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SEAPORT CONCESSION:

RE-DEVELOPMENT OF NIGERIAN SEAPORTS IN THE NEW MILLENNIUM

Introduction.
Since the inception of seaports in Nigeria by the colonial masters in 1921, no systematic process for their re-development had been put in place until the current concession programme of port reforms started in 2000. This programme brought into existence the current set of private port operators in Nigeria. Moreover, this process of concession gained global credibility with the involvement of the World Bank, CPCS Transcom (of Canada) and Royal Haskoning (of Holland) as project monitors, concession bid managers and consultants, respectively. They worked with the National Council on Privatization (via the Bureau of Public Enterprises, BPE) to birth the new seaport re-development agenda. This advertorial is a brief expose of developments at the Ro-Ro Terminal at Tin Can Island Port Lagos since it was handed over to Five Star Logistics Ltd in May 2006 at the conclusion of the concession exercise.

As the nation’s mass media duly informed Nigerians, about 86 local and foreign shipping companies and marine interests were pre-qualified from an even longer list of applicants to enter the initial bid for the concession programme. The 86 firms started by writing an expression of interest to the Bureau of Public Enterprises in 2004. The entire process culminated in the emergence of private port operators for all the concessions declared by the Nigerian Ports Authority through a widely circulated Memorandum of Information. This was the actualization of a Federal Government policy of urgently needed seaport reform agenda.

What led to the Seaport Concession Programme?

As at the turn of the 21 st century, the world was still waiting for Nigeria to get her acts right at the seaports. Seaports are the major gateways for many nation’s international trade. Due to the huge population of the country, the Nigerian economy accounts for about 70% of all seaborne trade in the West African sub-region. Yet her seaports’ operational profile ranked low in efficiency among maritime nations of the world.

Nigerians who had to do business at the seaports before the onset of seaport concession went through a baptism of fire because of the difficulties. Various forms of shoddiness, lack of plants and equipment, pilferage, bribery and allied vices were carried out by miscreants called wharf rats, by unscrupulous labour contractors who held ship masters and agents to ransom even after they have paid all official fees, and by a multiplicity of poorly coordinated federal law enforcement and security operatives. Some of the deplorable acts were, sometimes, committed by some of the over-bloated workforce of the authorities at the seaports or through their collusion. The fate of Nigerian maritime trade was hanging in the balance when the Federal Government acceded to the proposal of the Federal Ministry of Transport to invite all interested international stakeholders in Nigerian seaborne trade to partake in a competitive bidding for private operators to run the ports purely as profit-oriented commercial ventures which pay royalties to the Federal Government of Nigeria. This was the basis of the seaport reform agenda adopted by the Federal Executive Council and implemented by its agencies beginning from 2000. The proposed reforms were also to address the abysmal lack of development at the seaports which saw them stagnate, over the years, and operate at very minimum efficiency despite thousands of technical and administrative staff employed by the authorities.

A summary of the ills being suffered by the system in the old order included:

  • Turn around time for ships was too long, and usually calculated in weeks, sometimes months, depending on the cargo being loaded or discharged.
  • Cargo-handling plants and equipment owned by the NPA were few and mostly unserviceable, leading to shipping companies hiring these machines from private sector sources after having paid NPA.
  • Dwell time for goods in ports was prolonged due to poor port management. As a result, overtime cargo filled the most active seaports leading to port congestion.
  • Labour for ship work was held in the vice-grip of wharf overlords who controlled dockworker unions and supplied less than the manpower paid for. This fraud, which became accepted by the maritime community lasted for years and was usually perpetrated to extract maximum revenue from helpless ship owners and their agents without a care of how this impacted on the Nigerian economy and the already dented reputation of Nigerian seaports.
  • Nigerian seaports were, as a result of the compounded problems, rated as one of the costliest seaports in the world. See the table on port charges in other West African seaports for a comparison.
  • Many port premises and quay aprons had fallen to disuse and failed road sections inside the ports made movement of goods within port grounds cumbersome and very slow.
  • Following the seaport congestion, complaints of untraceable or missing cargoes were being regularly lodged against the NPA, all to no avail.
  • Security inside Nigerian seaports was compromised by the relentless ingress of multitudes of all shades of persons into the seaports. As a result, miscreants called wharf rats easily gained access into the ports and pilfered goods in storage or vehicle parts. In fact, security within port grounds was at the mercy of an elusive racket.

What are the Objectives of Port Reform and Concession Programme?

In 2001, the Royal Haskoning report on Nigerian seaports reform called Haskoning Study was submitted to the Federal Government and was accepted as a dispassionate x-ray of the Nigerian seaport system. It called for critical reforms. Based on the go-ahead of the Federal Government, the BPE organized four workshops in all the port cities of Nigeria and a national workshop in Lagos to sensitize the nation to the expected sea change in the way shipping in Nigeria was to be modified. The BPE website also published the most orchestrated information about the rigorous programme of bidding and due diligence which were meant to take our fakery, incompetence, underhand dealing or any false representations in the manner of the entire concession programme. The objective was clearly to mark a break with the failures of the past. In summary, the following objectives were clearly identified:

  1. Nigerian seaports should be made efficient in operation. The process to do this will cleanse the Augean stable made up of corrupt labour unionism, wharf rats menace and lazy, lethargic bureaucracy. Therefore effective services to calling ships at reasonable competitive prices must be delivered.
  2. The cost of port services to port users should decrease. This was projected to be achieved by introducing the element of competition among different private port operators managing the various port berths.
  3. The Federal Government should be freed from the costs it incurred developing or managing port operations since these can be commercialized as in other developed maritime nations of the world. Instead royalties should now accrue. Also by this token, the role of bringing port development to keep pace with global maritime infrastructure and best practices will be private sector-driven.
  4. Private sector participation was targeted by the Federal Government as one way to inject new blood into the maritime sector and even take its fortunes to higher levels without committing the lean resources of the public sector which should be channeled to providing basic amenities to the citizenry.

How was the Concession Programme Implemented?

Firstly, the seaport concession agenda benefited from a re-conceptualization of seaport operation in Nigeria. For the first time since its inception in 1954, the NPA had a role re-definition which enabled it to concentrate on the landlord aspect of its mandate, namely, developing and maintaining Nigerian seaport systems. Various government reports identified the over-bloated functions and staff strength of the NPA conglomerate as a weight it could not easily sustain and still deliver quality terminal services in the new millennium. Under the new re-definition, NPA concentrates on ownership and maintenance of its vast maritime infrastructure while ceding port operations to private terminal operators who must show that they possess the competence to deliver world-class terminal management services at Nigerian seaports. The process of their selection was via an international competitive bidding for the available concessions which will now operate as private port terminals paying royalties and levies to NPA and the federal government. In the new dispensation, roles reserved by the NPA include supervision for port planning and development, safety, security, environmental vigilance and keeping law and order amongst all port players, nautical management of the channels and waterways like lighting and dredging activities plus ownership and leasing of port land and infrastructure. Private terminal operators’ roles in the new dispensation include terminal operations for goods passing through the ports, capital investment and maintenance of superstructure and cargo-handling plants and equipment.

To implement these objectives, the Federal Government established in September 2000 the Transport Sector Reform Implementation Committee (TSRC). The Honourable Minister of Transport was made the chairman. The TSRC then formed a sub-committee in NPA for the same purpose of coordinating the reform agenda. In 2001, the Federal Ministry of Transport through the World Bank Public Private Infrastructure Advisory Fund raised funds and commissioned Dutch consultants Royal Haskoning to do a Ports Modernization Project Study. The Study was tasked to do the following:

  • Conduct a detailed technical and financial due diligence of NPA and all the seaports;
  • Increase the involvement of the private sector in the financing and operation of port services and operations; and
  • Define a revised role for the NPA shifting from operational tasks to regulatory and controlling tasks.

Following the submission of consultants’ reports and extensive consultations of maritime stakeholders, consensus was reached upon the strategy for reforming and modernizing Nigeria’s seaport system. The National Council on Privatisation endorsed the “landlord port model” for Nigeria and directed its secretariat to implement the concession process.

The Competitive Bid for Nigeria’s private terminals…

Since seaports are venues of international trade and the reputation of the first-ever private port terminals in Nigeria will depend on the process of their emergence, the Federal Government elected for an international reputable team of players to manage the change process. They are to guide the tender processes and the bid for the available port terminals. Global best practices were required from all players. Therefore the BPE engaged CPCS Transcom to evolve the legal and regulatory framework for the series of transactions, to prepare the restructure and concession plans and to assist in the bidding process.

By this means twenty three terminal leases were carved out from the eight port being run by the NPA. They would, sequel to the concession, be run as separate port terminals and for these slots, the bidders were free to bid for any or all. These terminals styled concessions were located at Apapa, Tin Can Island, Lilypond and Kirikiri all in Lagos. The rest are in Port Harcourt, Calabar, Warri and Koko. (See map for the ports locations). Expressions of interest were requested from bidders worldwide and pulled through the entire gamut of rigor to establish the best offer that would most benefit the Nigerian nation.

The anchor of Transparency

A few ground rules were set to meet and satisfy the international standard of transparency and fair competition in the transactions, as follows:

  • Deadlines for bid submissions were strictly followed.
  • Bid openings were done in the open and involved all relevant stakeholders from NPA, the bidders, CPCS Transcom and even the print media and national television stations.
  • Technical evaluations must be done by BPE’s transaction advisors only.
  • Evaluation reports were approved by the National Council on Privatisation and the Presidency before opening of financial bids, and
  • Post-bidding negotiations with winners involved all stakeholders including the BPE, NPA, labour and the Federal Ministry of Transport.

To become the highest bidder, a company must have fulfilled the submission of two sets of separately packaged proposals, a Technical and a Financial proposal; with accompanying electronic and hard copies, and according to all stipulations, to the BPE within the time limit specified. After the bid winners were announced, the winners had a specific time frame to pay up the proposed commencement and other relevant fees to be able to consummate its winning of the terminal lease agreement for each of the terminals put under lease. In fact, the seaport concession programme bid process can be ranked in the same success bracket with similar bid processes like the telecoms concession programme of 2001.

                             
Failed Section of the Terminal ...................................Another failed section of the terminal


Car Park at the Terminal

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