Ailing Ports Get Management Tonic: Nigeria Is Finally Tackling the Chronic Problem of Poor and Inadequate Port Facilities with a Degree of Determination. It Plans to Build New Ports and Simultaneously Tender the Management of Existing Ports to the Private Sector. Neil Ford Reports
Ford, Neil, African Business
Port sector reform has become a cause celebre in the struggle for the future of the Nigerian economy. Since President Olusegun Obasanjo came to power in 1999, the government has struggled to sell off loss-making state-owned companies, privatise parastatals and generally increase the role of the private sector in wealth creation. While the removal of fuel subsidies has become the focus of efforts to commercialise the retailing of basic goods, the fate of Nigeria's ports has come to fulfil a similar role in the conflict over privatisation.
Aside from comprising an important industry in its own right, the success or otherwise of the port sector is important for the rest of the economy.
The government is eager to promote economic diversification outside the oil and gas sector and is especially keen to encourage the growth of manufacturing and processing enterprise. Yet domestic manufacturing will continue to swim against the tide if vital machinery stands idle on Nigerian docksides while it is processed for import, or if exports are held up by a lack of capacity.
To date, Nigeria's main ports are managed by the state-owned Nigerian Ports Authority (NPA) on behalf of the government. As in much of sub-Saharan Africa, a lack of investment over many years has restricted both capacity and efficiency. The shipping sector often measures port efficiency in terms of turnaround times--that is the length of time required to process and unload a cargo before reloading with goods for export. Elsewhere, turnaround times of 48 hours are considered the norm; in Nigeria the process takes days or even weeks rather than hours.
The government appears to be providing a two-pronged solution to this problem: allowing private companies or consortia to develop new ports and introducing the port landlord model at existing facilities.
Under the latter, the actual port infrastructure remains the property of the state, while fixed term management contracts are offered under tender to private sector operators for each port in question. The port landlord model is being introduced in several other African countries, including Tanzania and Mozambique, and contracts generally cover 10 to 25 years.
Both aspects of Nigerian federal government policy have one common denominator--private sector rather than parastatal management. It is hoped that more efficient port management will improve efficiency and remove the need for the federal government to provide financial subsidies in order to keep the ports afloat.
Moreover, it is expected that Nigeria's main ports will be managed and operated by different companies, thereby encouraging competition. This should, in theory at least, drive down both the shipping costs imposed by port authorities on shipping lines and the shipping tariffs that shipping lines charge traders.
However, a proportion of the efficiency savings are expected to be made by reducing the number of employees at each port. The strong Nigerian trade union movement has therefore campaigned long and hard against private sector involvement on the grounds of expected job losses and also on the principle of state ownership of vital infrastructure.
New port landlord authorities
While the NPA may continue to manage any ports that do not attract sufficient private sector interest, its regulatory role is to be transferred to five new bodies. The five new landlord authorities will cover Calabar, Lagos, the Niger Delta, Port Harcourt, plus the inland ports. Also, the National Ports Commission (NPC) is to take responsibility for sector competition across the entire country.
After years of delay, partly caused by the government's in-ability to put the required legal and regulatory framework in place for the introduction of the port landlord model, the first tender processes are finally underway. Although Nigerian companies are among the bidders, it is expected that most if not all of the contracts at the NPA ports will be awarded to foreign interests. …