Another look at the cost of doing business in Nigerian ports
Private terminal operators have inadvertently become the whipping child of Nigerian ports. Nigerian Ports Authority (NPA) used to be at the receiving end of the blame game before port concession but that has since changed with the coming of port concession in 2006.
Whenever people mouth ‘high cost of doing business at the port’, without much thoughts, they readily point accusing fingers in the direction of concessionaires.
I think this is rather simplistic and a reflection of lack of deep thoughts and understanding of port operation in the country.
The truth is that private terminal operators have not only done much to improve the fortunes of our ports, they have also reduced the cost of doing business within their own spheres of influence.
Minister of National Planning, Dr. Shamsudeen Usman, who visited the port penultimate Friday succinctly captured the contribution of the terminal operators when he said “Any ship that comes into Apapa docks immediately but the time of discharge will depend on the type of cargo to be discharged. Before the concession, many ships were waiting to berth such that you see a large number of ships lining up to the Atlantic waiting to berth but now it looks as if there is no business going on in the port. What we see now is due to the work that all these terminal operators have done in the port.”
The Minister, who led the Policy and Monitoring Committee of the National Council of Privatisation (NCP), to the Lagos Port Complex, Apapa also said that port operation in Nigeria has come a long way, stating that “obviously with all the improvement and investment taking place we are heading to a situation where there is a significant headway.”
“For instance, the additional surcharge imposed on every containers coming into Nigeria has been removed and this has been a significant benefit to the importers and those who are doing business at the port”, the Minister stated.
What the Minister said had been stated severally in the past by other leading personalities and keen watchers of port operation in the country.
The situation in our ports today, especially due to increased volume of import by about 200 per cent over the past seven years, would have been worse but for terminal operators.
But port operation and its associated costs are way beyond the direct influence of private terminal operators. There is more to it than that. As a matter of fact, the amount paid to terminal operators, according to the Managing Director of APM Terminals Apapa Limited, Mr. Dallas Hampton, is less than 2 per cent of the cost incurred by importers in the logistics chain. Where then lay the big chunk of this cost of doing business at the port?
In my opinion and from years of observation, high import duty, corruption and bureaucratic bottlenecks are the major reasons why Nigerian ports remain the most expensive among ports in the West African sub-region. Not terminal handling charges or progressive storage charges.
High import duty, corruption and bureaucratic bottlenecks are the factors responsible for the high cost of doing business at Nigerian ports by way of increasing the amount of money importers spend on taking delivery of their consignments out of the port.
As a matter of fact, the costs incurred by port users as a result of these factors becloud the worthy gains of port concession.
Apart from being compelled by the Bureau of Public Enterprises (BPE) in 2006 to charge 30 per cent less than what NPA used to collect as Terminal Handling Charges, port concessionaires have succeeded in reducing the dwell time of vessels, improved turnaround time of vessels and enthrone, to a reasonable extent, efficiency in port operation.
Despite the improved turnaround time, unnecessary delay of vessels by government officials upon arrival and before departure is still commonplace.
Time is money in shipping and that is why in other climes, conscious efforts are made to avoid delaying a ship because the cost implication may be as much as $10,000 an hour. Elsewhere when a vessel arrives the port, it sails straight to berth and begins to discharge almost immediately while regulatory authorities simultaneously carry out their regulatory duties. But not so in Nigeria! When a vessel arrives at our port, it is first kept waiting for about six hours by the authorities under the guise of searching, rummaging and performing other regulatory functions. The vessel is also kept for an average of another six hours after discharging before it is allowed to sail. So unlike at other ports, a vessel calling at Nigerian ports wastes an average of twelve hours to bureaucratic bottlenecks. The average cost of this on a medium size ship will be about $120,000 (N19 million).
Will the shipping company absorb this cost? Of course not, it will pass it on to the shippers and consignees.
Delays in the clearance of cargo also contribute to the high cost of doing business. Many importers and agents do not commence the process of clearing their cargoes until the vessels arrive. If the clearance process could commence pre-arrival of vessels, most consignments would be cleared within the first three days of arrival which are rent free days and thus substantially reduce charges associated with storage payable to terminal operators and demurrage payable to shipping companies.
A publication titled Why Does Cargo Spend Weeks in Sub-Saharan African Ports? written by Gaël Raballand, Salim Refas, Monica Beuran, and Gözde Isik and published by the World Bank last year ranked Nigerian ports as having the highest cargo dwell time in Sub-Saharan Africa.
The book was the outcome of research conducted on ports operations in six countries in the region.
The authors of the book claimed that most ports in Sub-Saharan Africa have average cargo dwell times of about 20 days, compared to three to four days in most large international ports. They blamed the trend on the low level of professionalism of importers and clearing and forwarding agents and the strategies of shippers.
Apart from bureaucratic bottlenecks at the ports, corruption is also a major culprit. I will dwell more on this some other time.