Chief Chris Borha, the Port Industry Analyst and Head Analyst, C. A Borha Management and Economic Services speaks on the recent 48-hour cargo clearance directive of the Presidency.
Borha examines practical port processes and the possibility of attaining the 48 hours feat. He also bares his mind on review of port concession programme and the need to simplify trade facilitation processes while protecting Foreign Investments.
Is 48-hours cargo clearance visible in Nigerian Ports visible?
This concept of 48 hours clearing has been on for a long time but it is just a slogan because nobody has sat down to answer the question- 48 hours from when? So let us trace the process. The port is an interface between water and land. An ocean going vessel bringing goods to Nigeria will get to the boundary between the ocean and the channel. That boundary is called the fairway buoy…he gets to the fairway buoy and he tells Nigeria…”Hello Nigeria, I’m here.” Can we start counting 48 hours from there? No! Then Nigerian will say, “You wait we are bringing you in.” The Nigerian Ports Authority sends their pilot to go and bring the vessel into the berth if there is a chance. Where the berths are occupied, the vessel waits. So, coming to the berth it depends on the occupancy rate but let us assume that for this analysis there’s chance and the pilot berths the vessel successfully. Can you start counting 48 hours from there? I don’t think so. Now, you have left the water, you come to the land. In the past, it used to be one person that does all of these activities. It used to be Nigerian Ports Authority but during the ports concessioning era, the activity on land was concessioned to private terminals operators. So, let us assume for argument purposes that that vessel is in a container terminal. Then the private terminal must still offload the container, hold it and the vessel departs. I think it is at that point you can now start counting your 48 hours.
The point we are making on the directive is, from the time the container is offloaded and the terminal operator is waiting, the owner of the cargo must take possession within two days. But for the owner to take possession within two days, it is assumed that the owner of the cargo would have completed all documentation with the Nigerian Customs, paid their duties and also paid the Shipping line that brought the vessel. If you then come to the terminal operator, if you come within a specified number of days, you can take your cargo free of all charges before it gets into demurrage. The critical question is “What exactly is preventing the owner of the cargo from showing up within two days. If you can answer that question, you will be in a position to meet the objective of 48 hours.
Moreso, not all vessels are cleared at the same speed. General Cargo takes longer time. It sometimes takes a week to offload rice, cement. The requirements are different. Roll on, Roll off is supposed to be the fastest, they can be cleared within hours, followed by containerized cargo. Also, take the peculiarities of the Nigerian importer. Let us assume he imports cars from Belgium and has been told to pay one million naira to Nigeria Customs but he doesn’t really have a customer yet. He calculates the demurrage he will pay versus the amount he will pay if he takes his cargo outside the ports to the bonded terminal. If the cost of paying bonded terminal is higher than that of keeping his cargo in the ports, he will leave the cargo in the port.
Sometimes, people don’t clear Customs seven days or two weeks because of false declaration. Everybody wants to confirm that what is on the Bill of Laden is exactly what is in the container. So there’s the element of physical inspection. I know that with the professional method of the Customs, they can decide who has a green light or the red light. If the cargo is coming from areas they suspect they need to pay more attention, they pay more attention to it. But if you are going to do physical inspection of containers, it is going to take more time than the 48 hour bid. So the interplay of the characteristics of the Nigerian importer, of the characteristics of the Nigerian economy, of the characteristics of security demands of the nation, of our particular culture affects cargo clearance. On the security of the nation, let me ask you…If you have the power to clear your cargo at night, will you remove your cargo from the port at midnight? Will you put your container on the road at midnight from Lagos to Ibadan or even Apapa? No. Ours is a 12 hour economy. The Nigerian economy is not a 24 hour economy. The nature of the economy also affects 48 hour clearance. People don’t work on Sundays in Nigeria.
The point I’m making is that 48 hours clearing is a goal we should try to achieve by simplifying the trade facilitation process. We should progressively strive to attain 48 hours and it should start counting from when the vessel has departed and the cargo is with the terminal operator.
Again, it is only in the Western Ports that channels are open 24 hours. To this day in the East, vessels are not allowed to sail at night. It started from the Civil War but it is still on. If you sail at night, you are doing it at your own risk. Only the large LNG vessels going through the Bonny Channel sail at night because Bonny Channel has been adequately dredged and taken care of. You know all the various problems with the Gulf of Guinea. We should also try to ensure that 24 hour sailing on all our channels is attained.
Review of Port Concession: How do we get it right?
Nigerian Ports Authority as a tool port was not working. We were more efficient on water. We keep all the channels open. We also have the pool human capital. Since 1956, Nigerian Ports Authority has been bringing in vessels successfully. However, when it came to our activities on land, we were not quite the best. We did not do well in cargo handling, yard operation, terminal operations, cargo safety, port lining, access roads etc. That was why the thinkers at that time and World Bank said cargo handling should be concessioned. After the due process, private terminals operators came on board. The World Bank by the way recommended that we started concessioning only a few ports then if it is successful, migrate to others but because of the nature of our economy and politics, if we didn’t do everything at the same time the way it was done, it will never have been done. In fact, a lot of people forget that there was a second part to the Port Concession. The second part is the decentralization of the Ports Authority. And the decentralization was done. There was Eastern Port and Western Port so that the ports could compete amongst themselves. One of the reasons why the decentralization was necessary was this… hard currency that is being earned in the east, in the oil terminals at Onne, Calabar, Port Harcourt are all sent to NPA in Lagos and Lagos in turn gives them so to speak ‘pocket monkey‘ to run their operations. It was not the best. The argument was and I agree with that argument to let the port keep the money they have earned, let them use it to improve their ports and compete among themselves in prices, cargo handling and operational efficiency.
Government accepted that World Bank recommendation and actually decentralized Western Ports and Eastern Ports. But immediately the government that did it left power and the new government came, everybody said it (decentralization of the ports) wasn’t in the Port Act and instead of changing the port act to suit what had been done, it was cancelled. The autonomous port system was overruled and they came back to the unitary port system. That is the second part of the concession agreement that has not been done. I will counsel we should go that way. We have to give kudos to former President Olusegun Obasanjo who put the force of his office behind the concession exercise, the then Honourable Minister of Transport, Dr Abiye Sekibo, the then MD NPA, Chief Adebayo Sarumi who guided the concessioning exercise objectively and was successful.
Port Concession was successful because first NPA stayed away from terminal operations. Private sector invested in new equipment, yard management, automation etc. Before then, we had ‘wharf rats’, people looting containers, but now the Private terminal operators have added value. The Ports Authority also now makes more money through the annual lease fees, berth rent, cargo throughput fees. However, the test is to make good better and better best. So, we need to look at the agreement. Where have we had problems? A major problem of Port Concessioning was that the speed of taking decision was faster in the private sector than the public sector. The private sector is obligated to improve its berth but it must get permission. The private terminal operator brings a proposal for consideration and approval but the Port Authority takes months to approve.
There are obligations of the NPA in the concession agreement. Take the obligation of NPA to Port Harcourt Port. The Authority was obligated to deepen the channel so that they can handle bigger vessels. It has not been done. Before you do your budgeting, allocate money, get approval, advertise, shortlist and do the various things that government does, what should have been done in one year takes two years and then it creates a problem and becomes a business argument, a liability. Change in government policy is another issue. I remember there was a change in cement policy shortly after a terminal operator in Port Harcourt went into the business of bagging cement. In the middle of that transaction, the policy changed and the man was left holding the bag.
In my view, simplifying the processes of the Authority will also help the Port Concession Exercise. There is nothing wrong in the review but not just on the side of the terminal operator. Everybody should come to the table with the improvement they think should be considered. I understand there are some grumblings about throughput fees, about paying in hard currency, about updating government policies that affect their cargo offerings, about logistic base and people who want to handle oil and gas products but balance that with the hazardous nature of that business and the need to be particularly well equipped for the business during the review.
Port Terminal Operators say government is not protective of their interest. How important is it that we address this for our economic growth?
Government has not been consistent with its economic policies. Of course the terminal operators are right. The economic climate is hostile and whoever came up with the policy that made the Nigeria Customs to be independent of the Ministry of Finance should please think again. The Nigeria Customs implements policies, they don’t make policies. We have a system where the Nigeria Customs is making trade facilitation policies…this can come by land, we have stopped it, rice can come through the border in the morning, waylay vehicles and find out if they paid…but lack of consistency has not helped the private terminal operators.
I agree that part of the concession review should include a review of the Trade Facilitation processes of the Federal Government. Without that review, I’m sorry it is not going to work. We should not see private terminal operators as opponents, they are our partners. Let us make trade facilitation easier and step back from all this harsh environment. People have planned their terminals and in between, you just change the rules of the game for one reason or the other. The other day, export of logs of wood was banned, even finished products. Out of the blues! You are a company, you have taken your decision, you have opened Letters of Credit, traveled and met your business partner, they tell you we cannot export raw logs that you must add value, you have added value you are at the point of exporting and the Ministry of Environment issues a decree that because some people were smuggling unfinished logs, therefore nobody can take this out until after the Ministry’s review. What do you think you have done to that businessman? He may never be back in business. This is part of the inconsistency we are talking about. Everybody is in charge of trade facilitation-Ministry of Trade, Ministry of Environment…meanwhile the Ministry of Finance that has the capability that has signed all the agreement and has the fiscal responsibility is there.
The exit of Lekki Deep Seaport Partner- Could this also be as a result of a hostile business climate?
A formula was later arrived at to encourage foreign investors develop private ports. Foreign Investors were allowed to own 60%, the Federal Government through the NPA had 20% while the host community 20%. I think the Lekki investors should accept responsibility for one thing- the initial decision they took to look away from port development and concentrate their emphasis on the Free Trade Zone (FTZ) in my opinion was an error. They first of all acquired lands for Free Trade Zone .When they told NPA that they wanted to build the port, NPA told them that they could not build the port on their own land and so the financial/economic gymnastics started. They had to transfer the land to NPA, NPA valued, hand over to them etc. I think Lekki thereafter got Sovereign Guarantee. Now, the funding has been a problem. Everybody is saying “how much money have you brought?” NPA says “we have brought this amount of money”, Lagos State says, “let us pay you with land”. So, between Lagos State and the investor and the Federal Government, things were not moving quite as fast. Then access road became a problem. To evacuate your cargo from Lekki, a new form of express road has to be built; it has to pass through other States. Once Ogun State discovered it was passing through its State, it wanted to be part of the game. So, economic decisions that should have taken one year are taking four years, financial contributions that should have been done and dusted with three, four or five board meetings is taking four/ five administrations. They had brought in experts to build the Container Terminal, Ports Authority had already signed on and paying its money, Lagos State was active but the delays in signing off on regulatory and financial approvals affected Lekki until those people got tired. Look at what happened last year, calculations that had been made on N170 to the dollar suddenly became 400+ to the dollar. All the models became useless. Now it is 300+ to the dollar. However, can you plan based on this?
You need consistency of government policies to do some long term plan. If I want to sign an agreement with you and it has foreign currency content, what rate am I going to use if it is going to be a two or three year plan? The uncertainty is too high.