Nigeria losing revenue to faulty port concession agreement, says Official

Engr. David Omonibeke, Executive Director, Marine and Operations, NPA

Assessing the port concession programme 10 years after its inception in Nigeria, the Executive Director, Marine and Operations, Nigeria Ports Authority (NPA) Engr. David Omonibeke in an interview with some Maritime Correspondents, calls for a review of the concession agreement, revealing that Nigeria has lost over 200 million USD to the ‘move’ clause in the concession agreement with one of the terminals.
Omonibeke  also spoke on other industry issues….

What is your assessment of the Port Concession Programme in Nigeria in the last 10 years?
In any business or scenario, you have advantages and disadvantages so, what you do is to compare the level both and then, take a decision. If we are to look at the port prior to 2006 and where we are now, in terms of the advantages, we have removed some inefficiency especially when it comes to cargo handling which government was doing. And, that is the concession. We concessioned cargo handling which also has to do with stevedoring.
Government, prior to  the concession was having challenges. It was responsible for the machinery…equipment…the cargo handling equipment. There were so many people within the ports. There were wharf rats. You could import a car and when you come you will not see anything.
 Also, the government officials then too, you will see a crane that they say had been fixed but for it to handle a container, it will get stuck and that is, after releasing so much money. You also had scenarios where the tug boats took so much diesel and at the end, it will move only one vessel in and they will say there is no more diesel. So, you had longer waiting time for vessels. Also, to mobilise pilots, you had challenges of the pilot quarters and your tug boats.
So, when government in its wisdom looked at the concession and did it in 2006, they brought in terminal operators to help in terms of cargo handling and stevedoring services, expecting the concessionaires to pay lease fees and throughput which is a percentage of what we were collecting when we handled the goods ourselves. This was enshrined in the agreement. Where you are collecting 6.5USD for example, you give the Authority 1.1USD.
Some concessionares decided to specialise in goods going to the oil field etc. They did that in the bidding room with BPE (Bureau of Public Enterprises). Every concessionare was allowed to bring out their projections, the kind of cargo they wanted to handle, the kind of business they wanted to do. They were also allowed to tell government how much they could pay for the lease area. It was based on this that some other people were denied the concession. We also have what is called Guaranteed Minimum Tonnage. It is reviewed every two years and for all the concessionaires except one, it is tied on the throughput fees-the cargo movement.
It is only in one agreement that you have what they call ‘moves’ which is strange to the port operations because you are talking of the container ‘moves’. It means when they move the container from ship down and move it again and again. And they have a clause that once they do not meet certain targets, they penalize government. If they do not achieve their ‘moves’, what they do is that they make deductions directly from the lease fee. And the lease fee is fixed and is not supposed to be tampered with.
The provision of the clause says that if you want to touch the lease fees, it should be on technical grounds or the place is encumbered and you do not have access to it. We have related with the concessionaires to ensure they do not pay for areas they do not have access to. But by that agreement, that terminal has power to deduct money from the lease fee and government has suffered loss based on that agreement.
So, you mean government is losing huge money especially now that import volume has dropped?
That is exactly what I am saying. Because of the ‘moves’ agreement, they just do their deductions. Since the concession in 2006 till date, government has suffered deduction from the lease fee over 200 million USD. That is why NPA representing the government has been making attempts to call that terminal operator to a round-table for us to discuss and adjust that ‘moves’ to ‘throughput’ as it is in other concession agreements. But you see, the beauty of the concession is that it is the two parties that must come together and agree but they have been very evasive.
And we have taken a stand too because in previous times we had given considerations for one or two challenges they met like empty container export. They were supposed to pay the same with containers that were coming in, but we had meetings then, and government had consideration and brought it down. But when it comes to their own and they know that it is queued against government and to their favour and they do not want to come to the table. That is why presently, they are having challenges with dollar payment and we said no, if must discuss that, we must all come back to the table and this ‘move’ issue must be addressed.
Has the concession programme yielded any benefit so far?
At the ports now, there are no wharf rats anymore. The vessel turn-around time has also improved tremendously although it is not where we want to be. What government has in mind is 48 hours clearance of cargo. So, we are working towards that. Government will keep improving on its policies. And the concessionaires, we also expect that they get the cargo handling equipment. Yes, some of them have got some, but some have not.
As the landlord, there are certain things we have to do as well, as a government in terms of the draft channel. When we were handing over, agreement was reached as to what draft we are supposed to have. For some of the areas in the ports, government was unable to achieve the draft that was agreed because we do not have channel management companies in those areas.
Like you are aware, we have six ports and in Lagos, we have the Lagos Pilotage District where we have the Lagos Port Complex and Tin Can Island port. The Lagos Channel Management Company is responsible for the draft in Lagos District. And prior to the concession, the maximum we could have in some of those berths is maybe nine meters but now we are achieving 13.5 meters and we are having bigger vessels coming.
With the terminal operators, we are also discussing and carrying out simulations to see how they can bring vessels of length overall 300 meters which will also bring in more cargoes.
In the East, we have the Bonny Channel Management that dredge and maintain the draft for the Rivers and Onne ports and then Bonny, the Liquefied Natural Gas channel. There, we also have tremendous improvement in terms draft.
Government has also established the Calabar Channel Management but, we presently have some challenge that is being investigated. I believe when the issue is resolved, that area will be taken care of.
Government is also working on Delta port. We have already given consultancy services but some of the challenges there is that you have a lot of pipes. The West African Gas pipeline passed through there and they are in a certain depth that consideration has to be given to know which one can be removed or reduced for us to have a very deep channel. I think the consultants will come up with all those alternatives before government will finally set up the channel management company.
Presently, there is a lot of challenge there because at the Escravos bar, vessels face a lot of restrictions. They have to work with the tide to see how they can bring in ships.
On port development, we are investing in deep sea ports as well. We have the Lekki one which will soon start. That is where you have the Dangote refinery and the Free Trade Zone. It will have about 15 meters draft with big vessels coming in. The essence of that is that when you have a deep sea port you do not need channel management.
So, it will reduce the cost of maintaining the draft and then bigger ships come in and this will impact in ship dues and improve on the trade. These other ones are river ports and the only best way to have it is to have the channel management companies.
What is the situation on Ibom Port? The Honourable Minister had asked the former and current Transaction Advisers to settle their differences out of court but no one is meditating. As the body representing the Federal Government in the project, will NPA take this up?
I can’t discuss this since it is a matter in the court. The Minister has said they should settle outside the court. We have a committee where NPA is a member. Akwa Ibom State Government is really interested in the matter and that is why they have given us (NPA) the Certificate of Occupancy. The Governor is really interested and he is working towards resolving the matter. So, I cannot give you an affirmative as it is not directly what I am handling.
The Nigerian port is missing on the list of the top 50 world container ports published by the World Shippers Council. How can we say port concession is effective given this indices?
When we came on board (that’s this management) in 2012, we were fifth on the list of ports in Africa. Our goal is to be the leading port in Africa. Now, we are number three. Before, we were not including crude export in the throughput. Now, we have included them in the data and it has shown the volume the ports are handling. In terms of effectiveness, like I said in 2006, we concessioned the ports. Now, we have less people in the port. The port is not an area where you should have too many people. Once you have the system automated, a truck can just go when it is expected.
The ports should be like a graveyard. But in Nigeria here, the clearing agency, everybody wants to be in the port but government maintains just seven agencies.
Just recently, I read in the papers that the Minister of State for Agriculture said Quarantine should immediately move into the port because of the outbreak. I do not know how that will be done. Some agencies come into the ports at the invitation of Customs not that they have offices in the ports. We will look at all that and see how people can work outside and come into the ports only when the need arises.
That is why when our sister agency Shippers’ Council was asking to come into the ports too, we had to make them understand that they could have suggestion boxes in the ports but not offices so, if there are any complaints, people can reach them. If they need to meet them, they go to their offices not the ports. We should not take two steps forward and four steps backwards.
We are working towards efficient service delivery to see how the world will look at our ports and rank us as one of the world’s effective ports. This will happen when we start to reduce human traffic in our ports and have a single window in terms of payment. We are working with Customs, NPA, NIMASA and other major agencies can work together. If someone applies and payment is simple, easy and seamless, it will improve the status of our ports. So, it is not just Nigeria Ports Authority, it has to be a synergy of relevant agencies in the ports to ensure that we provide these services.
Also, security in the waterways, pirates attack …those are indices. If the Gulf of Guinea is safer and we do not get reports of hijacks once in a while then, it will also improve our marine insurance.