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How Nigerian Consumers Pay Heavily for Inefficient Ports Operations

More than two million containers laden with various cargoes worth over N5 trillion are currently stranded at the Lagos Port Complex. These containers lie stranded or rather abandoned at the Lagos ports for the simple reason that the businesses and individuals who brought them into the country have become largely frustrated by the inefficient operations at the terminals that those cargoes cannot be readily evacuated. The demurrages accumulated due to the slow pace of things are neck-breaking for several businesses that abandonment becomes the most economically rational thing to do.

Nigeria has six ports across Lagos, (Tin Can and Apapa), Port Harcourt, Onne, Warri and Calabar.  Of the six, Apapa and Tin Can account for 70% of imports into the country according to data from the Nigerian Ports Authority- NPA. Other ports in the country (except Onne where the bulk of the country’s crude oil exports pass through) have seen very little activity in the past five years. Experts opine that the administrative bottlenecks imposed by certain political interests do not encourage importation through any of the other ports in the country. Importers are almost nearly compelled to use the Lagos ports even for cargoes that are targeted for other parts of the country leading to unbelievable levels of congestion, sky-high corruption and criminal levels of inefficiency.

The challenges

Road users encounter serious difficulties along the roads leading to the ports

In studying the situation at the ports, a number of key problems ranging from sheer incompetence to criminal sabotage have been identified. Isn’t it strange that the UK with a population of less than 65 million is serviced by 120 commercial ports while Nigeria has only two active ports catering for the external trade demands of more than 200 million persons? Across the Atlantic, the USA has 20 container ports around its coastline, Mexico has 117 and Venezuela, an oil-producing country like Nigeria has 21 operational ports. Within the African continent, you will find 8 ports in South Africa, Kenya has 15 and Angola has four active ports. How come the largest economy in the region with six ports can only keep two- located within the same city- functional?

Nigeria is an import-dependent economy spending $36.5 billion bringing in several categories of goods from various parts of the world into the country in 2018. Of the figure, $22 billion representing 60.3% of total import value was spent on food items. Observers and commentators are stunned that a nation that relies virtually on imports to feed its population, fuel its machineries, bring in cars for commercial and official activities and several other materials with domestic and industrial applications could be so lackadaisical concerning what happens in its ports. Recent data obtained from World Bank and the United Nations Conference on Trade and Development revealed that in countries such as South Africa, Morocco and Egypt, containers are cleared within 4-6 days. In Nigeria by contrast, imported cargoes can lie idly for months at the ports, accumulating demurrage for the importers.

A long standing problem

To be clear, Nigeria’s port problems are not exactly recent. However, it is shameful that in the self-styled giant of Africa, problems are allowed to fester even as officials continue to present bogus claims to the public. In 2006, the Obasanjo government sought to introduce some reforms into the way cargoes are handled at the ports in line with the economic transformation agenda of the regime. NPA in the new order relinquished its active cargo holding responsibilities to private operators who were expected to bring in innovative solutions to the business of ports administration, introduce smart technology and reduce arbitrary corruption in the system. Under the new arrangement, the NPA was allowed to retain its responsibility for ports infrastructure, regulation, and monitoring, but handed duties such as cargo handling, maintenance, and security to port terminal operators. Currently, there are seven terminal operators at the Apapa Port.

The failure of earlier reforms

MD, NPA, Hadiza Bala-Usman

The madness observed at the ports- especially in recent times- points to the obvious failures of the reform initiatives. The Convention on Business Integrity (CBi) found the ports in the country to be amongst the most inefficient in the world and listed some of the peculiar problems you find in Nigeria to include- rampant exercise of discretionary power by port officials,  bouquet of payments made for services not provided, lack of awareness by port users of grievance-resolution mechanisms, abuse of discretionary powers over fees by ports officials, poor port infrastructure which cost port users excessive overruns in terms of extended port processing time and a rise in port charges due to processing delays. A 2015 performance review of the Nigerian Ports by Seaport Terminal Operators Association of Nigeria exposed failures of the port reforms. The reforms, according to Vicky Hasstrup brought about weaker vessel security and longer customs delays.

The congestion and general inefficiency you find in Nigerian ports have serious negative implications for an import-dependent economy like Nigeria. Aside from the outcry by port workers and business organizations, the port congestion has also led to an increase of operational costs by ocean carriers, which has generated severe service disruptions that have lasted September 2018. Several carriers including Maersk, MSC and CMA have since announced peak season surcharges with its attendant implication on the bottom-lines of the average importer.

The cost is on Nigerian businesses

The Lagos ports have since become giant institutions of corruption and exploitation with importers having to pay hundreds of thousands to facilitate the clearance of their cargoes- even after paying the statutory fees at the appropriate channels. The introduction of uniform tariffs (about five million naira no matter the value of your cargo) on containers also goes against international best practices and is heavily skewed against the operational success of small scale indigenous business people. The unwillingness of several regulators including the Nigerian Shippers Council, the Nigerian Ports Authority and the federal ministry of transport to protect Nigerian businesses may have motivated foreign terminal operators, international carriers and logistics handlers to raise their exploitation games, forcing Nigerian importers to pay penalties for problems they neither created nor are in a position to solve.  

Thousands of cargoes are abandoned at the Nigerian ports

A lot of cargoes are abandoned at the ports due to the heavy demurrages accumulated, some because the owners have been frustrated to the point of giving up while for others, the cargoes have become economic liabilities for the simple reason that the business opportunities that motivated the initial importation no longer exist.  It is estimated by some ports experts that Nigerian ports contain the highest number of abandoned cargoes.

The citizens also suffer

The ugly situation at the ports has wide-ranging economic and social implications including unemployment, low industrial capacity utilisation, loss of economic times, pervasive poverty and poor ease of doing business rating by international organisations.  More troubling is the knowledge that when importers eventually manage to clear their containers at the ports after paying exorbitant charges (both formal and informal), the cost is immediately transferred to the end-users (consumers) who now pay high fees for the products imported or for the final goods whose raw materials attracted the exorbitant charges at the ports. In a country where almost a hundred million people live below the poverty line, the government should be concerned that the citizens pay disproportionately higher amount for good that citizens in more economically advanced countries get for far less. 

Solutions

Getting other ports in the country functional can ease the stress of importation

The authorities must be concerned with humongous economic losses Nigerian importers and businesses suffer at the Lagos ports. For a start, Port Harcourt, Calabar and Warri ports must be brought on stream immediately and made conducive for ships to berth without paying discriminatory fees. Infrastructure must be provided at these ports to bring them to world-class levels while more effective terminal operators are contracted to inject private sector-led initiative into ports routine operations and to enhance efficiency. It does not make sense to penalise the brave men and women who have remained undeterred in their determination to contribute to the economic growth of the country despite the odds.

The views expressed in this article are the author's own and do not necessarily reflect ROOT TV's editorial stance.

ABOUT THE AUTHOR

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Okafor Chiedozie
Okafor Chiedozie is an economist, political writer and amateur Igbo historian. He pursues these and other interests out of Abuja.
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