Monday, 30 November 2015

Cotonou as Nigeria's biggest port

“I work at Nigeria’s largest seaport.”

“Really, congrats. Apapa Port is really a nice place to work.”

“Maybe it is but I’m not talking about Apapa Port. I don’t work in Nigeria neither am I a Nigerian.”


“I work at Le Port Autonome de Cotonou or what you people call in English Autonomous Port of Cotonou (APC).”

“Really? APC is also the ruling party in Nigeria.”

“I suppose they like our own APC because they make policies that favour us and push cargoes to our ports.”

“But the policies were made by the past administration.”

“Yes they were, but the APC government has retained them. Isn’t that a sign of love for us? Even our President Boni Yayi has described our country as Nigeria’s 37th state.”

“It is amazing really. I’m beginning to buy your argument. Otherwise why will a government watch as all the vehicles coming into its country are discharged in the port of another country and then smuggled in by night while security agencies look the other way.”

“You don’t know the full story. Our President hosted a party recently at Porto Novo to celebrate our economic boom which resulted from the increased activities at our port. Since your government decided to increase the import tariff on cars from 20% to 70% last year, our port has been booming. At present, more than 70% of the cars used by Nigerians are imported through our port because our own import duty here is a mere 10%. We have been able to employ a lot more of our youths and unemployment rate is less than three percent.”

“Really? More than 50% of the youths in my country are unemployed!”

“I know. And your ports are even sacking workers.”

“Na so.”

“Ah ah! You speak pidgin English.”

“My customers are Nigerians so I learn their language. No wahala.”

“Na wah o.”

“Did you know also that chicken and rice – the most popular pairing in Nigerian cuisine – find their way into your country from our port? I really love your government because they create a lot of jobs for us. After all we don’t have oil which your country has in abundance. And you guys are good at wasting resources so we benefit from your excesses.”

“Tell me about this rice and chicken business.”

“It is interesting but I like it. You know poultry products are banned in your country. So what we do is allow it enter our own country at five percent import duty. We know your borders are porous so with a little bit of support from our end, the products all find their way into your country. Just go and check your markets. How did all those frozen chicken and turkey, which are not allowed through your ports, get there?”

“But our Customs said they’re winning the fight against smuggling of poultry products.”

“Only on the pages of newspapers. Your ban on frozen poultry products is making the chicken-smuggling business fly. Look, just 20% of the chicken Nigerians eat comes from Nigeria. The rest come from our port and sneaks over the border onto your shelves.”

“This is very disturbing. Tiny Benin Republic, with a total population that is about half of Lagos State imports as much rice as China and nearly as much frozen chicken as the whole of U.K.”

“We’re importing them for Nigeria. Not for us.”

“I am sure this APC will do something about it very soon.”

“Will the APC of Nigeria undo the APC of Benin Republic? E no go happen. And I’m sure you know the story of textiles too. It is similar to the vehicle, rice, chicken and turkey story.”

“Your country is not a good neighbour. You’re destroying our economy. You’re saboteurs. We must shut our borders until you repent.”

“You tried that before. Remember your former President Obasanjo did exactly that in August 2003? The closure did not last more than a week.”

“Yes I remember. Obasanjo took the action because he wanted your then President Mathew Kerekou to handover the cross-border bandit, Ammani Tijjanni to Nigeria.”

“Exactly. You might also remember that more Nigerians cried over the border closure than Benenoise.”

“I think we are our own problem. Those who do the smuggling are mostly Nigerians.”

“Exactly my point. We merely handle the goods at our port but those who move them from Cotonou by trucks across the border are mostly Nigerians.”

“I believe our APC government will do something about these policies that promote smuggling. We now have noisemakers – I beg your pardon, I meant to say Ministers. Now that we have Ministers in place, all these smuggler-friendly policies will be reversed.”

“I don’t think so because we have already contracted some of your miracle-manufacturing prophets to pray earnestly against any such move.”

“I heard that even the man behind our controversial cargo tracking note is from your country.”

“Is that news to you? That is story for another day.”

Sunday, 22 November 2015

Wahahi if you tear my agbada, I go comot your cap

So politics change people or is it people that change politics. I was taken aback when I read of Senator Ali Wakili’s babariga dragging incident with another Senator last week over the composition of Senate committees. It’s still a bit difficult for me to understand the concept of ‘juicy’ and ‘non-juicy’ committees that has polarized the upper legislative chamber of late; distracting the ‘distinguished Senators’ from the crucial task of making laws.
I have known Ali Wakili for a fairly long time, I suppose about 16 years now. He was a Customs Comptroller who served at various times as Area Controller of Murtala Muhammed Intentional Airport Command, Tin Can Island Port Command and Federal Operations Unit – the Lagos-based anti-smuggling arm of the Nigeria Customs Service. In all the years that I have known him, the once youngest Customs Comptroller in Nigeria, portrayed the picture of a perfect gentleman.
You can then imagine my surprisation (apology to Chief Zebrudaya) when I read of the mild drama that played out between Senator Kabiru Marafa (APC, Zamfara Central) who has been critical of Senate President Bukola Saraki’s leadership style and Wakili (APC, Bauchi Central) at the Senate Press Corps secretariat shortly after Marafa walked out of the red chamber in protest of his being ruled out of order by the Senate President when he reopened debate on the recent formation of the Senate standing committees.
The entire drama, which sounds like a Nollywood comic scene, is a good portrayal of how our lawmakers ‘represent their constituencies’. Enjoy.

Wakili: You have come here to disgrace the Senate again. Is this what you want to do for the next four years?

Marafa: I will, I will. Because I am not working for you.

Wakili: You cannot sit down there and fight against the Senate.

Marafa: I am representing Nigeria and representing my people. And let me tell you, even the nonsense thing they are saying about suspension, nobody can suspend a senator.

Wakili: You are playing to the gallery. You are playing your script. Who has ever spoken about your suspension?

Marafa: Let us talk about issues.

Wakili: I have discussed all these your issues in today’s Mirror.

Marafa: Mirror, which kind Mirror? Let us do it (address journalists).

Wakili: Newspaper.

Marafa: Who, my own?

Wakili: Yes.

Marafa: Ku samun Mirror (Get me National Mirror). I will respond to it. We raised issues. And we give orders (rules) and point of constitution order.

Wakili: That is not what your constituency sent you here (to do).

Marafa: Are you one of them?

Wakili: We are talking of poverty, education. You are wasting your energy here on useless point of order. I am warning you.

Marafa: It is not useless. You can’t say that order is useless.

Wakili: I will go to your constituency and see what you have done there.

Marafa: Go back. I will go to your own. I was in politics before you when you were wearing uniform (both senators started dragging each other’s attire at this point).

Wakili: Gentlemen of the press, there are issues bedevilling this country…. (Marafa interrupts him).

Marafa: Even if you are not God-fearing, because they made you chairman, a bloody newcomer chairman of a committee. That is why you are talking this way. I am not doing anybody’s game plan. I am speaking the minds of Nigerians.

Wakili: Come, you are a storm in the Senate teacup and a gadfly.

Marafa: I told you I was in politics when you were wearing uniform (still dragging Wakili’s attire).

Wakili: Leave me, look at it. That is not the issue. How old are you?

Marafa: It doesn’t matter.

Wakili: Let go.

Marafa: (Talking to journalists). He said he raised issues in National Mirror. Let him say the issues. I will respond to them here.

Wakili: You see, your experience has not helped you. It (Senate rules) says that where such a matter has been decided, you cannot raise it again.

Marafa: That is nonsense!

Monday, 16 November 2015

The real problem with 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.
Former Minister of National Planning, Dr. Shamsudeen Usman, who frequently visited the port 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 former Minister, who once 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 had 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 former Minister stated.
What Usman 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 survey, is less than two 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 USD10,000 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 USD120,000.
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.
We must deal with these systemic and man-made issues if we’re serious about driving down the cost of doing business at the port.

Monday, 9 November 2015

A case for shipbuilding and repair yards

The maritime sector provides very interesting and exciting prospects for economic growth.
A strong and viable maritime industry and Nigeria-flag fleet is critical to our economic and national security interests. Our longshoremen and mariners serve a unique role acting as an economic driver in transporting domestic and international cargo. It is therefore critical that our national policies embrace maritime transportation as a vital component of our nation’s transportation system, and make significant investments in the Nigerian maritime industry and port infrastructure.
A vital component of the maritime sector is the shipbuilding and repair industry, which has largely suffered neglect since Nigeria’s independence.
Evidence from Ancient Egypt shows that the early Egyptians knew how to assemble planks of wood into a ship hull as early as 3000 BC.
In the early modern era, shipyards became large industrial complexes with shipbuilding financed by consortia of investors.
The industrial revolution made possible the use of new materials and designs that radically altered shipbuilding. Iron was gradually adopted in ship construction, initially in discrete areas in a wooden hull needing greater strength, (e.g. as deck knees, hanging knees, knee riders and the like.
After the Second World War, shipbuilding (which encompasses the shipyards, the marine equipment manufacturers, and many related service and knowledge providers) grew as an important and strategic industry in a number of countries around the world. This importance stems from the large number of skilled workers required directly by the shipyard, along with supporting industries such as steel mills, railroads and engine manufacturers; and a nation’s need to manufacture and repair its own navy and vessels that support its primary industries.
Shipbuilding has therefore remained an attractive industry for developing nations. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started to make shipbuilding a strategic industry in the 1970s, and China is now in the process of repeating these models with large state-supported investments in this industry.
Currently, South Korea is the world’s largest shipbuilding country with a global market share of 41%. South Korea leads in the production of large vessels such as cruise liners, super tankers, LNG carriers, drill ships, and large container ships. In the 3rd quarter of 2011, South Korea won all 18 orders for LNG carriers, 3 out of 5 drill ships and 5 out of 7 large container ships. South Korea’s shipyards are highly efficient, with the world’s largest shipyard in Ulsan operated by Hyundai Heavy Industries slipping a newly built, $80 million vessel into the water every four working days.
South Korea’s “big three” shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, dominate global shipbuilding, with STX Shipbuilding, Hyundai Samho Heavy Industries, Hanjin Heavy Industries, and Sungdong Shipbuilding & Marine Engineering also ranking among the top ten shipbuilders in the world.
Japan had been the dominant ship building country from the 1960s through to the end of 1990s but gradually lost its competitive advantage to the emerging industry in South Korea which had the advantages of much cheaper wages, strong government backing and a cheaper currency.
South Korean production overtook Japan’s in 2003 and Japanese market share has since fallen sharply.
China is an emerging low-cost, high-volume shipbuilder that briefly overtook South Korea during the 2008-2010 global financial crisis as they won new orders on medium and small-sized container ships.
The strength of shipbuilding and repair indusrty can be seen in a recent report released by the U.S. Maritime Administration (MARAD).
The U.S. shipbuilding and repair industry supported more than 110,000 jobs and contributed $37.3 billion in overall annual gross domestic product to the U.S. economy in the year 2013, according to MARAD.
The new figures show that the U.S. domestic shipbuilding industry is growing. MARAD’s last study, showing figures from 2011, showed that U.S. shipyards supported 107,000 jobs and directly and indirectly contributed $36 billion in gross domestic product.
In 2013, there were 124 active shipbuilders in the United States, spread across 26 states. In addition, there were more than 200 shipyards engaged in ship repairs or capable of building ships but not actively engaged in shipbuilding, according to MARAD. The majority of shipyards are located in the coastal states, but there also are active shipyards on major inland waterways such as the Great Lakes, the Mississippi River, and the Ohio River, the MARAD data showed.
According to MARAD, in 2013, the U.S. private shipbuilding and repairing industry directly provided 110,390 jobs, $9.2 billion in labor income, and $10.7 billion in GDP. Including direct, indirect, and induced impacts, on a nationwide basis, total economic activity associated with the industry reached 399,420 jobs, $25.1 billion of labor income, and $37.3 billion in GDP in 2013, the MARD data showed.
The states with the highest levels of overall direct, indirect, and induced employment associated with the industry are Virginia, California, Mississippi, Louisiana, and Texas, MARAD said.
The date also showed that the federal government, including the U.S. Navy, U.S. Army, and U.S. Coast Guard, is an important source of demand for U.S. shipbuilders. While just one percent of the vessels delivered in 2014 (11 of 1,067) were delivered to U.S. government agencies, 10 of the 12 large deep-draft vessels delivered were delivered to the U.S. government: five to the U.S. Navy, four to the U.S. Coast Guard, and one to the National Science Foundation, according to MARAD.
All ships need maintenance and repairs. A lot of maintenance is carried out while at sea or in port by ship’s crew. However a large number of repair and maintenance works can only be carried out while the ship is out of commercial operation, in a ship repair yard.
The MARAD study showcases the important role the U.S. shipbuilding and repair industry plays in both commercial and military sectors, while also highlighting the critical support the shipyard industrial base provides to the nation’s economic and national security.
We must therefore pay quality attention to this industry to create much needed jobs and retain value within the Nigerian economy.

Sunday, 1 November 2015

A wasteful $8 billion project

The Suez Canal took 10 years to build and cost thousands of workers their lives. When planners suggested three years for a second one, Egypt's president balked.
"Not three years, just one," he ordered.
Twelve months later, Abdel-Fattah El-Sisi hosted a party to celebrate the biggest expansion of the canal since it first opened in 1869. For the former army chief seeking to bolster his rule, the symbolism was impossible to miss.
Less clear are the economic benefits of what billboards in Cairo and New York's Times Square dubbed "Egypt's gift to the world," which will raise capacity and shorten the time it takes to sail the 193-kilometer (120-mile) link between the Red Sea and the Mediterranean.
The lavish August 6 opening ceremony of the expanded canal, attended by dignitaries including French President Francois Hollande and North Korea's deputy leader Kim Yong Nam, was held amid sluggish global trade growth to which the canal's fortunes are linked.
From a shipping industry point of view, the initiative to expand the Suez canal was a bit of a surprise to many because there was no pressing need for it. Plus it did not, and still does not, make business sense.
Suez has yet to fully recover since the global financial crisis caused shipping to plummet in 2009. Though total tonnage has increased, the number of vessels using the canal remains 20 percent below its 2008 level and just two percent higher than a decade ago.
Rather than a bottleneck, analysts say those statistics reflect slower global trade growth, which the International Monetary Fund (IMF) expects to average 3.4 percent in the period 2007-2016, compared to seven percent over the previous decade.
The Baltic Dry Index, which measures rates for shipping iron ore, coal and grain and is viewed as a bellwether for the global economy, slumped to a record low 509 points in February. It remains about 90 percent below its all-time high of 11,793 reached in 2008.
"At the moment, speed is not a key factor for container shipping, the shipping sector which most utilizes the canal," according to Michelle Berman, the head of operational risk at BMI Research, a unit of Fitch Group.
A bigger issue is a "surplus of ships" relative to demand, with ever-larger vessels built for the Asia-Europe route compounding the problem.
The government hasn't made public viability studies to show how it will gain a return on its 64 billion Egyptian pound ($8.2 billion) investment.
The expansion will meet future demand, with traffic expected to double to 97 vessels a day by 2023, said Mohab Mameesh, head of the Suez Canal Authority.
"By creating a second lane of the canal we are able to reduce waiting times, which reduces fuel expenditures and costs, with no increase in our toll fees," he said.
Global trade volume would need to rise by around nine percent a year for Suez to reach its traffic goal. And this is quite unlikely. But this didn't stop El-Sisi and his government from talking up the new canal amid political challenges to its rule.
Hundreds of Egyptians, most of them supporters of the deposed Muslim Brotherhood, have been killed and thousands imprisoned since El-Sisi, as army chief, pushed his Islamist predecessor from office in 2013 after mass protests. El-Sisi was elected president last year.
The political turmoil has polarized Egyptians. El-Sisi supporters say it saved the country from the deadly strife affecting much of the Middle East, while opponents criticize the government's human rights record and what they regard as brutality used to restore stability.
The August 6 canal commissioning party, with an estimated price tag of $30 million, was a chance for the government to send a more positive message by harking back to the events marking the canal's 1869 completion.
The canal has since transformed global trade with about eight percent of the world's cargo now passing through it, according to the Suez Canal Authority. Traveling from Singapore to New York through Suez reduces the distance by 19 percent compared to the route via the Pacific and the Panama Canal. From the Persian Gulf to Rotterdam, Suez saves 42 percent by removing the detour around the Cape of Good Hope.
"Even without any improvements, the canal would always be attractive," said Neil Atkinson, head of analysis at Lloyd's List Intelligence.
The second canal — actually a new 35-kilometer channel and 37 kilometers of widening and deepening of the original — allows two-way traffic and reduces transit time to 11 hours from 18, according to the canal operator. The expansion won't allow larger vessels to use the route.
New ports and logistical services are expected to follow, and the project includes six tunnels under the canal. The authority expects revenue to grow to more than $13 billion by 2023, up from $5.5 billion in 2014.
"'Build it and they will come' is not enough," said Simon Kitchen, a strategist with Cairo-Based investment bank EFG- Hermes, adding that companies will require incentives to build factories and other facilities. "The government needs to give ships a reason to sail through the canal," he said.
Others are more positive. Egypt's economy grew at over four percent in the nine months to March for the first time since 2010, mainly due to infrastructure spending related to the canal upgrade, according to investment bank Pharos Holding for Financial Investments.
A shorter transit may save up to four percent of journey costs depending on the length.
The project "was a necessity to maintain the attractiveness of the Suez Canal," said Michael Storgaard, a spokesman for Maersk Line, the world's biggest container shipping company. Even so, it is too early to say whether Maersk will route more vessels through Suez, he said.
Still, any future economic payoff is trumped by the political implications for the government from building confidence in El-Sisi's leadership.
Obviously, El-Sisi is trying to gain legitimacy through his government's achievements. His thinking is that Suez "shows the government can deliver, it can commit to something and get it done".
Perhaps this "wasteful expenditure" has some silver lining which other African leaders can borrow a leaf from?