*Government needs to review 2006 concession agreements
*81.7 % port cost lies in cargo clearance
By Omoh Gabriel & Godwin Oritse
As the nation’s economic fortune continues to dwindle, Nigerian ports have recorded drops in the cargo throughput for the first quarter of this year, an indication that less volume of goods was imported into the country within the period. There are also, indications that the second quarter may record further drop in the ports’ activities. The drop in gross tonnage was also reflected in the revenue generation drive of the Nigeria Customs Service as the agency also suffered deficit of more than N100 billion for the first half of the year.
Data on the first quarter report of activities at the ports indicates that over 1,131 oceans going vessels called at various ports across the country. Virtually all the ports recorded a drop in vessel calls and tonnage. The Lagos Port Complex which houses about three terminals, namely:
A. P Moller Terminals, ENL Terminals and Greenview Terminal, recorded a gross tonnage of 8, 195, 979 in the first quarter of 2016 as against 9,262, 792, in the same period in 2015 representing a drop of 11.5 per cent. The Tin Can Island Port handled a total Gross Tonnage of 11, 853,587, showing a decline of 1.2 per cent when compared to the 2015 figure of 12, 260, 427.
Calabar and Rivers Ports, respectively, recorded total gross tonnage of 776, 718, representing a decline of 15.4 per cent when compared to 918,237 recorded in 2015 and a 1,253,616 showing 14.2 per cent drop from 1,461, 562 in the corresponding period of 2015.
A total of 79 ocean going vessels also called at the Rivers Port within the period under review. Onne Port Complex recorded a gross tonnage of 9,851,240 reflecting a decrease of 13.4 per cent from 11,371,820 recorded in 2015. Surprisingly, the Ports in Delta namely, Warri, Burutu and Sapele ports recorded a gross tonnage of 1, 756, 305, an increase of 4.7 per cent over the 2015 figure of 1,677,915.
A total of 117 vessels were also handled at the Delta port within the period. For cargo throughput in the first quarter of 2016, a total of 43,347,523 metric tonnes was recorded showing a decrease of 12.6 per cent from a figure of 49,604,516 metric tonnes in the corresponding period of 2015. Cargo throughput is the total volume of cargo inward (imports) and (export) handled in all port Port locations during the period.
Analysis of this aspect of the report showed that the figure for general cargo stood at 1,893, 519 metric tonnes showing a decrease of 48.1 percent from a figure of 3,649,841 in 2015. The report also showed that while bulk cargo recorded 2,176,725 metric tonnes as against 2,306,938 metric tonnes in the preceding period of 2015, indicating a drop of 5.6 per cent, liquefied cargo shipment was 5,079,262 metric tonnes in 2016 compared to 5,459,402 metric tonnes in the first quarter of 2015, showing a drop of 7 per cent. In general terms, the drop in activities at the nation’s ports was captured by an audit report that will soon be published.
Mr. John Jenkins, Managing Director of Sifax Group, owners of Port & Cargo had attributed the huge drop in cargo volume at the port to the scarcity of foreign exchange. “The inability of the government to generate the required foreign exchange to oil the wheel of the economy posed a great challenge,” Jenkins said. He said apart from the inability of importers to source foreign exchange to import cargo, “power is also a big challenge.”
The situation at neighbouring Joseph Dam, Five Start Logistics and PTML terminals also within the Tin Can Island Port Complex, are even more pathetic. PTML and Five Star have lost more than 70 per cent of their RORO vessel and cargo traffic due to the dollar scarcity and the National Automotive Policy introduced by the Goodluck Jonathan administration in 2014. The policy, which raised the tariffs on imported vehicles from 20 per cent to 70 percent, led to the diversion of more than 50 per cent of Nigerian-bound vehicle imports to the Port of Cotonou from where they are smuggled into Nigeria.
A Maritime audit report sighted by Financial Vanguard said: “Spiraling inflation and the declining value of the naira has eroded the value of seaport terminal operators’ earnings by 238 per cent over the past ten years.” The report indicates that the terminal operators, who invested over N200 billion between 2006 and 2015, have lost an estimated N58.9 billion in earnings over the period.
It stated that the private terminal operators are responsible for only 1.4 per cent of port costs while the bulk of the charges at the port, estimated at 81.7 per cent lies in cargo clearance, which includes import duty payment, payment of the comprehensive import supervision scheme (CISS), various levies and surcharges collected by Customs on behalf of government. Other port costs, according to the report, include charges collected by shipping companies (13.8 per cent); transporters (1.4 per cent) and clearing agents (1.7 per cent).
According to the report, the various charges at the ports include Freight charges to the shipping line, $2,000; container deposit fees (refundable); demurrage charges (varies); terminal handling charges: N45,500 ($138); storage charges (varies); Customs examination charges, N18,000 ($54.5); delivery charges N5,500 ($16.7); Stevedoring (charged to the shipping line); import duty, 5 per cent; CISS, 1 per cent; Surcharge, 7 per cent on import duty; ETLS, 0.5 per cent; VAT, 5 per cent; Transport, N70,000 ($212); clearing fees, N80,000 ($242
According to the report, the 2006 port concession had resulted in significant improvement in port operations in the country. “For example, there has been the emergence of larger vessels with improved cost effectiveness, improved cargo-handling technology and delivery speed as well as reduced unit freight cost. In addition, the concession has increased Nigeria’s port competitiveness, reduced waiting time for ships and enhanced movement of goods across international borders and offshore manufacturing,” it stated.
The report further explained that the sector witnessed increased participation of foreign and private investors in terminal operations, investment in new port facilities and equipment as well as investment in automated computer tracking system and establishment of new ports.
Explaining further, the report said private sector developments and Nigerian Ports Authority (NPA) were responsible for the improvement in the overall key performance indicators (KPIs) at the ports, including ship waiting time, ship turn around time, dwell time, container moves per hour, customs examination time and overall cargo clearance
Despite the number of improvements recorded in port operations over the last 10 years since concession, the sector is still plagued with numerous challenges. Some of these challenges include: Insufficient power supply, dilapidated port access roads, traffic gridlock at the ports, uncertainty of policy direction with non-passage of industry legislative bills, Ports and Harbour bill and blurred assignment of regulatory functions, amongst others.
As a result of these challenges, the business environment has not enabled the industry to reach its full potential as the hub of maritime in the West African region. The Federal Government of Nigeria has attempted to introduce several additional reforms which are aimed at improving the effectiveness of the sector.
“Some of such reforms include the National Transport Commission, NTC bill, the Railway bill, the Ports and Harbors bill and the Inland Waterways bill, each of which will have its impact on the maritime sector. The essential reforms these bills set out to establish include a more effective industry regulatory system, improved service delivery for services performed by the government through NPA (e.g. maintenance of quay walls, dredging, towage and pilotage services), and ensure improved welfare of industry stakeholders.
The Ports and Harbour bill in particular, should see the Ports and Harbour Authority being the technical regulator and promoting private participation. However, the bill is yet to be enacted into law by the relevant arms of government since 2006. Industry stakeholders have also called for a review of the Coastal and Inland Shipping (Cabotage) Act to reduce multiple layers of levies and additional cost of compliance for operators in the industry.
Nigeria is beginning to put in place several strategies to reform the non-oil sector of the economy in order to diversify its revenue base and promote local production of goods which could be exported. Many of the goods will rely on an efficient ports system for it to be efficient and globally competitive.
Primarily, the government will need to review the 2006 concession agreements to ensure that the terms are sufficient to continue to encourage private sector investment and commitment. In addition, the government must fast-track the conclusion, passage and implementation of the requisite regulatory reforms and Bills required to support the sector and encourage further private sector investment. In addition, there is a need to appoint a substantive economic regulator and improve the synergies between the key agencies and MDAs that impact the efficiency of the ports directly and indirectly.
Synergies between the Federal Ministry of Works (access roads), Nigeria Railway Corporation (rail), Ministry of Power (IPP and Power) NPA, Customs, Freight Forwarders and others are critical to this success. These key changes will support vision of diversifying the economy from oil into other sectors in order to provide for greater economic stability and placing the nation on a path of self sufficiency and sustainable growth.