Omonibeke: Nigeria Has Gained from Port Reforms

The Executive Director, Marine and Operations, Nigeria Ports Authority, David Omonibeke spoke to journalists on what Nigeria has gained from the reforms in the nation’s seaports, adding however that the country is also losing due to certain provisions in the concession agreements. John Iwori presents the excerpts:

Port Concession Programme in Nigeria
In any business or scenario, you have advantages and disadvantages. What you do is to compare at every level and then, take a decision. If we are to look at the port prior to 2006 and where we are now, in terms of the advantages, we have removed some inefficiency especially when it comes to cargo handling which government was doing. And, that is the concession. We concessioned cargo handling which also has to do with stevedoring.

Government, prior the concession, was having challenges. It was responsible for the machinery and equipment. A typical example was cargo handling equipment. There were so many people within the ports. There were wharf rats. You could import a car and when you come, you will not see the car or you will see the car but its vital components have been removed. Also, the government officials then too, you will see a crane that they say had been fixed but for it to handle a container, it will get stuck and that is, after releasing so much money. You also had scenarios where the tug boats took so much  diesel and at the end, it will move only one vessel in and they will say there is no more diesel again. So, you had longer waiting time for vessels. Also, to mobilise pilots, you had challenges of the pilot quarters and your tug boats.

So, when government, in its wisdom, looked at the concession and did it in 2006, it brought in terminal operators to help in terms of cargo handling and stevedoring services, expecting the concessionaires to pay lease fees and throughput which is a percentage of what we were collecting when we handled the goods ourselves. This was enshrined in the agreement. Where you are collecting $6.5 for example, you give the authority $1.1.

Some concessionaires decided to specialise in goods going to the oil field, wet or dry cargo and so on. They did that in the bidding room with Bureau of Public Enterprises (BPE). Every concessionaire was allowed to bring out their projections, the kind of cargo they wanted to handle, the kind of business they wanted to do. They were also allowed to tell government how much they could pay for the lease area. It was based on this that some other people were denied the concession. We also have what is called guaranteed minimum tonnage (GMT). It is reviewed every two years and for all the concessionaires except one, it is tied on the throughput fees, that is, the cargo movement.

Moves and Lease Fee
It is only in one agreement that you have what they call ‘moves’ which is strange to the port operations. This is because you are talking of the container ‘moves’. It means when they move the container from ship down and move it again and again. And they have a clause that says that once they do not meet certain targets, they penalise government. If they do not achieve their ‘moves’, what they do is that they make deductions directly from the lease fee. And the lease fee is fixed and is not supposed to be tampered with.

The provision of the clause says that if you want to touch the lease fees, it should be on technical grounds or the place is encumbered and you do not have access to it. We have related with the concessionaires to ensure they do not pay for areas they do not have access to. But by that agreement, that terminal has power to deduct money from the lease fee and government has suffered loss based on that agreement.

Loss from Deductions
The federal government is losing huge money especially now that import volume has dropped. That is exactly what I am saying. Because of the ‘moves’ clause in the agreement, they just do their deductions. Since the concession in 2006 till date, government has suffered deduction from the lease fee over $200 million. That is why NPA, representing the Federal Government  of Nigeria has been making attempts to call that terminal operator to a roundtable for us to discuss and adjust that ‘moves’ to ‘throughput’ as it is in other concession agreements. But you see, the beauty of the concession is that it is the two parties that must come together and agree but they have been very evasive.

And we have taken a stand too because in previous times we had given considerations for one or two challenges they met like empty containers for export. They were supposed to pay the same with containers that were coming in, but we had meetings then, and government had consideration and brought it down. But when it comes to their own side of the bargain, and they know that it is skewed against government, they do not want to come to the table. That is why presently, they are having challenges with dollar payments and we said no, if we must discuss that, we must all come back to the table and this ‘move’ issue must also be addressed.

Concession Programme Benefits
There are enormous benefits in the port concession programme of executed by the federal government. For instance, at the ports now, there are no more wharf rats. The vessel turn-around time has also improved tremendously although it is not where we want it to be. What government has in mind is 48 hours clearance of cargo. So, we are working towards that. Government will keep improving on its policies. And the concessionaires, we also expect that they get the cargo handling equipment. Yes, some of them have got some, but some have not.

As the landlord and as a government, there are certain things we have to do as well in terms of the draft channel. When we were handing over, agreement was reached as to what draft we are supposed to have. For some of the areas in the ports, government was unable to achieve the draft that was agreed. This is because we do not have channel management companies in those areas.

Draft and Channel Management
Like you are aware, we have six ports and in Lagos, we have the Lagos Pilotage District where we have the Lagos Port Complex and Tin Can Island Port. The Lagos Channel Management Company Limited is responsible for the draft in Lagos District. And prior to the concession, the maximum we could have in some of those berths is maybe nine meters but now, we are achieving 13.5 meters and we are having bigger vessels coming. With the terminal operators, we are also discussing and carrying out simulations to see how they can bring vessels of length overall 300 meters which will also bring in more cargoes.

In the East, we have the Bonny Channel Management Limited (BCC) that dredge and maintain the draft for the Rivers Port Complex and Onne Ports Complex and then Bonny, the Liquefied Natural Gas Channel. There, we also have tremendous improvement in terms draft.
Government has also established the Calabar Channel Management Limited (CCM). However, we presently have some challenges that are being investigated. I believe when the issues are resolved, that area will be taken care of.
Government is also working on Delta Port Complex. We have already given consultancy services but some of the challenges there is that you have a lot of pipes. The West African Gas pipeline passed through there and they are in a certain depth that consideration has to be given to know which one can be removed or reduced for us to have a very deep channel. I think the consultants will come up with all those alternatives before government will finally set up the channel management company.

Presently, there is a lot of challenge there because at the Escravos bar, vessels face a lot of restrictions. They have to work with the tide to see how they can bring in ships.
On port development, we are investing in deep sea ports as well. We have the Lekki one which will soon start. That is where you have the Dangote refinery and the Free Trade Zone. It will have about 15 meters draft with big vessels coming in. The essence of that is that when you have a deep sea port you do not need channel management. So, it will reduce the cost of maintaining the draft and then bigger ships come in and this will impact in ship dues and improve on the trade. These other ones are river ports and the only best way to have it is to have the channel management companies.

Ibom Port
The Honourable Minister of Transportation had asked the former and current Transaction Advisers to settle their differences out of court but no one is meditating. As a federal government, I cannot discuss this since it is a matter in the court. The Minister has said they should settle outside the court. We have a committee where NPA is a member. Akwa Ibom State Government is really interested in the matter and that is why it has given us (NPA) the certificate of occupancy (CoO). The Akwa Ibom Governor is really interested and he is working towards resolving the matter. So, I cannot give you an affirmative answer as I am not the one directly handling.

Nigerian Ports and Top 50 World Container Ports
When we came on board (that is this management) in 2012, we were fifth on the list of ports in Africa. Our goal is to be the leading port in Africa. Now, we are number three. Before, we were not including crude export in the throughput. Now, we have included them in the data and it has shown the volume, the ports in Nigeria are handling. In terms of effectiveness, like I said earlier, in 2006, we concessioned the ports. Now, we have less people in the ports. The port is not an area where you should have too many people. Once you have the system automated, a truck can just go when it is expected.
The ports should be like a graveyard. But in Nigeria here, the clearing agents, everybody wants to be in the port but government maintains just seven agencies.

Just recently, I read in the papers that the Minister of State for Agriculture said Quarantine should immediately move into the port because of disease outbreak. I do not know how that will be done. Some agencies come into the ports at the invitation of Customs not that they have offices in the ports. We will look at all that and see how people can work outside and come into the ports only when the need arises.

That is why when our sister agency, Nigerian Shippers’ Council (NSC) was asking to come into the ports too, we had to make it understand that it could have suggestion boxes in the ports but not offices. Therefore, if there are any complaints, people can reach them. If it needs to meet them, they go to their offices located outside the terminals not inside the ports. We should not take two steps forward and four steps backward.

Collaboration with Other Stakeholders
We are working towards efficient service delivery to see how the world will look at our ports and rank us as one of the world’s effective ports. This will happen when we start to reduce human traffic in our ports and have a single window in terms of payment. We are working with other stakeholders such as the Nigeria Customs Service (NCS), NSC, and the Nigerian Maritime Administration and Safety Agency (NIMASA) to ensure that we are on the same page on the key issues that will drive port efficiency.

We are also have a synergy with other major agencies so that we can work together to attain set goals and objectives  For instance, if someone applies and payment is simple, easy and seamless, it will improve the status and rating of our ports. So, it is not just Nigeria Ports Authority. It has to be a synergy of relevant agencies in the ports to ensure that we provide these services.

Also, security in the waterways will eliminate or reduce drastically pirates’ attacks. Those are the indices. If the Gulf of Guinea is safer and we do not get reports of hijacks once in a while then, it will also improve the high rates insurance firms across the globe charge our marine insurance.