How Unstable Inland Freight Rates Mar Dry Port Operations- Raimi

By Kenneth Jukpor

Mr.  Rotimi Raimi is the Port Manager, Kaduna Inland Dry Port. In this interview with MMS Plus newspaper, he analyses the opportunities and threats to dry port operations in Nigeria. He highlights the unique roles of railway, shipping lines, government political will in dry ports while he speaks on other salient port sector issues.

Enjoy it:

 

How has business activities fared at Kaduna Inland dry port in 2020, especially under the COVID-19 pandemic?

Well, we have been getting cargoes because the government allowed operations of seaports to continue and this extended to the dry port. There hasn’t been any problem because we are getting our containers from Port Harcourt Port, Tin Can Island Port and Apapa Port. However, we are beginning to see the effects of the pandemic on port activities which are dwindling. The low activities show the implication of the COVID-19 as most importers can’t import and the exchange rate has also increased. There are other problems associated with the imports as a result of this pandemic, but I believe with time we will be able to adjust. Across the world, there has been lockdown to curb the pandemic but many countries are beginning to ease the lockdown.

Hopefully, in few months, things should gradually return to normal. At the beginning of the year until the end of the first quarter of 2020,most of the cargoes already on sea came in. These are the cargoes that were received until April, but from May we can already see a decline. I believe with the government relentless push to get the vaccine for the virus and the improvement as people are recovering and being discharged every day, the port activities will bounce back.

One of the objectives of dry port is to facilitate export from the hinterlands. How has export activities fared at the Kaduna dry port?

Last year, there was an improvement compared to the export figures in 2018. After the dry port was commissioned by President Mohammadu Buhari in January 2018, we used that period to sensitize exporters on need to use the port. Last year, we had more than 2000 metric tonnes of export against the 2018 figure which was only 66 metric tonnes.

The only area we are having challenge in export is the absence of inspection agents. At the dry port, there must be an inspection agent from the Federal Ministry of Finance to inspect and certify all the exports that is being forwarded to various countries. So, we are pushing to get one because the official here was swapped and taken to Lagos, but the Ministry of Finance has been trying to address that. Once we can get one inspector, export can move from Kaduna dry port straight to other countries.

Container deposit refund has become a major problem at Nigerian ports. Has this challenge also been prevalent at your dry port?

For a dry port operation, there is not supposed to be any container deposit because the shipping line’s service is from port of loading to port of destination. It is the responsibility of the shipping companies to ensure that the inland transit is been done by them, although they can outsource it to any logistics company.

The challenge, however, stems from the fact that Kaduna dry port is the first dry port in the country and the port isn’t operating fully as a dry port. Shipping companies have to come down to Kaduna to address the challenges otherwise there is no way we can have a successful dry port operations.

Shippers are demanding that they want their goods delivered to Kaduna, but during their negotiations with shipping lines, the shipping lines representatives would state that they don’t recognize Kaduna as point of discharge. They would do their best to get the shippers agree for the goods to be discharged in Lagos. This is a huge challenge mitigating full operations of Kaduna dry port.

The only way we can address this is what Nigerian Shippers’ Council (NSC) which is our regulator and the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN) is trying to do. Kaduna dry port lacks global recognition and a port code. For a shipper to post his container to a port, he or she would need this port code. Kaduna dry port is a replica of a seaport just like Lagos seaports. The only difference is that ours isn’t on the seas but on land, that’s why it is called dry port.

If not for the COVID-19 pandemic, CRFFN would have gone to Switzerland to present Kaduna IDP to shipping lines and get us a port code. Shipping lines in the country also have an obligation to help us and not persistently convince our customers that they don’t recognize Kaduna IDP. I have several cases where customers call me to complain that shipping companies have told them that they can’t come to Kaduna because all their cargoes must be discharged in Lagos.

There is need for the political will that would see shipping companies recognize and patronize dry ports. I’m not just talking about Kaduna IDP here but also about other dry ports in Kano, Abia, Oyo, among others. These are investments which the sponsors have made with intention of making returns. If the pilot dry port project isn’t performing well, you can be sure that others would begin to reconsider their investment in dry ports.

So, I’m pleading with the government to compel shipping companies utilize dry ports which will also help decongest the Lagos seaports. The government is doing a fantastic job with the railway. They are doing a lot to develop the railway system and the rail is a major transport mode for moving cargoes from the seaports to the dry ports.

What is the highest cargo traffic recorded at the dry port, prior to the COVID-19 pandemic and related challenges?

There has been an improvement since 2018 and we are giving kudos to the Kaduna State government and Shippers’ Council. For the last quarter of 2019, there was about 35% increase in terms of cargoes compared to the previous year. If not for this pandemic we would have continued to record lots of activities here because we are not resting on our oars in advertisement placement both electronic and print media. We sensitize people that this is the best way particularly in the North for you to bring your cargoes. Fortunately, Kaduna is close to Abuja, so people just have to patronize us and the northern states have no other choice than to move their cargoes from here.

Rating our activities in terms of figures in TEUs, for the first quarter of 2020 we had over a 1500 TEUs compared to what we had in 2019, which was about 750 TEUs.

Sensitization is very important, how have you been able to utilize this to get stakeholders patronize the dry port?

We have been using three approaches one is by sensitization through seminars. We had three major sensitization programmes last year. One was sponsored by the NSC and we had another one with Manufacturers Association of Nigeria (MAN) where we sensitized the exporters. MAN has also helped us by compelling their members to use the Kaduna dry port and I believe with time and the government support, we will be able to have more cargoes as a result of these sensitization campaigns.

The government should also compel major port stakeholders like shipping companies and terminal operators to support dry ports because this would eliminate continuous congestions at the Lagos seaports. Since the Federal Government closed the land borders all imports and exports are done through the seaports and this enhanced the volume of cargoes at seaports leading to congestion which can be dissipated using dry ports.

Kaduna State government route all their cargoes through the Kaduna dry port. Kano and Abuja are also doing the same. However, we are reaching out to other states in the Northern region to use Kaduna dry port. I intend to write the Nineteen Northern states soon to encourage them to patronize the dry port.

There have been allegations of cargoes lost in transit to the Kaduna dry port. Have such incidents been recorded, if so, how were you able to manage it?

No, I don’t think is Kaduna dry port. Since I have been here, there has been no report of such incident. The only thing that we have recorded is breakdown of trucks on the roads or accidents because on our system we have a tracking process as soon as the container leaves Lagos. We also have a logistics staff to monitor this.

We expect the container to arrive within 48 hours and we contact the haulage companies after this period. The haulage companies we patronize must have facilities to track their trucks using trackers. So, at every point in time they can ascertain where the container is located. So, it is almost impossible for cargoes to get lost in transit.

With the Customs NICIS II platform, there is a bond ensuring that containers are covered by certain amount of money. When the container gets to the Kaduna dry port, the Customs officer has to indicate that it has arrived. If it doesn’t arrive, such haulage company wouldn’t be approved for another business because they have to explain the circumstances surrounding the former one which hasn’t reached the destination.

We can do the monitoring and tracking of the containers and Customs can also do the same thing. Government revenue is very important for the Customs and as service providers, it is very important that the dry port provides optimum service to our customers.

Does it cost extra to place Customs officers onboard trucks as escort to dry ports?

No, it doesn’t come at extra cost. Every container must have Customs escort because the container hasn’t become ours until it gets to the dry port. It doesn’t come with an extra cost for Customs because it is part of the service they render.

Railway plays a crucial role in dry port operations. What’s the level of rail connection from Lagos to Kaduna dry port at the moment?

At the dry port, we have rail handling tools that can contain forty 40ft containers on each side. We also have a rail station close to the dry port. There is a rail that connects the station to the dry port.

How long does it take from Lagos to Kaduna dry port via rail?

In an ideal system it shouldn’t take more than a day. However, there are several issues with the rail tracks and we utilize local wagons. Currently, they are doing some refurbishments on the rail lines.

We should be able to load consignments via rail every 48 hours when the rail line is functional. We should be able to move two or three rakes from the port when the rail system is perfect. Each rake can take up to 20 containers and we can do two or three every 48 hours. This would also reduce the cost because going by road increases the cost of using the dry ports. An effective rail system would allow avail us the opportunity to send exports straight to the ports. That would enhance our traffic and it would give more confidence to importers and exporters.

The extra cost of bringing cargoes to Kaduna is possibly an issue making shipping lines reluctant to route cargoes to the dry port. Has this been a challenge to your operations?

Shipping companies are mandated to ensure cargoes move from port of loading to port of destination. Therefore, the cost up to the point of destination should be in their charges. The inland freight charge after the cargoes gets to Lagos seaport is part of the freight charges. However, the shipping line could outsource the inland freight service to another company.

The most problematic issue for shipping lines is that there is no standard rate for the inland transit. I have had meetings with several shipping companies to project Kaduna dry port but they asked for the rate of inland transit. They need the cost from the seaport to Kaduna to know the turnaround cost to bring the containers back. This information is vital to enable them set the freight rate for both inland transit and ocean transit.

In Lagos, you could find that the cost to move a 40ft container to Kaduna could be N600,000 today. However, in less than two weeks this cost could be increased to N850,000 which is more than 35 percent.

This is one of the major challenges shipping companies have complained about. If the rail was functional, there would have been some degree of certainty in the cost because the government can’t make such sudden arbitrary increase. If they have to make any increment, there would be a notice of about 90 days.

The individual truck owner would let you bluntly that if you don’t want their price, you could buy your truck or patronize someone else.

I want to commend NSC for coming up a standard rate even though they are still discussing with the truck owners. There is need to have this certainty in rates so that shipping companies can input this on the cost in the true bill of lading. Recently, NSC was able to waive about 30 percent of trucking cost after successful deliberation with truck owners associations. This is a good development for the port industry.

Shippers’ Council has begun moves to replace container deposits with insurance. What’s your position on this?

It is a good development to have insurance premium replace container deposits. The insurance firms should be able to value the containers and give a premium. This would create businesses for the insurance companies while they also mitigate the risk on shipping companies.

If the value of a container is N400,000, they can give a premium of N25,000 but the shipping company must know their customers. The know-your-customer guideline in financial services requires that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship.

The agents should also be able to indemnify the shipping companies that if there is a loss or damage to that container, they would pay for it.

After the premium has been paid, the shipping companies should give a minimum of 30 days grace to the shippers in the hinterlands like Kaduna, while others close the seaports should have a minimum of 15 days to return the empty containers.

If the containers aren’t returned after this enormous grace period, they can go ahead to charge demurrage despite the insurance premium.

With the situation at Lagos ports, there is no way you can pick cargoes from the port and return the empty containers within one week. So, there is a need to expand the grace period because shipping companies have been milking Nigerian importers for too long. For importers around Lagos and its environs upto to Jebba and Benin, they should have 15 days to return the empty containers while those in far away hinterlands from Jebba upwards like Kaduna should have 30 days.

It is also important to note that these shipping companies are also in business. Most of these containers aren’t theirs because some of them are just hired and branded by the shipping companies. The utilization of insurance companies would also assist the shipping lines in ensuring the containers are retrieved. The insurance parties know how to inject clauses in their agreements to ensure that the agents return the containers.