Occasional Paper Series

The

Fronteira Post
Economic Policy & Financial Markets
May 27, 2010

An Assessment Seaport Reforms

of

Nigerias

By Dr. (Alhaji) W. A. Kareem, mni 1

Introduction The federal Government of Nigeria in part II, section II of the Customs and Excise Management Act (CEMA) described a Customs port which is what a seaport is, as any place or area in Nigeria designated by the President of the Federation, specified in the order to be a place of arrival or departure of ships by sea for Custom purposes. This legal definition is wide enough to cover airports, inland container depots, dry ports, land entry points in Nigeria etc. It is equally important to know that ports are of different types, depending on the type of activities they engage in. For example, a port can be classified into service port, tool port, landlord port, private port among others. While a service port provides all range of services, a tool port only provides infrastructural and supernatural facilities required to make the port fully operational. In the same vein, a fully privatized port is entirely constructed, funded, managed and controlled by its private owners. On the other hand, a landlord port maintains a balance between public and private sector activities in the form of Public Private Partnership (PPP). Background The seaport reform is an integral part of the general economic reform of the President Obasanjos administration which was majorly predicated on the National Economic Empowerment and Development Strategy (NEEDS). Faced with daunting challenges posed by the countrys decayed infrastructure, terribly bartered economy, corrupt political leadership, mounting external debt and near absence of democratic ethos, President Obasanjo on assumption of office in 1999 adopted NEEDS as an appropriate tool or response to tackle these challenges. With regards to the port sector reform, NEEDS provides excellent opportunities for Nigerias private sector participating

in coastal shipping as well as trades within the ECOWAS. Besides NEEDS documents focus on development of efficiently competitive seaport with capacity to handle modern shipping activities, establish inland dry port and develop human capital. Moreover, through creation of a prominent role for Nigeria seaports within ECOWAS, NEEDS encourages private sector participation in infrastructural development using BOT, BOOT, ROT and ROOT as investment options. It was the view of President Obasanjos government that combination of port reform the provision of enabling legal framework was the first necessary condition to achieve the stated above policy objectives. State of Nigerian Ports: PreReform According to report by Taaffee Morrill and Gould (1963) in the early 19th century about a hundred small seaports were said to have existed in Nigeria. Factors responsible for establishment of these early seaports included the following;i. Invention of sail ships and steam engine ships. ii. Huge trade potentials that existed between the West African countries and Europe. iii. The booming slave trade During this period, shipping encountered major difficulty due to shallow port entrance caused by large amount of sand and the siltation rate of the coast exacerbated by instant littoral drift and shifting of channels. In order to address this problem, the construction of the East and West moles began in 1908 and was completed in 1910. the moles made it possible to have a depth of 8.23 metres at the entrance to the Lagos port which equally allowed for the development of the Custom Wharf on the Lagos Island to handle ocean going vessels. In 1914 the first mail steamer drawing 5.64 meters entered the harbour. To allow vessels with higher draught to enter Apapa, construction of four deep water berths were totalling 548.64 metres was completed in 1921. During this period also, some small seaports existed in places like Bonny, Old Warri, Old Calabar, New Calabar, Brass, Akasa, Sapele, Degema, Port Harcourt, Okirika among others. Prior to the establishment of Nigerian Ports Authority (NPA) in 1955, port activities and function were shared among various Government departments. For example, while the Nigerian Railway took charge of cargo handling at the Lagos and Port Harcourt quays, Marine department was responsible for the harbour and channel maintenance as well as berthing of ships. The Engineering Department was assigned the responsibility of maintaining the quay areas of the ports. However, with the establishment of NPA in 1955 all these responsibilities and functions were harmonized and transferred to it. Consequently, on the

B. Sc (Hons) MILR, Ph. D. (Ibadan); Chairman, Nigerian Ports Consultative Council

1

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Policies, Challenges, Reforms and Nigerian Disposition to Insurance Contracts

1st April, 1955 NPA officially commenced operation with the following specific mandate: To carry on the business of carrier by land or sea: stevedore, wharfinger, warehouseman, ligtherageman etc. To construct and develop ports, docks, harbours, piers, wharves, canals, water courses, embankment and jetties; To appoint, license and manage ship pilots; To enter into agreement with any person for the operation or provision of any of the port facilities which may be provided by the authority; To develop, own and operate ports and harbours; To provide safe and navigable channels; To provide towage and pilotage services; To offer cargo handling and storage services; To maintain port facilities and equipment; To ensure safety and security; To control pollution within port limits and approaches; To provide other ancillary services such as ship repairs, supplying of water and bunkers to vessels etc. To a very large extent, it would be fair to state that NPA succeeded in discharging many of its assigned responsibilities by law. For example, NPA undertook the following projects among others in the sixties and seventies:Construction of 6 berths with a total quay limit of 943 metres in the Lagos port and 4 berths with a total limit of 506 metres in Port Harcourt. Construction of warehouse in both ports in addition to a floating dock with 4000 tones lifting capacity for ship repairs and maintenance. Development of the following ports to check port congestion:i. ii. iii. iv. v. vi. vii. viii. ix. Third Apapa Wharf Tin Can Island Port Calabar New Port Atlas Cove Oil Terminal Onne Terminal Phase I Onne Terminal Phase II Onne Federal Ocean Terminal New Sapele Port Kirikiri Light Terminal Phase I and II.

and cargo traffic destined for the Nigerian ports. The concomitant effect of all those things was the notorious port congestion of the mid seventies which would have crippled and paralyzed economy but for the countrys oil boom and resilience. To ensure that the situation was brought under control, the Federal Government at the time embarked on massive port development and introduction of Ship Entry Notice (SEN) which every vessel desirous of coming to any Nigerian ports must obtain prior the arrival. This measure helped in no small way to assuage the effect of port congestion. Major Raison Dtre for the Port Reform Before 1999 when President Obasanjo came to power the situation of most of the ports under NPA management was quite chaotic to say the least. The ports suffered from infrastructural decay ad dearth of suitable ship and cargo handling equipment as a result of old age, poor maintenance as well as high level of corruption, mostly among the ports operational staff. Besides, port approaches and channels were shallow, poorly buoyed and replete with wrecks, all of which constituted serious danger to safe navigation and entry into the port. Moreover, pilotage services were inefficient as ships berthing and sailing suffered unnecessary delays for lack of tugboat, pilot cutters as well as inability of ports to operate night shifts. In addition to all these anomalies, dockworkers were not only grossly inefficient and undisciplined but also extortionist. Some ships had to bribe the labour, pilots or any other port officials if they wanted to avoid delay. Tired and frustrated by these problems, some ship owners decided to divert their ships laden with Nigeria bound cargoes to neighbouring ports of Benin, Togo, Ghana among others. The resultant effect of this was colossal loss of revenue by NPA, Customs, Nigerian importers, Manufacturers, Industrialists and several other Nigerians whose livelihood depended on port related services i.e. shipping companies, agents, freight forwarders, transporters, ship chandlers etc. the main reason for this development was that ships which were responsible for the revenue generation were no longer coming in droves but in trickles. The logical questions that any observer of this situation would probably ask were as follows: i. ii. iii. How did we allow our port to deteriorate to this ignoble state or level? What was NPA doing as the manager of the ports? What was the Federal Government doing as the owner of these ports?

However, over the years as a result of rapid expansion and growth of the economy, coupled with the post civil war reconstruction and development as well as the countrys import and export rising profiles, NPA seemed to be faced with diminishing returns. The reasons for this were not far fetched. Many of its aging facilities such as ship and cargo handling equipment etc would no longer cope effectively with ever rising ship

The answers to these questions are quite simple. First, some of our oldest ports which are in Lagos and Port Harcourt were built almost 100 years ago.

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Policies, Challenges, Reforms and Nigerian Disposition to Insurance Contracts

Consequently they needed massive repairs, refurbishment and in some cases upright replacement. For example, many of the quay aprons were craving in; cargo handling equipment were obsolete and irreparable. Channels were shallow and littered with wrecks that were crying for immediate removal. Unfortunately these problems were far more beyond the financial resources of NPA since they involved capital projects and huge finances. In 1999 President Obasanjos government was not prepared to commit any further public funds to resuscitate ailing or dying port sector. In its view, it would have been better to commit such funds, if available, to provide social amenities such as schools, hospitals, water, roads, security etc. Also at some points in time, Federal Government took decision to commercialize NPA such that it would run profitably, charge commercial tariffs and generate enough revenue to run its business. Consequently, NPA was one of the II public enterprises selected for full commercialization under schedule II, part II of the Privatisation and Commercialization of decree No 25 of 1988 in compliance with the Structural Adjustment Policy (SAP). The policy objective of this move was for NPA to be reorganized in such a way to make profit and operate without government subvention. With this government approval, NPA was vested with authority: a. b. c. To fix rates, prices and charges for its facilities and services To capitalize its assets. To sue and be sued in its corporate name.

f.

g. h. i.

To facilitate the emergence of Nigeria as a transshipment hub for the West and Central Africa sub regions. To reform the institutional and structural set up in the ports to support desired efficiency. To reverse incidence of diverting ships and cargoes meant for Nigeria to neighbouring ports. To align the Nigerians ports system with the global trends and practices.

Main Elements of the Port Reform Nigerias port reform has the following features: a. The Landlord model

The port reform in Nigeria is based on Landlord port system or arrangement. Under this arrangement, concessionaires or terminal operators are selected under a rigorously transparent process based on international specifications. Successful bidders with the highest bid price and proven technical competence emerged as the winners and they were allocated their respective terminals. Each of the successful terminal operators then paid the agreed fees to the Federal government through Bureau of Public Enterprises (BPE) and signed the lease agreement. Some of the concessionaires entered into 25 years or 10 years lease with the Federal Government. At the expiration of the lease period, the terminals would revert back to the Government. However, if both parties agree, the lease could be renewed for another 25 or 10 years. Under the landlord model, terminal operators provide and maintain their own superstructure such as office buildings, warehouse sheds, container/cargo stacking areas, quays cranes, conveyor belts, transtainers, forklifts, mechanical workshop etc. Similarly, private terminal operators employ, remunerate, deploy and train their own stevedores. The responsibility of NPA under this system are therefore confined to taking charge of port planning, licensing control; port development including quay wall extension and maintenance; technical regulations pertaining to safety, security, environment, marine services and channel management. b. Public Private Partnership (PPP)

During this period NPA was incorporated as a public liability company (plc) and operated as such for a while. However, after some time NPA was directed to revert to status quo or its former position as a public enterprise. Perhaps this was done in order to prepare NPA for a full port reform. Port Reform in Perspective Having irrevocably committed to port reform, Federal Government set out the following objectives for the reform: a. b. c. d. e. To improve efficiency and transparency of port operations and management in Nigeria. To reduce port charges and promote competition. To facilitate further development of Nigerias transport infrastructure To eliminate or reduce incidence of port congestion. To reduce government financial burden and increase private participation in port operation and management.

Port reform in Nigeria is based on Public Private Partnership (PPP) which involves participation of private sector in port funding, development and technology transfer in port operations. This has also promoted development of Greenfields or new ports. For example, 230 metres of quay length of RORO berths have been built at Tin Can Island Port by Port

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Policies, Challenges, Reforms and Nigerian Disposition to Insurance Contracts

and Terminal Multi service Ltd (PTML), one of the terminal operators. Similarly, new 376 metres jetty extension at the Federal Lighter Terminal 4, Onne has been built yet by another private operator. Also another concessionaire, West Africa Container Terminal (WACT), has constructed 570 metres quay length and terminal extension at Onne. All these development brought about by the port reform of Government would have been impossible if NPA were to remain at the drivers seat of the port operations in Nigeria. Neither the Government nor NPA would have been able to fund all the above projects. In the coming months and years Nigeria would witness more infection of private funds and technology into the countrys maritime, oil and gas sectors. Already the following projects have taken off, thanks to the port reform and favourable investment climate in Nigeria today:a. b. c. d. Olokola Deep seawater project Ogun/ Ondo States Bonny NLNG. Deep seawater ports for oil and gas at Lagos, Warri and Onne. Brass NLNG

mediate in such disagreements or conflicts. By the same token, the port patrons or users can challenge action of either NPA or terminal operators if the need arises to do so. Some of the issues which port users may table before NTC include poor quality service or excessive or untariffed charges by terminal operators. NPA may also challenge the actions of the concessioning agreement and vice versa. Some Strictures or Criticisms of Port Reform Like any programme or policy no matter how well intentioned, some people would still criticize it. So it is with the port reform. While not a few people applaud the policy in view of its overwhelming benefits, a few others see it otherwise. For example, to the labour unions whose members lost their lucrative jobs in the process, port reform is ant people policy. In the same vein, to the academics or intellectuals, especially those of them with socialist bend or inclinations, port reform is seen as a ploy by the ruling elite to appropriate or corner what is considered the nations commonwealth or nations asset for their selfish gains, albeit in collaboration with foreign capitalist or bourgeoisie class. Late Dr. Bala Usman of Ahmadu Bello University, Zaira was one of such people. Conclusion Although port reform may not be a perfect policy as yet, especially in Nigeria, in our present circumstance it seems the best option for now. In a situation where all our port infrastructural facilities had become so old and obsolete, with NPA or Government having no fund to fix them, one could imaging what could have become our port today without the port reform. Finally, the fact that port reform has almost become a fad today globally is not an accident. It is because people see it as a viable option or panacea for rapid port development and socio economic transformation of the economy.

Moreover in the spirit of port reform and PPP NPA has entered into joint venture agreement with the Lagos and Bonny channel management companies to carry out regular dredging of both the Lagos and Onne channels to allow for bigger vessels to come to Nigeria. As a result of these agreements, a ship of 256 metres length recently called in Nigeria and this historic development was celebrated. Furthermore, there are many other tangible benefits of port reform which include the following among others:Improvement in cargo handling equipment Faster ship and cargo turnaround Improved port efficiency Enhanced revenue by the Government from ports. Complete stoppage of incessant labour strikes Delineation of NPA and terminal operators responsibilities to avoid conflict. Enhanced port security and safety Enhanced remuneration for dockworkers. Injection of private investments into port development. c. Provision of National Transport Commission (NTC)

In envisaging possible disagreements between NPA and concessionaires or any other stakeholders, the port reform policy provides for the establishment of National Transport Commission (NTC) to intervene and
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