Sunday, 31 January 2016

Cash crunch, NPA and its lessees

These are tough times for government and private businesses. Even publicly quoted companies are not smiling at all. There is cash crunch in the economy. Now cash crunch doesn’t necessarily mean that a company is going bankrupt – it simply means that they an organisation is running low enough on cash so that it starts to have an impact on its operations.
The Nigerian Ports Authority (NPA) no longer directly provides services at the port. It has since leased out various portions of the port to third parties to manage and provide services that used to be provided by government. For the provision of marine services, NPA formed special purpose vehicles – Lagos Channel Management, Bonny Channel Company and Calabar Channel Management Company – to provide pilotage, towage and dredging services at the port while for terminal handling and stevedoring operations, NPA entered into what is known as “lease agreements” with the various lessees while it retained the role of lessor and technical regulator. The concession lease agreements range from 10 years to 25 years depending on the nature of the facility.
In these agreements, NPA gave the exclusive right to the private companies (the concessionaires or lessees) to operate, maintain and where necessary, carry out investments on port facilities, within designed premises at the nation’s ports for a given number of years and on terms and conditions agreed on, between the NPA and the respective concessionaires.
The port concession agreement was a smart move by government to relief the NPA of financial burdens typically incurred on capital expenditures, overheads, patronages, stealing and wastages. NPA does not have to carry such burden anymore while it has been able to maximise revenue collection through the effectiveness of the private sector. Port efficiency has also improved considerably.
The three types of fees payable under the various concession agreements are commencement fees payable immediately after the execution date; fixed annual payment of a sum as specified in the agreement payable in installments; and throughput fees payable on total volume of cargo handled on vessels that used the leased premises or property. These fees are paid to NPA in dollars. NPA abhors naira. Lol.
This arrangement worked fine while the naira-dollar exchange rate was relatively stable. The problem now is that naira has lost over 100% of its value over the past ten years and 50% value in the last one year. Forget the Central Bank of Nigeria band of N197 – N199.50; nobody gets dollar to buy through the official foreign exchange window. What this means is that while a lessee or concessionaire required say N130million to pay NPA $1million in 2006, it had to cough out N200million one year ago to make the same payment. The situation is worse today, as a whopping N300million is required by the operator for the same payment.
And to compound the operators’ woes, volumes have been declining. The various terminals lost volumes in the region of 14% to as much as 50% last year, depending on the type of cargo they handle.
The combo of naira depreciation, drop in volume and rising inflation has created a perfect storm for operators, resulting in the inability of some of them to meet their dollar payments to NPA. The situation is not getting any better at all as the federal government, faced by its own share of the cash crunch, pounds pressure on its various agencies to turn in more revenue. NPA naturally becomes a target in an era of aggressive revenue drive. I saw this scenario clearly in a public notice NPA published on Monday.
It read: “The Nigerian Ports Authority hereby give notice to all holders of leases all over the country to come forward and settle fully their rental obligations within four weeks from the date of this publication. This includes all categories of lessees with any outstanding payment.
“Failure to comply within this stipulated period will be viewed as a breach of the lease covenant for which the lease may be terminated.
“All holders of new leases who have not met the lease terms and fail to comply with this deadline should consider such leases terminated.”
No one can live in denial of present day realities in the country, just as no one can deny NPA its legitimate revenue.
My appeal therefore is that government should allow NPA collect the naira equivalent of dollar payments due to it at CBN rate. After all, we don’t spend dollars in Nigeria. Whatever goes into the federation account will eventually be converted to naira before or after it is allocated to states, local governments or for federal government’s use.
I don’t think we should kill the goose that lays the golden egg. It is important that those running the various concessions remain in business. Their ability to pay staff salary, meet their overhead costs and continuously invest at the port must not be impaired. The stance must be such that will produce a win-win outcome for all.

Monday, 25 January 2016

Dasukigate and the warped minds

Nigeria no doubt is one tough country. I am not sure there is any issue that does not end up being robed in ethnic or political gown. Not the least the anti-graft war.
When in 2014, Lamido Sanusi, then as Central Bank Governor, alleged that $20billion was missing from the national treasury, the goons went to town alleging a northern agenda. The substance of the allegation was largely ignored. But even in a country like Nigeria where untold oil wealth disappears into the pockets of a few, $20billion is huge. The amount is equivalent to six trillion naira – the amount needed to fund the country’s 2016 budget in its entirety.
Did the Nigerian National Petroleum Corporation (NNPC) remit to the government the entire proceeds of its crude oil sales? If it did not, are there proofs of the purpose to which the unremitted amounts were applied? Did NNPC have the legal authority to withhold these funds? These were critical questions that should have been asked and which the government of that period have been made to answer.
The prosecution of former Director General of Nigerian Maritime Administration and Safety Agency (NIMASA) and his embattled godfather “Tompolo” by the Economic and Financial Crimes Commission (EFCC) for stealing over N34billion from NIMASA is also fast wearing the ethnic toga. Tompolo and his propagandists are making it look like a war against the Niger Delta. But the truth is that many in the Niger Delta are victims of their malfeasance. 
The mind-boggling revelations straight out of the Dasukigate has been conveniently dubbed political witch-hunt by the principal actors. So many young Nigerians who should throw stones at those who stole their money thereby depriving them of jobs, security, water, electricity, good roads and several other social amenities that their counterparts enjoy in other countries, are busy defending what they lack proper understanding of. 
The same warped minds are running commentaries against the government for prosecuting Dasuki and his co-travellers.
Perhaps many don’t understand the amount of money involved here. We are talking of $2.1billion. This is the equivalent of about N600billion. That is about the size of the budget of Lagos State for 2016. The amount is also sufficient to fund the budgets of all the five states in the South East.
In a country with over two million IDPs who can barely feed and whose children no longer go to school, $2.1billion would have solved a lot of problems. That amount will sufficiently rebuild and modernise both the Lagos-Ibadan and Apapa-Oshodi expressways. But instead of spending the money on arms procurement and other pressing security needs, Dasuki turned father Christmas doling out the money to Peter Odili N100m, Rasheed Ladoja N100m, Attahiru Bafarawa. N100m, Mahmud Aliyu Shinkafi. N100m, Jim Nwobodo N500m, Tony Anenih N260m, Bode Goerge. N100m/$30,000, Yerima Abdullahi N100m, Olu Falae N100m, Tanko Yakassai N63m, Bello Sarkin Yaki N200m, Raymond Dokpesi N2.1b, Iyorchia Ayu N345m, BAM Properties N300m, Dalhatu Investment N1.56bn, Mohammed Bello Haliru and son N300m, Bello Matawalle N300m, ACACIA Holdings N60m, Bashir Yuguda N1.95m, Olisa Metuh N400m, Nduka Obaigbena N670m, Guild of Editors N50m, Isa Jafaru N160m.
These are all political cronies. The $2.1billion is even extra-budgetary. It was not the main vote for security in 2015. What if Buhari decides to investigate the Jonathan government’s spending on security from 2011 to 2015? And many have the effrontery to accuse the president of being lawless. Does anyone in his right frame of mind think that these guys deserve bail? Was the money meant for PDP’s political campaign? Shouldn’t all those who collected the money by now be apologising to Nigerians and returning what they collected with interests?
If these guys were in China, most of them would have committed suicide as a face-saving measure while their families would have been ostracised but many Nigerian politicians are shameless.
The one thing we should not do this year is clap for those who stole our money.
President Buhari should not, by any means, relent in prosecuting those who shortchange the country. He should go a step further to create processes and systems that will make it impossible for depraved minds have a field day at the expense of the people. Creating transparency and openness in government spending will go a long way in this regard.
Going forward, subsidies, tax exemptions, public procurement of goods and services, soft credits and extra-budgetary funds under the control of politicians must be administered in ways that are transparent. The more open and transparent the process, the less opportunity it will provide for malfeasance and abuse. 

Monday, 18 January 2016

The columnist as a yeoman

A few days to the end of 2015, a columnist in one of the national dailies ventured into a terrain he knew nothing about. Worse still, he was too lazy to do a thorough research before embarking on his voyage of disinformation, thereby confusing and misleading Nigerians.
This columnist, whom I used to admire until he exhibited his fatuous prejudice and witlessness in the twilight of the year, wrote about the need for the Buhari administration to diversify the nation’s revenue portfolio. He identified the maritime industry as a sector capable of generating much needed revenue in place of oil. This is a no-brainer. The least knowledgeable person in the maritime industry will point this out in a flash. Operators have cried themselves hoarse drumming this into the ears of our policy makers. However, this is the least of my concerns today.
Our friend, in advancing his argument, set off by claiming that the Nigerian Shippers’ Council (NSC) was made port regulator by former President Olusegun Obasanjo. This is highly misleading. It is an unpardonable error by this columnist, which indicates that he was either too lazy to carry out a proper research before setting pen on paper or was simply pursuing an agenda. Obasanjo did not make Nigerian Shippers’ Council port regulator – either interim or permanent. Under the port concession agreement signed between the Federal Government and port operators in 2006 and 2007 – during Obasanjo’s era, Nigerian Ports Authority (NPA) was designated the lessor and interim port regulator “until there is a change in the law by the National Assembly”.
Before the port concession, Nigerian ports were bedeviled with a high level of inefficiency including unnecessary delays in the turnaround time for ships and high cargo dwell time. Most of us remember how vessels had to wait for almost 40 days before they were able to berth at the port. The dearth of cargo handling equipment made operations at the various ports hellish. But with the concession of 2006, the narrative changed dramatically; vessels now sail straight to berth without delays. The stronghold of the retrogressive ‘mafia’ that held the port by the jugular was broken while various congestion surcharges imposed on the ports by shipping lines as a result of delays were removed.
One cannot forget the congestion surcharge slammed on the ports by a liner conference known as the Europe-West Africa Trade Agreement (EWATA). That surcharge varied from USD1,000 to as much as USD2,500 per TEU or FEU as the case may be. The private terminal operators or concessionaries were able to eliminate this surcharge less than six months after they took over operations at the port thereby saving the economy over N100 billion annually.
On the other hand, Nigerian Shippers’ Council (NSC) was set up in 1978 by law to protect cargo interest ie consumers of shipping services. These consumers include shippers – importers and exporters. It was only recently – November 2013 to be specific, under former President Goodluck Jonathan’s administration – that NSC was appointed “interim regulator” by former Minister of Transport Idris Umar. The appointment was for a period of six months. I will not delve into the arguments of the merits or demerits of Umar’s action as the appointment is still a subject of litigation.
Our friend also mentioned the need to check the diversion of Nigerian-bound cargoes to the ports of neighbouring countries. While he was correct in the assertion that several cargoes meant for the Nigerian market are landed in the Port of Cotonou and ports of other neighbouring countries, the reasons adduced for this diversion are faulty. For the records, it must be stated clearly that importers who prefer to land their cargoes in the ports of neighbouring countries do so to evade series of smuggler-friendly policies enacted by the past administration in the country. These ill-conceived policies include the National Automotive Policy, the rice policy and the fish quota system. The Central Bank of Nigeria (CBN) restriction on access to the official foreign exchange platform by importers of some 41 select items has exacerbated the situation.
Prior to the enforcement of the National Automotive Policy, an average of 20,000 units of vehicles representing about 65% of local demand was imported through our seaports but this has changed. Since last year, only about 30% of such vehicles now come through our ports. The reason is that the auto policy raised the import duty on vehicles to 35% with an additional surcharge of 35% effectively bringing tariff on imported vehicles to 70% from the 20% it used to be. The tariffs on similar imports in our neighbouring countries stand at between 5% and 10%. So importers naturally discharge at these other ports and look for ways of smuggling their goods into Nigeria. Of course they smuggle into Nigeria easily largely due to the porous nature of our land borders. The same argument applies to rice, fish and textiles. The way out therefore is to reverse these policies. It is that simple. The true impact of these policies can be clearly seen in a satire titled Cotonou as Nigeria’s biggest port published on 30 November 2015.
For his comments on the implementation of the controversial Cargo Tracking Note (CTN), I will refer him to the opinions of leading industry stakeholders and the organised private sector.
Sadly, our columnist friend failed to publish my rejoinder to his article, which made me wonder if he wasn’t pursuing some sort of agenda.