Economy

Lack of legal framework threatens investments

by Editor

March 4, 2013 | 2:34 pm
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Prior to the concessioning of the nation’s ports, the ports suffered from increasing inefficiency, which resulted in long turnaround times for ships, high container dwell time, increased insecurity of cargoes, corrupt practices and excessive shipping charges.

The ports, considered to be the second highest revenue earners for the economy after oil and gas, were running at a loss such that Nigerian Ports Authority (NPA), which until now was highly centralised and responsible for both regulatory and operational functions of the ports, sought for financial support from the Federal Government to carry out majority of its capital investments.

However, in 2006 the former President Olusegun Obasanjo led administration through its concessioning programme, transformed the nation’s seaports from being state enterprise-controlled to private sector driven, handing over cargo handling operations functions of NPA to the port concessionaires while Nigerian Ports Authority (NPA) assumed the landlord functions.

The idea, the Federal Government said, was to encourage massive investments in port infrastructure and facilities, enthrone efficient port operations, reduce cargo dwell time, improve vessel turnaround time and reduce the cost of doing business at the ports.

To drive this laudable concession initiative, the Federal Government drafted two bills which include Ports and Harbour Bill and National Transport Commission Bill. The bills, currently on the floor of National Assembly, are yet to be passed to further achieve the gains of port concession.

The draft of the Ports and Harbour Bill was introduced on the floor of the House of Representatives in 2009, three years after the nation’s ports terminals were leased out to private concerns under the then ports reform programme by the Bureau of Public Enterprises (BPE).

BusinessDay findings reveal that though some terminal operators have been investing in the infrastructure development at their various terminals, others have left their terminal infrastructures at the same dilapidated state in which they inherited those terminals from NPA.

The non-passage of Ports and Harbour Bill, findings show, is responsible for the failure and underdevelopment of Nigeria’s maritime sector till date. This is because the absence of a legal framework leads to uncertainties amongst private operators who fear that they may lose their investments as the Nigerian Ports Authority’s Act does not allow for direct private investment in ports infrastructure.

Content of the bill

The passage of the proposed Ports and Harbour bill into law will bring the following into play: the creation of two autonomous Ports and Harbours Authorities from the present Nigerian Ports Authority. These are the Lagos Ports and Harbour Authority (LPHA), and the Port Harcourt Ports and Harbour Authority (PHPHA).

The bill is expected to create competition among the terminals in each port authority, as well as competition between the two port authorities. The two port authorities will be supervised by the ports’ arm of the proposed National Transport Commission (NTC) to ensure economic and safety at the ports.

LPHA will control the container terminals, break-bulk, bulk terminals and Ro-Ro terminals in Lagos while the PHPHA will be responsible for supervising 14 smaller scale terminals located across the South-East and East of Nigeria including Port Harcourt, Warri, Calabar and Koko.

The drafted bill will enable the new port authorities to become responsible for the day-to-day technical and safety regulatory functions; primary rights to the basic and operational infrastructure within their respective jurisdictions; power to coordinate marine activities (pilotage, mooring, vessel management etc.); general responsibility for overall port planning and development, power to issue licenses (as authorised by and subject to guidelines set by NTC); lease and concession port infrastructure and collect port authority tariffs among others.

The bill also seeks to create a National Transport Commission (NTC) that will serve as the much agitated commercial regulator to regulate the excesses of both the port authorities and the private sector players.

Besides limiting the role of the government and the Federal Ministry of Transport in the port, the bill seeks that private operators perform the port operations, which include investments in the Quay Apron (except the Quay wall), stacking yard, equipment, security wall, lighting, cargo handling and stevedoring

operations.

Most importantly, the new arrangement will substantially improve benefits from Nigerian ports to the local and national economy, both directly (as financial benefits) and indirectly (through increasing efficiency in the sector).

Stakeholders’ views

Olayiwola Shittu, president, Association of Nigerian Licensed Customs Agents (ANLCA), said that the Nigerian ports are not witnessing enough investment as it ought to from the terminal operators.

Out of the 26 concessioned ports in Nigeria, Shittu said, not more than six of them, which include APM Terminals, Port and Terminal Multipurpose Limited (PTML), Tin-Can Island Container Terminal (TICT) and three others, are investing heavily in port infrastructure for efficient port management.

No doubt that most concessionaires, according to him, inherited dilapidated and abandoned structures from the government such that some started from the scratch to build and renovate ports infrastructure, but Nigerian ports are yet to compete favourably with other internationally concessioned ports.

Confirming this, Olisa Agbakoba, a maritime lawyer told BusinessDay that Nigerian port needs a legal framework to back concession. “There is need for institutionalisation of Nigerian Ports and Harbour Bill, which has been pending for eight years on the floor of the National Assembly.”

According to him, the problem with Nigerian ports does not lie in the fact that the concessionaires are not willing to invest in infrastructure that will improve the port industry but lack of legal and regulatory framework has discouraged private operators from investing.

“If you want someone to invest in your sector, there must be a legal backing. For instance, the old law of telecoms made NITEL the sole owner of telecom industry that is why it took a new telecom act to allow private sector to come in. No private sector person will invest money merely because Mr. President said that his country is very fertile for investment, therefore, there is need to have laws that define the operating state of the actors,” Agbakoba said.

“If you put in a legal framework saying: ‘I hereby authorise you to own’ there will be a legal protection for the private operators. In case anything happens against the law, the private people will go to court. The reasons we do not have new people coming in to invest is because they are not quite sure of what the government wants them to do,” he added.

Also, Yusuf Suleiman, former minister of Transport said in a report that lack of enabling laws to protect investors’ investments at the ports has been one of the issues discouraging some of the operators from investing funds in ports development.

“It is clear that some of the operators are afraid to invest because when they invest their money, they should have protection for their investments through a legal framework. This is why it became difficult for some of them to continue to invest in infrastructure without the corresponding legislation that would protect their investments,” said the former minister in the report.

He continues: “The ports have been concessioned but people are still complaining because they hardly see additional investments except in one or two places and these are the issues the Ministry

“If you put in a legal framework saying: ‘I hereby authorise you to own’ there will be a legal protection for the private operators. In case anything happens against the law, the private people will go to court. The reasons we do not have new people coming in to invest is because they are not quite sure of what the government wants them to do,” he added.

Also, Yusuf Suleiman, former minister of Transport said in a report that lack of enabling laws to protect investors’ investments at the ports has been one of the issues discouraging some of the operators from investing funds in ports development.

“It is clear that some of the operators are afraid to invest because when they invest their money, they should have protection for their investments through a legal framework. This is why it became difficult for some of them to continue to invest in infrastructure without the corresponding legislation that would protect their investments,” said the former minister in the report.

He continues: “The ports have been concessioned but people are still complaining because they hardly see additional investments except in one or two places and these are the issues the Ministry

operations

and prosper without some measures of independence, therefore autonomy is strategic and it is required to ensure operational efficiency in line with international best practices,” the NPA boss said.

Economic implications

One of the major aims of the concession initiative was to make Nigerian ports very competitive so as to reduce the cost of doing business at the ports through effective and efficient service delivery. Till date, the cost of clearing one container from Nigerian ports is still very high due to some level of inefficiency as well as lack of commercial regulators in the port.

There is a direct correlation between investment and good service delivery. The existence of all the needed terminal facilities and equipment provides the terminal operators with the opportunity to deliver cargos effectively and timely to the consignees.

Apart from the bureaucratic bottlenecks that importers witness at the ports during cargo clearance, absence of quality cargo handling equipment in some terminals contributes to the delays in cargo clearance. And this delay adds to the cost of doing business at Nigerian ports.

As a result of these, Nigerian importers prefer to take delivery of their consignments from ports in the neighbouring countries where it is faster and cheaper to clear goods. Findings have also shown that in terms of cost, taking containers from Nigerian ports almost doubles the cost for the importer rather than using other ports outside Nigeria like the Cotonou ports.

Currently, over 40 percent of Nigerian bound cargos berth in Cotonou before coming into the country, showing that Nigerian importers prefer to go to Cotonou to bring their cargos into Nigeria rather than sending the cargo directly to Nigerian ports.

The high costs of clearing goods from the ports is one of the major issues that make Nigerian importers go to the neighbouring ports because it is always cheaper for them totake delivery of their consignments.

Government position

Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of Finance, during her visit to the ports in Lagos, promised to intensify efforts to ensure that the two critical bills in the maritime sector are passed into law.

Zainab Kure, chairman of the Senate Committee on Marine Transport, during the committee’s visit to Nigerian Ports Authority (NPA) in Lagos, who bemoaned the arbitrary shipping and terminal charges including demurrages importers pay to shipping companies and terminal operators, said that there is need for an economic regulator to be instituted at the ports.

The regulator, they say, will help in controlling private operators, whose excessiveness has translated into high cost of doing business at the ports despite the concession programme.

“There is still more to be done for port concession to become effective. On our own part, the Ports and Harbour bill that is currently on the floor of the National Assembly, which has undergone the first reading, will undergo a second reading,” said the committee chairman.

According to her, the enactment of Ports and Harbour bill into law, which maritime stakeholders have been agitating for will bring in an economic regulator to regulate every operator in the sector and this will cut cost for importers.

Ifeanyi Ugwuanyi, chairman of House of Representatives Committee on Marine Transport, said that the bill will be reintroduced to Nigeria’s maritime public to agree on what to do with it.

Volume of business

Business activities at the port have been on the upward trend since 2006 when the cargo handling aspect of the port business was concessioned to the private operators. Within a period of six years (2006 to 2011), the non-oil import into the nation’s seaport recorded a total of 390,566,475 million metric tons.

A breakdown as released by NPA shows that a total of 46,150,518 million metric tons of cargo was imported into the country in 2006. This grew to 54,641,048 metric tons in 2007, 65,192,919 million metric tons in 2008 and 66,908,322 million metric tons in 2009. In 2010, the volume grew to 74,910,284 million metric tons and 82,763,384 million metric tons in 2011.

The statistics further shows that in 2006, about 3,689 vessels berth at the Port. In 2007, it rose to 4,050 and 4,477 in 2008. In 2009, it grew to 4,620 in 2009, 4,962 in 2010 and 5,327 in 2011.

As a result of this increase, cargo clearance at the ports in recent times, are yet to improve to 48 hours cargo clearance policy targeted by the Federal Government. This, industry analysts, blamed on insufficient cargo handling equipment and port facilities in some terminal, and this limits the capacity of the present ports to increase service delivery for port users.


by Editor

March 4, 2013 | 2:34 pm
12893  |   93   |   0  |   Start Conversation

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