Wednesday, 20 November 2013

America Wonder!

 

Wonders, they say, shall never end.
The story of the vessel known as C-Retriever is an amazing one. For the benefit of those who might not have followed the story, C-Retriever is a 221-foot oilfield supply ship owned by an American company known as Edison Chouest Offshore, based in Louisiana, USA. Before I delve into the story proper which might sound like a typical storyline out of Hollywood, it is important to point out that C-Retriever was operating illegally on Nigerian waters. It was in total breach of the nation’s Cabotage Law which requires vessels, including offshore supply ships, carrying out business on Nigerian waters to be owned by Nigerians, registered in Nigeria, maintained in Nigeria and crewed by Nigerians.
To the best of my knowledge - and I made enquiries at the appropriate quarters - C-Retriever did not comply with any provision of this law. First breach; it was flying American flag. Next, it is owned by an American company operating from America. The ship, according to my findings does not undergo serious maintenance checks of any sort in Nigeria and to make matters worse, its Captain and Chief Engineer are Americans. And it did not obtain waiver as required by law to trade on the nation’s territorial waters. So I think the first thing for NIMASA to do with regard to this ship is to apprehend it and prosecute the owners or their agents.

Now to the story: C-Retriever was said to have been hijacked near Brass, Bayelsa State on 23rd October, 2013. It was the Cable News Network (CNN) that broke the story. Every Nigerian newspaper that reported it subsequently only mouthed what CNN and other western media reported.
It was the western media that also claimed that two American sailors, the ship Captain and Chief Engineer, were kidnapped and taken hostage. No any other detail. No mention of the names of the Americans, no mention of other crew members; no nothing. And to make matters worse, the Nigerian Navy which maintains regular patrol on the nation’s waters said it was not aware of the hijack. Neither the American authorities nor the US Embassy nor the owners of the vessel nor family members of the kidnapped sailors deemed it fit to make any report to any Nigerian authority. All we got on the hijack and kidnap was the usual arrogantly terse statement from the US authorities. The US State Department said it was "closely monitoring" the reports and was "seeking additional information about the incident." And that was all. No mention of working with Nigerian authorities to rescue the ship.
The Nigerian Navy had no clue of what was going on. The Director of Naval Information, Commodore Kabiru Aliyu, said shortly after the alleged hijack and kidnap that despite the fact that the incident was not reported, Nigerian Naval officials were doing all they could to find the vessel and rescue the two sailors. He said the Central Naval Command, Yenagoa, had been instructed to take over the search for the vessel and the sailors.

The Central Naval Command in Bayelsa also said it had been combing the creeks around the area to track the vessel. The Commanding Officer, Forward Operating Base, Brass, Bayelsa State, Capt. Aniedi Ibok, said that it was curious that the company where the two sailors were working before their alleged abduction did not report the matter to naval authorities.
He said the only report they heard about the entire incident was on CNN. He said while the Navy was working round the clock to find the vessel that was conveying the Americans, information from other crew members on board the C-Retriever could be of vital importance. “We are still searching our waters to see if we can get the vessel since it was not reported to have been kidnapped. Apart from reported abducted two Americans, there were other people in the ship. They should be able to talk. They should be able to tell us where they are. They have not made any report. They have not called the Navy, neither have they called the Joint (military) Task Force. The only report anybody has heard regarding the abduction is from the CNN and nobody can work with that. The company they are working with should be able to give us information. They cannot be working in Nigeria from America. At least, somebody should be able to tell us what happened,” Ibok said.
He said it would be impossible to have taken the vessel to the creeks.

“They could not have taken the vessel to creeks. The vessel is too big to be taken to the creeks. They did not say they kidnapped the vessel. They only said they kidnapped the Captain and the Chief Engineer,” he said.
But despite the lamentation from Navy, the Americans won’t budge.
The next thing we heard about the vessel was that it had been sighted somewhere around the creeks of Onne. Recall that Ibok had stated above that the vessel was too large to enter into a creek! But the Americans said they found it in the creek. And it was reportedly found by, wait a minute; NBC News. Not by the Nigerian Navy. Not by NIMASA. Not by the Marine Police or any security agency in Nigeria but by a press crew made up of an Asian and an American which flew in from America (and headed straight to where the ship was lying, I suppose!). That happened on Monday last week and by Wednesday (two days after), CNN again reported that the two American sailors had been released.
The cable news network quoted the US State Department as having confirmed the release. “We welcome the release of the two U.S. citizens who were kidnapped from the M/V C-Retriever. For privacy reasons, we will not provide any additional information,” a State Department official reportedly said in a statement.
“It is the policy of the United States not to pay ransom or encourage the payment of ransom money,” the statement added although other reports claimed the men were released unharmed after a ransom was paid.
And no one in Nigeria saw the men. They were said to have been flown “home”.
Really I am beginning to doubt the integrity of all these. If truly this happened on Nigerian waters and the Nigerian authorities were not involved in it, then something is definitely wrong somewhere and the Nigerian government will do well to lodge formal complaints with the US authorities. I wonder if another country could have acted on US waters, the way the Americans did in Nigeria with regards to the C-Retriever case, and get away with it.
And if it truly happened and the two sailors have been flown out of Nigeria, the government should demand their repatriation to Nigeria to face prosecution for breaking the Cabotage Law.

Monday, 11 November 2013

Import duty waiver: The scam of the affluent

 

Import duty waivers, exemptions and concessions are used by governments in various parts of the world to protect local businesses and jobs but they have typically been serially abused here in Nigeria and have become a major drain on the national economy.
Minus the abuse which they have been subjected to in Nigeria, import duty waivers are useful devices carefully used by sovereign nations to meet specific economic goals, especially in protecting local industries, creating jobs and promoting exports.
An import duty waiver means excluding a firm from paying import duty on certain goods for a fixed period. Countries like Japan, China, Malaysia and India, at various times, had used import duty waivers, concessions and exemptions to protect and build up their local textile, vehicle, agricultural and manufacturing industries. Today, all four have become economic power houses with export-led economies.

When Nigerian policymakers latched on to import duty waivers, the advertised objectives were to boost certain local industries, make some much needed raw materials or goods available in the short term and boost employment. In three decades of reckless granting of import duty waivers, however, it is obvious that none of these lofty goals have been met. Import duty waivers, which were started in the 1980s by the Shagari administration, have been shamelessly abused by successive governments to the detriment of taxpayers.
Comptroller General of the Nigeria Customs Service, Dikko Abdullahi, told members of the Senate Joint Committees on Finance and Appropriation last Monday that Nigeria lost a whopping N603.2billion to waivers and concessions in the first eight months of this year.
“If not for government policies of waivers, import duty exemption etc on some imported goods and free trade zones that are largely being abused by traders involved, the Nigeria Customs Service would have collected more than N600 billion more of the N530 billion it remitted as at the end of September this year”, Dikko said.
The amount lost by the country in the first eight months of this year more than doubles the amount lost through the same means in eight years. It had been estimated that N276.9 billion was lost to import duty waivers and concessions from 2000 to 2008.

Federal lawmakers have observed in the past that the waivers were not only “illegal and indiscriminate”, but were granted to “totally undeserving firms and individuals”.
Some of the beneficiaries of the duty waivers are purely business enterprises that will not pass the benefit to Nigerians. They include The Redeemed Christian Church of God, Messrs Western Metal Products, International Hotels, Mandarin Hotels, Le Meridian, Grand Ikoyi Towers & Resort, Federal Palace Hotels, Dangote Industries, Vaswani, Coscharis Group and Stallion Group, among several others.
Dangote Group has been described as a major beneficiary of duty waiver due to the closeness of its President, Alhaji Aliko Dangote, to the seat of power.
There are unconfirmed reports that Dangote allegedly got a concession of five per cent for raw sugar and exemption from payment of the ten per cent sugar levy. The exemption is said to be ongoing and has no expiration date. Dangote is also alleged to have a two-year concession from payment of duties on the importation of tomato paste.
There have also been reports that the Presidency waived over N100 billion worth of import duties to the Vaswani Brothers sometimes last year. The Vaswani Brothers is a purely business concern engaged in importation of consumer goods and there is no record anywhere to indicate that it passed this huge savings to the Nigerian consumer.

Politicians, businessmen and religious leaders have continued to collude to undermine the nation’s economy through the issuance of fraudulent waivers.
Duty is a tax levied on imports by the customs authorities to generate revenue and to protect domestic industries from more efficient or predatory competitors from abroad. Such duty is charged generally on the value of goods or upon the weight, dimensions or some other criteria of the item. Waiving such duties to well-connected businessmen and political loyalists automatically leads to loss of billions of naira in revenue; money that could have accrued to the public coffers and used for the common good.
Indiscriminate granting of import duty waivers is not only a drain on the nation’s resources; it is undermining local manufacturing and concentrating the commonwealth in the hands of a privileged few.
We are now at the point where President Goodluck Jonathan will do well to heed the advice of the Speaker of the House of Representatives, Aminu Waziri Tambuwal, who recently called for scrapping of the duty waivers and review of the policy that allows indiscriminate import of goods into Nigeria. 

Can Lagos cope with two new deep seaports?

 

The development of new deep seaport in Lagos is certainly a most welcome initiative since it will be a huge boon not only to the economy of the state but that of the entire nation. It goes without saying that a viable deep seaport project will create close to half a million direct and indirect jobs for Nigeria’s teeming youths.
Container throughput at Lagos ports is expected to hit two million twenty-foot equivalent units (TEUs) by 2018 whereas the maximum capacity that the ports and the Inland Container Depots (ICDs) in the State can accommodate is 2.2 million TEUs.
Lagos ports alone handle 90 per cent of the cargo in and out of Nigeria. With this expected growth in container volumes, the combined capacity of Apapa Port fully-developed and Tin Can Island Port and all the Inland Container Depots (ICDs) in the Lagos area is expected to be inadequate within the next five years. The same situation also applies to general cargo terminals.
A new port will therefore be needed to keep up with the demand for capacity, as the existing ports are surrounded by the city and cannot be further expanded.

At present, two new seaports are at various stages of development in Lagos State. Leading global terminal operator, APM Terminals and its consortium of partners are developing the new Badagry mega-port project and Free Trade Zone while Indian firm, Tolaram Group, is spearheading the Lekki Port project being developed within the Lagos Free Trade Zone. The first phase of both port projects have been scheduled to open in 2017.
With the forecast in container volume, the pertinent question in the mind of stakeholders is the viability of building two new deep seaports, in addition to the existing port facilities.
Analysts have stated severally that since the existing ports in Lagos will run out of capacity in the next five years – a new port has become imperative but certainly two new deep seaports will be an over kill. So which of the two new ports will be sustainable? The natural location, the supporting infrastructure and the support of stakeholders are key success of a Greenfield port. In choosing the location of a Greenfield port, the factors that must be considered include natural deepwater and harbour and supporting navigational channels with commensurate draft.
Other factors include lower risk of encroachment of city development in the immediate future, connection to multimodal infrastructure for evacuation of cargo by road, rail and barge, government support to the investors with policies that will protect investments, presence of adequate supporting services and review of cargo clearance processes to support faster cargo evacuation and reduce dwell time.

Both Badagry and Lekki have natural features for a port. Natural harbours have long been of great strategic naval and economic importance. They reduce or eliminate the need for breakwaters which would ordinarily cost a fortune to construct. Some examples of natural harbours are New York City harbour in the United States; Kingston Harbour in Jamaica; Subic, Zambales in the Philippines; Sydney Harbour in Australia; Pearl Harbour in Hawaii; San Francisco Bay in California; Visakhapatnam Harbour in Andhra Pradesh, India; Killybegs in County Donegal Ireland; and Halifax Harbour in Nova Scotia, Canada. Unlike Lekki which is more of a residential area; Badagry has been used before now as a port especially in the days of slave trade.
The proposed Port at Lekki is surrounded by the lagoon and you can go in and out of the port area through only one way. Because the Lekki axis is largely a residential area, vehicular traffic in and out is very heavy without the added burden of trucks plying that route. What will happen when trucks join the fray on the road is better imagined. Due to this constraint and in the absence of a rail system, evacuation of containers from the Lekki Port to the Western part of the country will be very difficult if not impossible. You can’t move goods up north either except a new bridge the size of the Third Mainlaind Bridge is constructed around the lagoon.

Trucks evacuating goods from the port however can head for the Eastern part of the country but then, they will have to travel almost 100 kilometres to link up the Benin-Ore road. Movement of goods out of the port through barges is not an option either because Lekki is backed by a very broad and shallow lagoon making barging difficult.
Badagry is devoid of the logistics constraints confronting Lekki. The lagoon, which terminates just before Badagry, will form one of the boundaries of the Badagry mega-port. The lagoon is not a problem for the port as a bridge already exists over it.

Access road in and out of Badagry is much better than Lekki. The little congestion being experienced on the Badagry expressway is already being addressed by the Lagos State Government through the construction of six lanes on each side.
There is also a road link from Badagry through Agbara which can take trucks to the northern part of the country and which by-passes the heavily crowded Okokomaiko-Mile 2 axis. Badagry also has a higher potential for barging with its narrow but deep lagoon.
From a logistics perspective therefore, Badagry is superior to Lekki but one must quickly add that neither Badagry nor Lekki has rail links at present.
From a commercial perspective; it is necessary to consider how to move patronage from the existing facilities to the new port.
The inertia of freight forwarders, importers, exporters and other stakeholders to move their structures and operations from existing port facilities to a new satellite port is a significant challenge associated with new ports.
This major challenge can be seen with regards to the operation of the Batangas International Seaport in the Philippines which commenced operation eight years ago and despite several government incentives, is still struggling. The Port of Manilla was hugely congested and Batangas, located 70 kilometres away, was built to take pressure off it. For the first two years of operation, no ship called at Batanga and till date, the port handles less than ten percent of Manilla’s cargo.

Lekki Port’s business strategy, anchored on getting shipping lines to call at the port with the believe that this will compel patronage, has been proven time and again that shipping lines don’t actually control where cargoes go. It is overly simplistic to assume that once you offer shipping companies certain level of incentives, then the port will come alive.
Despite reduction in wharfage, berthing fees and vessel-related charges at the Batangas Port, activities are very low almost a decade after it commenced operation.
No doubt, government support and legislation are required to make new satellite ports work but it is important also to have the ability to move freight forwarders, truck operators and other stakeholders.
From this perspective - Badagry Port also has an advantage over Lekki because the promoters – APM Terminals and its consortium partners including Orlean Invest, the Macquarie Group, Oando PLC, the Chagoury Group and Terminal Investment Limited (owners of Mediterranean Shipping Company – MSC) have control over cargo volume in Apapa unlike the promoters of Lekki who have no control of any port operation in the country – or in any part of West Africa.
A “build it and they will come” mentality won’t work with a new port project. A new port must also have a significant basis of gateway cargo in order for a solid business case to be built for transshipment cargo. Building a port, like Lekki and Badagry, on the assumption that it will be sustained on transshipment cargo is a fallacy. Transshipment cargo can come and disappear overnight especially without strong domestic cargo.
The cost of building a new port cannot be underestimated with about USD1.5 billion (about N240 billion) required for investment in quay wall, quay apron, terminals, cargo handling equipment, information technology etc. Potential investors and financiers will certainly be interested in good return on investment.
Spending USD1.5 billion in Lekki and another USD1.5 billion in Badagry means someone is going to get their fingers burnt. There will be growth in volume over the years no doubt but not such as can take two new deep seaports in addition to the two existing ports.
Again, there isn’t likely to be people interested in investing in these two ports considering the huge capital requirement. The volume of cargo increase just can’t justify any such investment in the medium term and who is willing to invest and not get return in 8 to 10 years?
As stated earlier, two new deep seaports in Lagos in addition to Lagos Port Complex Apapa and Tin Can Island Port is an overkill. There is simply no market for it and there won’t be in another half a century.