7 October 2012

Nigeria: 'Why Ports Aren't Making Profit Despite Concession'


Former Minister of Transport Yusuf Suleiman said President Olusegun Obasanjo administration rushed to concession the nation's seaports even when the necessary laws to protect investors investments were not in place. This is one of the issues discouraging some of the operators from injecting funds. Excerpts:

The ministry of transport you once headed concessioned sea ports. Recently, the exercise was criticized by some Nigerians including former head of interim national government, Chief Earnest Shonekan who said the seaports should have been privatized. Have you ever seen a fault in the concession of the seaports?

I have not seen Chief Earnest Shonekan's comments on the concession of the seaports. But if you are a key observer in the sector and if you have followed all my comments, right from day one when I was appointed minister of transport, I have been a major critic of the concession structure in the country.

Because I felt, for anything to work, there has to be all the variables that will make it work. There are so many issues involved in the subsector reform; institutional reform which was to reform all the parastatals of the ministry of transport and Nigerian Ports Authority (NPA), NIMASA, NIWA, NITT Zaria, Maritime Academy, Oron and all the other subsidiary establishments.

And then the legal reform addressing the issue of statues. For example, the Nigerian Ports Authorities Act does not allow a direct private investment in ports infrastructure. The same thing with the Nigerian Railway Act which does not allow direct private participation in railway infrastructure. That is why the Bureau of Public Enterprise and ministry of transport developed what we called reforms in legislation.

The Nigerian Ports Authority was supposed to have ports and harbour bill that separates the Nigerian Ports Infrastructure and the Services. The key objective is to separate core infrastructure development and service delivery whereby the establishment, as we have today, Nigerians Ports Authority, the Nigerian Railway Corporation and NIWA will maintain the infrastructure as regard reforms then you can privatize the services to the private sector. But the ports concession took place before the legislature passed the relevant bills.

It was at the tail end of the Obasanjo administration that for whatever reason, they jumped the gun and the ports were concessioned even before the bills were passed. So when I came as minister of transport, this was the issue that we had to address.

It is clear that some of the operators are afraid to invest.

We concessioned the infrastructure but operators in the concessioning agreement and the key infrastructure investment were required and we were supposed to give them the necessary legislative protection. When they invest their money, they should have the protection for their investments through the legislation which was not done. So it became difficult for some of them to continue to invest in infrastructure without the corresponding legislation that would protect their investments.

On the other hand, you have to accept that an agreement must be honoured. You signed an agreement without the legislation and so you must come out and work because the idea is to liberalize operations in the ports and make them more consumer friendly, better service delivery, increase the port output so that at the end of the day it becomes more competitive.

These were the issues that we needed to face at that time and I understand that that might be why Chief Shonekan today will say it would have been better if you had sold it because if you know that you bought it, it is your own.

Then the issue of concession does not arise because it is your business so you can put whatever you think you can invest. But today, they are like tenants. Nigerian Ports Authority is the landlord but there are areas they are supposed to make the investments.

Will it be right to say that absence of legislation is the major problem hindering the development of ports in Nigeria?

To me, that is the key issue that needs to be addressed. And these are the issues that fundamentally, must always be addressed in a manner that provides the protection, for both the private investor and the public institutions in a win-win situation. In this kind of arrangement, it doesn't make sense to say that I must get the best cut. No, each of you should work in a manner that all of you will want to see development in the sector because that is key.

The ports have been concessioned, people are still complaining. You hardly see additional investments except in one or two places and these are the issues the ministry of transport will still continue to confront until we break down the problem--address the legislative framework, when the bills are passed.

Experts say Nigeria's privatization program will never succeed so long as the Infrastructural Concession Regulatory Act remains as it is.

I have said it many times, even while I was the minister of transport that it is time we looked at the Nigerian Infrastructure Concession Regulation Act as it is today. I remember, I went to an investment forum organized by NIPC. I think it was in Singapore in 2010. One of the guests came to me and said, "Honorable Minister, is it not an error? You people keep coming out to us ask us to come and partner with you in infrastructure development in the country. You keep coming out looking for investment; I think you should go back and look at your laws. The Infrastructure Concession and Regulation Act does not allow for unsolicited bids. You have asked me to come and partner with you but when I come to Nigeria and bring $100 million and I want to invest in infrastructure development, it is only when I arrive in Nigeria that you will now start policy A, policy B, policy C, policy D. I don't have the time and patience to go through all that before committing my funds to investment."

Luckily for us, even statutes in themselves require that after five years you can review a law in terms of implementation and remove all the grey areas so that you can take it back to the National Assembly. It is for infrastructure concession arrangement reformation to look at some of these key issues that were unnecessary in the original act of 2005, in terms of how to address issues of unsolicited bids; people who want to come indirectly and put in their money and invest.

It is common knowledge that many Nigerian importers prefer going through Cotonou when they are importing. What is the correlation between investment and good service delivery?

There is a direct correlation between investment and good service delivery because you will invest your money where you think you will get better services. See, the irony we have in this country is that over 80 percent of the goods that go through Cotonou are Nigeria bound. These are Nigerian goods and we have always asked this question, why would Nigerians prefer to go to Cotonou than come to our ports in Nigeria?

Yes, these are the issues that we have. When you look at even the terms of the costing, if you are sending a container to Nigerian, the cost is almost double between Nigeria and Cotonou. Now, part of the concession arrangement was to address these issues, to make sure that we had better service delivery in our ports so that they can be more attractive. When a ship berths in the Nigerian waters, for example Apapa port and it has to wait for two weeks, it will turn around because every day, a demurrage is charged on the ship.

And there are people who do not have the patience to wait. When the ship berths, they want their goods into their warehouses. These are the issues that take most of our businesses to Cotonou.

Then there are other administrative problems, particularly in our ports. I am happy to see that some of these are beginning to be addressed like reducing the number of operators in the ports. They have been reduced to about eight or seven now.

I think we have started in the right direction. The idea is to get to a point where within 24 to 48 hours you are able to clear your goods at our ports. If we are able to achieve that, then we can become better and more competitive.

But don't forget, this is an area that most people do not understand. At Lloyds in London, most of these international businesses have certain characteristics and classifications they give ports, particularly harbors and I think the classification they gave Nigeria is similar to the one they give to war-torn countries. So it's like there are also war associated risks in terms of bringing goods into Nigeria.

You have to pay for that because if a ship is going into a peaceful coastal area like Cotonou or Lome and when you're coming to Nigeria, perhaps because of the militancy and other piracy issues that were found in the Nigerian waters previously, they characterized some of our ports as those of war-torn countries and that also has implications to cost.

These are the issues that we need to address as a nation to make sure that our ports become more competitive and Nigeria gains its rightful place in Africa.

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