Midstream Discharge: Dangers and government efforts to stop the practice

OPINION FOR THE RECORDS:
The maritime sector in countries with large population and vast water bodies is seen as a cash cow, that is only second to the oil sector judging by the volume of trade and the accruing financial benefits to the government of such nations.
Nigeria with a population of over 170 million and extensive and navigable waterways perfectly falls within the category. With nine designated Custom Ports, 47 private jetties in Lagos, 32 private jetties in Port Harcourt in River State, 23 private jetties in Warri in Delta State and another five private jetties in Calabar in Cross River State, the country has no reason not to reap maximum benefits from the sector.

Maritime experts hold the strong opinion that all that the Federal Government of Nigeria needed to do over the years to sustain collectable revenue inflow from transportation, berthing and cargo discharge of vessels was to enforce the policies that have been in existence for many years, boost economic activities in the sector as well as ensure that regulatory agencies enforced rules and regulations without compromise.

Assessing what has been happening in the sector in Nigeria, experts are of the view that Nigeria has a set of good polices guiding the conduct of players in the maritime sector, but that the challenge has been the impunity with which operators, especially owners of private jetties collaborate with shipping companies and importers to flout rules and regulations. The situation, according to them, is compounded by the low political will of successive regimes to ensure compliance.

Meanwhile, investigation show that since 1991, there have been at least 37 official correspondences which include letters, circulars and memos from agencies of the Federal Government  such as Nigeria Customs Service, Nigeria Ports Authority, Federal Ministries of Finance, Transport, Office of the National Security Adviser, newspaper publications as well as circulars signed by former Presidents Olusegun Obasanjo and Goodluck Jonathan, resolutions of the Federal House of Representatives insisting that terminal operators should stick to the laws, rules and regulations guiding their operations in the maritime sector and avoid the habit of flouting government policies because of inherent risks.

The major offences committed by terminal operators which have been of concern to the Federal Government due to the negative financial and security implications include irregular berthing and midstream discharge of ships/vessels outside Customs Ports as well as the habit of private jetties receiving and handling  cargoes of ocean going vessels.
It is on record that the midstream discharge of cargoes was banned on May 22, 2002 via a Presidential circular Ref./No. PRES/99. In the circular signed by the then President, Chief Olusegun Obasanjo and addressed to the Minister of Transport he said `` I have been briefed on the illegal use to which private jetties are being put nationwide. The illegal activities being carried out at these jetties present major risks to the nation and therefore cannot be allowed to continue. You are to take immediate steps to close all private jetties by revoking the registration licenses of their operations.’’

Earlier in that same month on May 2, 2002, Obasanjo had sent a circular to the Minister of Transport titled ``Stoppage of Mid –Stream Discharge of Cargo’’ in which he said `` I have been informed that Government is currently losing huge revenue as a result of the unwholesome practice of some shipping companies in collaboration with unscrupulous public officials in the maritime Sector.’’

``These practices are not unconnected with mid-stream discharge of cargo. In order to put a stop to them, I hereby direct that mid-stream discharge of cargo should cease forthwith, ‘’ Obasanjo stated.

In a follow-up letter, Abdullahi Nyako, the Principal Secretary to the then Vice President forwarded a circular dated June 23, 2002 to the Minister of Transport and the Comptroller-General of NCS reminding them of the Presidential letter on the stoppage of mid-stream discharge of cargo and the need to enforce compliance.

 On Feb. 22, 2007, the then Minister of Finance, Nenadi E. Usman also sent a circular directing the NCS boss to stop the illegal activity. The adamant private jetty operators who have been desperate to play in the big league by directly receive vessels from foreign waters and discharging their cargoes were still not deterred. The Federal Government has ever remained the loser.

On its part, the Federal Ministry of Transportation in a circular to the Managing Director, Nigeria Ports Authority in 2007 and signed by the then Minister of State for Transport (Water), Prince John Okechukwu Emeka observed that the mid-stream discharge and handling of cargo of ocean going vessels at private jetties were being done ``in flagrant disregard to Federal Government directive banning midstream and offshore discharge of cargo.’’  

These and many other circulars were issued to concessioned terminal and private jetty operators during the regime of Chief Olusegun Obasanjo but nothing changed. It will be recalled that some of these circulars were issued after the Federal Government had concessioned ports in 2006 which saw the handing over of operations of the big terminals that handle the cargos of ocean going vessels, especially the ships that carry oil and gas related cargo to private sector operators.

As it is today, operators of concessioned terminals are still struggling to get value for their investment and thanks to private jetty operators who encroach into their business domain by illegally allowing ocean going vessels to berth and discharge cargo at their terminals.
Further analysis of circulars show that while some of the documents were served on all terminal operators others were served on offending companies that flouted the rules and regulations of government in the conduct of their businesses.

Both sets of documents drew the attention of those concerned of the unwholesome practice and warning them of the consequences of their actions which include huge revenue loss to the Federal Government and attendant security risks. From the documents, private jetty operators which include Ladol and Nigerdock were sent specific circulars intimating them of their recalcitrant behavior and for them to comply with regulations.

It is important also to underscore the point that current efforts to reposition and sanitize operations at port terminals dates back to 1999, six years before the concession agreements were signed. At that time the stock in trade was the midstream discharge of ships. The circulars also show that it is virtually the same companies that have perpetuated this practice.   

From the records Lagos Deep Offshore Logistics Company (Ladol) found to be involved in the practice,  received five uncomplimentary circulars from either Nigeria Ports Authority or the Federal Ministry of Transport concerning its operations. The company was also mentioned in circulars of the Federal Ministry of Finance and Ministry of JusticeAs far back as 2008, a paragraph was dedicated to the company in a circular No. 041/2008 issued by the Tariff and Tradesection from headquarters of the NCS.

The circular which was signed by an Assistant Comptroller-General of NCS, Ihenacho, N.O. said ``there are indications that ships are arriving from foreign anchor at the Ladol Free Trade zone and Snake Island Free Trade Zone as if these zones are free ports instead of arriving and reporting at the Customs Ports. 

Vessels arriving from foreign and anchoring in these locations are violating the provision of section 12 (1) and 4 of CEMA Cap, C45 LFN 2004. Unlawful berthing of ships from foreign and unauthorized locations pose security threat to the nation as it could lead to trafficking in arms and ammunition and also losses in collectable government revenue.’’
Even with the threat that ``NCS will henceforth arrest any ship or vessel in whatever form arriving from foreign waters and berthing in any location other than the approved Customs ports for any reason whatsoever,’’ never deterred the company.

Closely related to this was a circular sent by the office of the National Security Adviser to the Minister of Transport on Nov. 5, 2010 and copied to the President of the Federal Republic of Nigeria and the Comptroller-General of NCS. The document which was signed by the then OA Aziza, then National Security Adviser said ``the recent discovery of illegally imported military armament at the Apapa wharf calls for proper procedures to be followed at the nation’s ports’’.  Incidentally, Ladol jetty is at Apapa wharf. The circular further stated that ``there are indications that some vessels still berth at unapproved jetties outside Customs Ports. You are to please note that these are possible avenues for influx of small arms and other illicit goods into the country.’’

On April 2, 2008, Ministry of Transport responded to Ladol’s request to handle ocean going vessels at the company’s Free Zone in Tarkwa Bay in Lagos. The circular signed by Danladi Achejeon on behalf of  then Minister of Transportation expressed, ``regret to inform Ladol that your request to be allowed to continue with your operation including direct berthing of ocean going vessels with oil and gas related cargos and barges at Ladol free zone is not approved due to the following obvious technical reasons.’’

The Minister listed the reasons to include ``the concessioning of the ports to private companies, Ladol free zone is not a conventional port and cannot operate one and that Ladol free zone is a private jetty and private jetties are banned from receiving ocean going vessels from foreign waters.’’

From the tone of a circular issued by Mrs K.D. Jayeoba on behalf of the Minister of Transportation few months later in July of 2008, it appears that Ladol did not heed to instruction which led to a disruption of flow of work into the company’s free zone. 

In the circular titled ``Re-Recent Disruption of Flow of Work into Ladol Free Zone,’’ Mrs. Jayeoba said `` in view of the guideline for handling oil and gas related cargos, Ladol being a private jetty should not handle third party vessels or receive vessels directly from foreign waters.  That all vessels carrying oil and gas related cargo should be routed through any of the oil and gas related cargo terminals which are specifically built for the purpose. In line with the above, you are advised to comply strictly with the above mentioned guidelines.

In response to a letter from NPA titled ``Loading/unloading specialized oil and gas related cargo and vessels/barges and direct payment of NPA port dues and charges incurred by vessels calling at Ladol in Ladol free zone in Tarkwa Bay, Lagos ‘’, the Ministry of Transportation in April 2008 told NPA that Ladol being a private jetty cannot receive ocean going vessels directly from foreign waters. ``Consequently, it should not receive vessels from international foreign waters to its jetty directly.’’

All these efforts of checking Ladol failed as records show that the company is unrelenting in testing the will of the government in calling it to order. On May, 14 2010 at the official inauguration of the port facilities and foundation stone laying of Phase 4 project at Onne port complex, the President at the time, Dr. Goodluck Jonathan in his speech reminded ``businessmen that all cargoes imported into the country must be discharged at the NPA designated terminals.

``Presidential directives banning midstream discharge and private jetties from receiving ocean going vessels directly at their jetties are still in force. Government will no longer condone security threats and huge revenue loss through the practice of midstream and private jetties discharge of import/export cargoes’’. The President’s threat amounted to nothing as the company did not budge.

In 2011, Nigerian Ports Authority wrote to the Managing Director of Ladol requesting him to note that as a private jetty, the company’s facility is not authorized to receive ocean going vessels. In the letter signed on behalf of the Managing Director of NPA by one Abubakar Dansoho of the Authority said: ``This assertion is pursuant to NPA’s commitment to port’s security and the nation generally. It is important to state that the handling of ocean going vessels by private jetty operators have huge security implications to the nation. In fact this issue has been addressed by several previous circulars from the Federal Government.

``The Authority is determined to sustain the objectives of the Federal Government’s port reform policy that led to the concessioning of ports to private terminal operators. Clearly, the practice of receiving ocean going vessels at private jetties will distort the plan and impede the realization of the port reform aspiration of making Nigeria the ports hub in the sub-region’’, the document stated.

Infact, the most disturbing and embarrassing circular concerning Ladol and which ought to have deterred the company from engaging in illegal operations was contained in a Federal Ministry of Justice circular of Nov. 25, 2013 which showed that the company falsely obtained permission to receive two ocean going vessels per week and smuggled the fake decision into a government gazette.

In the gazette dated  September 4, 2008 Vol. 95, page 226 and titled ``Ministry of Transport-Designation of Ladol Free Zone,’’ it was stated ``Be it hereby notified that the Honourable Minister of Transport has approved the designation of Ladol Free Zone as a Deep Offshore Logistics Base within and part of the Apapa Pilotage District having fulfilled all the relevant guidelines pertained thereof. Under the approval, Ladol is allowed to receive a maximum of two ocean going ships per week. The approval is effective this day 27th September, 2010.’’

Following a letter of Nov. 15, 2013 sent by a company, Supermaritime (Nigeria) Limited to NPA seeking permission to berth a vessel and discharge its cargo at Ladol facility and the insistence of the Authority that such permission would not be granted because Ladol was not qualified to perform such function, the company shocked NPA by brandishing an official gazette authorizing it to receive two ocean going vessels per week.

The development prompted the Managing Director of NPA, Habib Abdullahi, who incidentally is now the current chief executive of the Authority (following his reinstatement) to seek the clarification of the Minister of Transport concerning the status of Ladol. 

In furtherance, the Ministry of Transport reached out to the Ministry of Justice which replied on Nov. 23, 2013 saying that the unsigned gazette ``was irregularly issued’’ based on the fact that ``the law under which the designation was made was not stated, no person or authority took responsibility for the designation and that it is insufficient for the document to bear an unnamed Permanent Secretary.’’

Furthermore, the circular which was signed on behalf of the Attorney General of the Federation and Minister of Justice by J,K,Ehichoya, Esq also stated that ``even though government notice No. 284 did not use the word Port, its effect was to declare Ladol Free Zone a port. Under section 30 of Nigeria Ports Act, it is only the Minister of Transport that is vested with power to declare any place a port. And this power cannot be delegated; and Government Notice No. 284 is ultra vires the unnamed Permanent Secretary who purportedly used it.    

Added to the efforts at enforcement of regulations were 10 full page advertorials in several national newspapers on the illegality of offshore/midstream discharge of cargo. These advertorials were sponsored by the Federal Ministry of Transportation when Dr Edugie Abebe was Permanent Secretary and the Nigeria Customs Service when Olufemi Taylor was Assistant Comptroller-General in-charge of Trade and Tariff. These publications hardly achieved desired results.

The Legislature has also done its bit to ensure that sanity prevailed in the maritime sector but Ladol has refused to bend. In May, 2012 the Federal House of Representatives passed a resolution ``that there is urgent need to enforce the ban on mid-stream discharge of cargoes as well as use private jetties to discharge and load import and export cargo’’. The lawmakers also resolved that ``all oil and gas related cargos are to be discharged only at appropriate designated terminals’’. These resolutions were never carried out.

The last effort by former President Goodluck Jonathan to enforce policies on maritime transport was in April 2015 when he gave instructions that all ships bearing oil and gas cargo should berth and discharge at designated terminals in Onne in Rivers State, Calabar port in Cross River State and Warri in Delta State.

 Hell was let loose as soon as this pronouncement was made as companies which include Ladol, Nigerdock, Customs Licensed Agents, Ports and Terminal Operators Limited (PTOL), SIMCO Free Zone Company and MCI FZE Yard Development Limited embarked on a serious media war attacking the policy and blackmailing Intels Nigeria Limited, accusing it of seeking for a monopoly in maritime sector cargo handling business.

 Apart from the media campaign of calumny, most of the listed companies headed for the courts where they obtained injunctions which continue to frustrate the Federal Government from enforcing the concession policy which has been in existence for nine years.

On May 12, 2015, Ladol and MCI FZE Yard Development filed originating summons and vide a motion ex-parte before a Federal High Court in Lagos,obtained an interim order the same day restraining the passage and assent of the Bill for an Act to amend the Oil and Gas Free Zone. They also obtained an interim injunction restraining the defendants which include the President, National Assembly, Federal Ministry of Transport and the Attorney General of the Federation from enforcing the Presidential directive that all oil and gas cargoes should be handled in Onne, Warri and Calabar Ports.

This order obtained without disclosure of all relevant facts and without joining other parties likely to be affected by the order, had the effect of reversing the extant policy of the government on the handling of oil and gas cargoes in the nation’s seaports. The hidden intention of Ladol was to use the court as subterfuge to continue to perpetrate its illegal activities. 

It is also on record that Nigerdock which has recorded unauthorized use of its facilities going by the contents of Federal Ministry of Transportation memos of February and March 2007 has also jointly filed a suit with another culprit SIMCO Free Zone Company and obtained an order of interim injunction on May, 2015 restraining the National Assembly and the Clerk of the National Assembly from forwarding the Bill for an Act to amend the Oil and Gas free Zone Authority Act to the President for assent pending the hearing and determination of the originating summons. The plaintiffs claim the bill seeks to confer undue advantages on the operators of Onne, Warri and Calabar ports which is not accorded to others.

Similarly, in what is clearly a gang up by the trio to subvert and frustrate government policy, PTOL has sued the NPA and the Attorney-General of the Federation and also obtained an order of interim injunction of March 20, 2015 restraining the defendants from diverting a vessel or any other vessel meant for plaintiff’s terminal pending the determination of the Motion of Interlocutory Injunction.

It is instructive that the suits were filed contemporaneously and all the injunctions issued within days of each other. Even when the illegitimately obtained interim orders have expired by operation of law, these entities continue to hide under the orders to flout government policy. What is disturbing is the silence and inaction of the concerned government agencies.

The observation that has been made is that as long as these injunctions persist the Federal Government will continue to lose U$4.83 US dollars per ton of oil and gas cargo discharged at terminals not designated to handle such cargo.

This translates into the loss of huge sums of foreign exchange annually because in a duly designated terminal for handling oil and gas cargoes such as Intels terminal at Onne, $5.83 is currently being paid per ton as against one Dollar in other terminals.
Furthermore with injunctions, non-compliance to orders and poor regulatory mechanisms, the efforts of the Federal Government to call the shots in terms of enforcing compliance with policies will remain paralyzed thereby leaving it at the mercy of Ladol and others that have forced themselves on the driving seat to be dictating what happens in the sector.

Since the regimes of Obasanjo and Jonathan have failed to regulate what happens in the sector, will the President Muhammdu Buhari follow suit? There seems to be the strong desire by the present administration to change the turn of events in the maritime sector going by the pronouncements of the Vice President, Prof Yemi Osinbajo and relying on the commitment of the President to fight corruption in all its ramifications.
Only time will prove whether both men will fall prey to the near perfected antics of private jetty operators who have resolved to make government rules and regulations irrelevant and redundant or take a drastic decision that will be in tandem with the CHANGE mantra. It will be unfortunate if the Federal Government continues to be a toothless bulldog in the maritime sector.
On the other hand, the new Minister of Transport, Mr Rotimi Amechi should take up the challenge posed by terminal operators in the smooth running of transactions in the maritime sector with a view to ensuring that sanity is restored.