, efficient and transparent
iii. The reduction of systemic risks
iv. The reduction of crimes
v. The maintenance of consumers’ confidence in the market place

The duty of commercial regulator is to;
 Contribute to the fulfilment of one or more of these objectives
 Maintain an open market that can be participated by widest range of appropriate participants with no unnecessary barriers to entry and exits
 Provide an equal regulatory standard on all participants that meet minimum criteria.

Since its appointment as Ports Economic Regulator, Nigerian Shippers’
Council (NSC) has played a pivotal role to create an enabling
Environment for investment in maritime industry. These include:

i. Identified the investment need in transport industry, investment such as: Inland Dry Ports, Truck Transit Parks (TTPs) were amongst others identified
ii. Analyze and appraise the project to ascertain viability on its investment
iii. Make recommendation on the viable mode of finance of such as: Outright privatization, Concession, PPP etc
iv. Provide guidelines for investment on the identified project
v. Liaise with appropriate agency of government to procure concession (where necessary) for the investment
vi. Identified the site locations for the projects
vii. Facilitate the secure of title document (Certificate of Occupancy) from Government for the investment site
viii. Facilitate the procurement process for the project to ensure compliance to official procedures
ix. Facilitate the selection of preferred bidder to guarantee the investment in compliance to extant rule
x. Provide non-financial guarantee to secure the investment
xi. Monitor and control to ensure investment compliance to design.
xii. Facilitate the designation of investment in ICNL Kano as port of origin and destination.

The Nigerian Shippers’ Council (NSC) has promoted investment in various projects since its appointment, these include investment on ICD / IDPs and TTPs. While some of these projects have been completed and commissioned and are currently operational (e.g Kaduna Inland Dry Ports), others are in various stages of completion.