Post Concession: Port Performance Evaluation
Maritime stakeholders can recall that in 2005 the World Bank Maritime study groups diagnosed the missing gaps and factors responsible for the deterioration of quality port services to include:
a. Government control port sector, thrived on a phenomenon that encouraged slow pace and rigid hierarchical planning, a dogmatic command and control structure with myopic planning foresight.
b. Government unwillingness to invest in expensive port infrastructures or the ‘mis – investment’ in infrastructures, i.e. providing facilities that didn’t match the needs of shipping and port industry. Hence, during this period, a number of beautifully constructed port complexes became “White Elephants” projects, when expected demands failed to materialize.
c. Government pretended but later realized that port development had collateral consequences for public interests, especially in job creation which moved the nation’s economy backward.
d. It was obvious that large scale government involvement in port operations was self defeating and destructive to private initiative.
e. Government then realized that its role should be to focus on services that the private sector operators have no adequate incentive to provide for public good.
f. Then the Nigeria government interest and consideration to privatize its public enterprises took an administrative centre stage.
In privatizing the public enterprises, the government had to ensure that it puts in place a mechanism that will guarantee an effective regulatory supervision and stabilization on the activities of the private operators to mitigate abuses and practices the country might later regret.
In the context of effective regulatory mechanism, the essence of integrating “Port Performance Reevaluation” as a special clause into the Port Concession agreement is aimed on one hand to accord the Government the supervisory roles of monitoring the investment pace in correspondence with the profit repatriations to the abroad mother company of the concessionaire; on the other hand, to ensure that the right cargo handling equipments are purchase and deploy into terminal.
It would also ensure that port investment plans are in sequence with the agreed milestone development plan.
Again, it should ensure that the port activities and commercial obligations do not negatively distort the workings of the Consumer Price Index – with regards to checkmating and cushioning the effects of inflation on the overall economy.
This role is undertaken by effective monitoring and auditing of all necessary books in order to mitigate against the usual operators’ tendencies of extortion via arbitrary charges and receipt fees for services not rendered.
Furthermore, it is to enable the government to ensure that as it is in practice and stipulate that certain aspects of the locally generated charges are not shipped outside the country via profit repatriations.
For instance, one of the major terminal operators at earlier stages of operational commencement was reported to have invested less than a billion in two years, but made a profit after tax of seventy eight billion, while the concession agreement is for twenty-five years at one billion dollar per year.
From this particular report the early red flag signals against the pitfalls of concession are heavily pronounced in our port system.
Notwithstanding, it is on record that, the ports concessions was carried out without an Economic Regulatory Framework, while the promoters then assured that through a yearly performance reevaluation exercise window of the concession agreement, government can monitor effectively, and pleaded for a commencement and a test run, hence, the Government right of Intervention, unfortunately such plea sailed through to a much later realization that it entered into a business contract that should be respected or anything short of that presents the Country as an investors unfriendly nation.
Notably, all entreaties to make the Government and the promoters to understand the essence and objectives of putting in place an economic regulator before or after concession, especially so in the face of our major ports being concessioned to the first generation port model operators (Terminal Operators with Shipping Company affiliates). This model of port operators is reputable for wrecking a nation’s economy but the early signals were ignored, nevertheless, the reality is bare.
It is also on record that, post port concession, 15 years down (2006 to 2021) the Government through the Ministry of Transport and the Nigerian Ports Authority (NPA) cannot convincingly boast of a yearly port performance reevaluation reports for a 15-year period for any of the concessionaires. All port stakeholders hear from the staff of the NPA and the Transport Ministry officials are accusations of compromises by the Authority or shortcomings of the terminal operators.
On the basis of this failure to timely do the needful and other supervisory compromises in the port operations, the present day port quagmires or operational challenges ranging from port congestion, road dilapidation & traffic gridlock, unstructured trucking system, arbitrary charges, unfriendly ports environment, shipping company arm-twisting port users and its related environmental challenges increase at our ports.
This development is in contrast with the aims and objectives of the government intendments for embarking on an ambitious and robust port concessions exercise that drew global attention in 2006.
The Federal Government port concession was an integral conception of its institutional/port reform program of vision 20:20:20 (unfortunately, today we are in 2021 already).
The laudably objectives and benefits of the port concession as was proposed by its promoters includes but not limited to:
a). To achieve quick clearance of cargoes at the ports.
b). To enhance quick turnaround time of vessels.
c). To reduce port charges by 20 -30%, thereby saving port users around USD$ 70m to $100m per year.
d).To eliminate the flow of funds from limited government resources.
e). To boost economic activities and accelerate development.
f). To make Nigeria the hub for international freight and trade in West and Central Africa.
g). To reduce port operating costs by 65 to 80 million yearly or about 20% – 25% yearly ( saving the nation USD$580m).
h. To reduce the cost of Nigerian bound imports by as much as 5% – 13% per annum.
i. To quadruple cargo handling productivity in our ports.
j. To attract massive investment in the area of port handling equipment and infrastructures (achieving modern port development) so as to reduce cost of shipping and clearing of imported goods, thereby improving service delivery.
k. To increase and achieve ports operational efficiency, so as to reduce the negative impact of revenue losses from cargo diversion to neighbouring ports.
All of these are laudable proposals and intentions of the government , but in the reality of the port concession program 15 years after, the reverse is the case, majorly due to the absence of an industry economic regulator.
At this juncture, it is important for us to critically reconsider the following earlier red signals of the port concession pointers, with a view to evaluate and see the missing gap created due to the absent of an economic regulator in the port operations:
a). Concession the ripe and right enterprises.
b). Concession at the right price.
c). Concession at the right scale.
d). Concession at the right timing.
e). Concession without compromise to the right operator.
f). Concession with the right sets of tariffs.
g). Concession with technical umpire (regulator).
h). Concession with a clear and non ambiguous agreement that is driven by developmental objectives.
The question, whether the concession programme was properly structured, can only be answered in the face of the prevailing situation in our port environment after 15 years.
It is pertinent to unequivocally reinstate that, openly, the quagmires or throat squeezing challenges in our ports today revolves around the absence of an economic regulator with legislative empowerment.
Though NSC was appointed to spearhead this role in 2014, the concessionaires with its shipping affiliates believe that they are into a major business contract that cannot be checkmated by any arrangement which does not have legislative enablement.
In most instances they call the bluff of the Council and can easily question the functions and powers of the Council. The terminals have never hidden their willingness to contest such arrangements to the highest level possible.
To make meaning of its position, we saw the legal fireworks it undertook with the NSC when the later stopped the collection of illegal and illogical charges imposed by the Terminal Operators and their Shipping Lines affiliates, and to make way for compensation, which they refused to adhere and subsequently joined issue in the court.
This legal battle lasted for a period of almost three years plus. At the end, the court ruled in favor of the NSC. Here again, compliance to the ruling has also been an issue of political meandering.
It is contained in the lease agreement that: “The operations rates shall also be adjusted throughout the term on an annual basis in accordance with the Consumer Price Index for all Urban Consumers ( CPI – U)….”.
This aspect of regulatory compliance requires the professional technicalities of an independent economic regulator, due to its importance to the average life of the citizens.
The same situation is applicable in unbundling the reality of the ” applicable laws and prudent Industry standards” as enshrined in the lease agreement, but owing to negligence or compromises, the scenario presents the same dogmatic posture as it was under Government administration.
It is on the premise of filling this missing gap that gave rise for the National Transport Commissson – NTC, which took years to scale through the legislative surgery and transmuted to the Presidency for assent, but was stopped by forces suspected to be the political machinery of the port operators.
Going forward, it is a height time after 15 years for the Federal Government to right the wrongs ( unstructured port concession process) committed in 2006, doing so for the good of the greater number, bearing in mind that concessioned ports are public enterprise, abinitio.
It is my strong and candid Position that the parliamentarians as the representative of the people should be concerned when they make laws for the greater number, hence, the need to consult the Presidency and clarify grey areas of interests, thereby concluding the enactment of the National Transport Commission Act.
It does not suggest nor promote a healthy representation and legislative process, whereby bills are legislatively attained to, and abandoned at the Presidency.
The Presidency, should as a mark of leadership to the citizens, participate actively during legislative processes and make necessary observations during the process, so that, upon conclusion of a bill, it will meet the deserving attention and accelerated passage into laws for the good of the people.
The present state and port structure is rather a betrayal of the people and a defeat of the national goal, this is because port is private enriching and not national, while investment, development and employment of labor objectives can not be boldly said to be in commensurate with the pace of profiting inherent in the system.
The time to position our ports for optimal efficiency, competitiveness and business friendly is now. And the best and first approach is by the full enactment of the NTC into an Act.
Finally, I am bold to state that, privatisation or concessionnning of any public enterprises in whatever form or category without a central supervision and effective control or an industry economic regulator is a conspiracy against the citizens by the capitalist and the political class.
Therefore, the prevailing status quo in our port Industry has to change, and the time is now.
The ball stops in the hollow chambers cum executive tables.
Thanks for the attention.
Dr. Eugene Nweke Ksm Rff.
Former President of National Association of Government Approved Freight Forwarders (NAGAFF)