Nigeria Needs Commercial Regulator At Port ? Folarin
Fri, 24/08/2012 ? 4:19am | SAMSON ECHENIM Interviews Features
Chairman of the Nigerian Ports Consultative Council (NPCC), Otunba Kunle Folarin, is referred as ?Nigeria?s Maritime Encyclopaedia? by industry players and stakeholders alike. In this interview with SAMSON ECHENIM, the frontline maritime technical advisor speaks on the path to follow in order to make the country the international trade hub in the West and Central African regions.
What is the Nigerian Ports Consultative Council all about? What is the role of the council in the nation?s maritime sector development?
The NPCC is the oldest advisory council in the maritime sector and it was established in 1955. It?s as old as the port itself; it?s as old as all the ports in the Nigeria and it basically has technical competence and able to advise government in all areas of the economy, particularly because the maritime sector should be the pivot of the economy itself.
And, of course, may I remind you that 85 per cent value of all the goods and services that enter Nigeria comes through the seaports. This makes the country?s maritime sector a very formidable one. The membership of the council cuts across all the key sectors in the Nigerian economy.
The Central Bank of Nigeria (CBN) is a member; the economic ministries ?Finance, Transport, Trade ? are members; the agencies in the maritime sector ? NIMASA, NPA, Nigerian Shippers? Council, the Inland Waterways Authority ? are members;? the leading multinational and indigenous shipping companies are members and the Chamber of Commerce is also a member of the council.
Basically, that gives you the scope from which the council derives its functions and its mandate and it?s according to the law, because the Nigerian Ports Act of 1955 as amended by 1963 includes the provision of the ports consultative council.
So, it is by law and by the fact that it has the mandate to play a leading role in advocacy, provide technical advice in the maritime sector and maintaining international relationship with key maritime nations in the West and Central Africa regions. We collaborate with the ports in Ghana, Ivory Coast and Togo in the region. Therefore, we have a leading role to play in the synergy between the Nigerian maritime sector and those of other countries.
Despite the role played by the NPCC, there are still many committees in the sector set up by the executive arm of government. Are the committees necessary when there already exists a port consultative council to advise in virtually all areas of port development?
Issues that come to the NPCC are fundamental, such as developmental and interventional issues, but when you look at the mandate of the presidential committees, they are rather specific; they are not standing committees: most of them are ad-hoc committees, dealing particular issues that come up at some particular times.
For instance, the port reforms committee is dealing with issues of port congestion, access to the port and how to attain faster clearance of cargoes from the port. They are not dealing with such issues as how to set up a permanent policy for development of the sector. For instance, the Single Windows issue is a policy issue that is not being dealt with by any of the presidential committees.
Single window cut across regions; it is like a United Nations mandate that goes to all the countries. In other words, where those committees are set up, they are given specific issues. Of course, that does not suggest that such issues do not receive the attention of the NPCC. We have committees on issues of maritime security, which is a major. The issue of piracy is another major one and that of deep seaport development.
Currently, the NPCC is the only advisory body working on deep seaport development in the country. We are looking at how we can deal with it from the fundamental stages, so that we don?t end up building deep seaport that would not work. We have to determine whether the corridors are not enough to absorb bottlenecks to access the port. We are also looking at the design ? whether for the bulk cargo, containerised, and such other characteristics that exist in the port.
We don?t end up in irreversible errors that limit the capability of the port. So, we are able to advise on the type of port that is most relevant in Nigeria of today. NPCC is not a problem-solving committee. Yes, we solve problems, but we are dealing with them from the fundamentals. We look at the issue of maritime security, which we have defined. We also advise on legal aspects. The Ports and Harbour Bill too has attracted our input.
We go to public hearing at the National Assembly to make input in relevant bills that are before the Assembly. We also look at the demand today for national transport commission bill to do commercial regulation in the port. We all know that today there is no commercial regulator in our ports, so a lot of things that would create problems, and we nip them in the bud, because we have the technical competence. We take issues from the beginning and determine possibilities for things that can happen in the future.
A case in point is the recent demand for deep seaport in the country. At the moment, virtually all the coastal states ? Akwa Ibom, Delta, Ondo, and Lagos -?? are yearning to build deep seaports. So, if we do not treat it well, we may have proliferation of these ports which cannot do the job of just one of such deep seaports in other countries.
If we do not do certain things at this fundamental stage we might have some difficult issues in the future. It may lead to having many deep seaports and none is working, whereas there is only one deep seaport in Ghana, Cote d?Ivoire, or in Togo. So we don?t have four that cannot do the work of one in other countries.
Presidential committees, like I said before, are only dealing with ad-hoc issues, but the fundamental issues are left to the NPCC. We have also been doing some residual functions that the presidential committees do. The issue is, these roles in the maritime sector cut across several ministries.
If something is happening in the port, the Ministry of Transport intervenes, but when it has to do with Customs operation, we know that is has become a ministry of finance thing, but the NPCC has the mandate to perform through all ministries. There are up to four ministries who are key players in the maritime industry. So, we need a body that can act and build a synergy between all the ministries and that is what the NPCC is doing.
How would you score the concession of the nation?s ports? Has it yielded good results?
If you concession, it means you are giving it out for a period of time, and government decided that it goes the concession model way. There are still elements of security here, so government cannot give ports outright to private hands without any form of regulation. It will have to do with technical regulation and commercial regulation. It will help government to be able to focus on what the concessionaires are doing ? whether they are performing according to the laid-down terms of the contract or not.
Concession specifies the nature of business and span of time the concessionaire is allowed to run the business and gives all conditions of operation signed by the custodian of federal government properties and businesses, the Bureau of Public Enterprises (BPE), and not NPA. This is the first time we are embarking on concession of the ports and a lot of things were put in place only at the last minute.
There is no physical demarcation of boundaries, but there are some standard issues of best practices seen all over the world, such as how much the concessionaire intends to invest. The concessionaire is tasked with certain level of productivity and that productivity level determines how much cargo he can handle at a particular time. Investing in equipment is essential to maximise productivity.
That aspect was spelt out. So, I will say that the port concession, though not perfect, jumpstarted the concession regime. There are other aspects that will follow, such as the legal regime. Remember that there were some opposition from the National Assembly because they said there was no legal support for concession of the ports. The NPA however came out to say that its laws allow it to lease terminals to private operators.
Today, under the concession regime NPA does not handle cargo. Cargo handling is now totally in the hands of private terminal operators. The objectives of the concession of ports to increase productivity and reduce the cost of doing business at the port. I will say that the terminal operators have not actually fully achieved that, because they have to increase the number of equipment they engage. If they match equipment with the level of business they are having, then they will be able to maximise productivity.
They have agreed to a timetable of investment, but now most of them have come up with a list of challenges for not meeting investment targets. They say ?how will I will invest equipment in a 10-year agreement and at the end I just shake hands with NPA and say goodbye, and don?t take anything out of the terminal?. They now say the tenure they have makes it difficult to maximise investment. Again, there is the other side to it.
They say the NPA is not making them realise target because the channels are not dredged, or the key walls are not maintained to allow bigger ships or to fully load up ships to capacity. At the moment some of have only achieve 20 per cent of the agreement and it?s already five years in. So, how will such concessionaires be able to achieve 80 per cent within the remaining five years and say goodbye after that?
Then comes the issue of modernisation. No port in the world will attract traffic. No port in the will have full productivity if it is not modernised. Modernising the port means providing common infrastructure, such as good port access roads, illumination of the ports to make it work 24 hours circle. If the roads are bad and no illumination, how can they do 24 hour operation to achieve the so-called 48 hours target for cargo clearing?
The port should have its own power generation ? that is what they are trying to do no, which is good, so that it does not depend on public supply to able to operate. The third is the issue of interconnectivity. The world has gone beyond working with tonnes of papers.
This is the idea in the Single Windows project, where the shipping company would be connected to the bank, and the bank to Customs and Customs to the importer and must be connected to the terminal operator and terminal operator to every player involved. So that even without leaving your office, you would know when you have to be at the port. This will also reduce human and traffic jams at the port.
There?s so much clamour by industry players, especially importers, customs agents and freight forwarders for a commercial regulator at the port. With the NPA and the Nigeria Shippers? Council already performing such role, is a fresh agency necessary as a commercial regulator?
We absolutely need a commercial regulator. Let me tell you why: there are port charges and, as I said earlier, the objectives of concessioning the ports is that of achieving maximum productivity while reducing the cost of doing business.
One of the major issues that will face the commercial regulator is the issue of port charges. In a single invoice you find 20 activities listed and charged ? discharging and offloading; offloading and loading; equipment charge; labour positioning for Customs examination; so many administrative charges, whereas all these charges can be articulated, they are related to a function.
We need a body to determine the level of charges for the various types of operations, not a sitation whereby a terminal operator may decide to charge whatever he wants. We need a regulator just like the National Communication Commission (NCC) is the commercial regulator in the telecoms. The NCC makes it impossible for operators to charge above a recommended cost of services.
Telecoms operators can charge below that recommended cost; if any of them likes, it can charge as low as N1,? and that?s what?s happening now; otherwise, they could have been charging up to N500 per minute now if there was no commercial regulator. In Nigerian port, a terminal operator can charge N1 million for one container, he can charge anything he likes.
There?s no control over port charges. So, if the government wants the benefit of concessioning to be fully realised, there must be commercial regulation; there must be, at least, some kind of arrangement whereby an importer can predict the cost of his consignment; not somebody surprising with big costs such as N100,000 or N200,000.
Again, this is why the cost of goods and services are so high in this country, because up to 90 per cent of what we consume come through the ports, a sector that is unregulated.
The NPA has power for technical regulation, such as harbour services, pilotage. The commercial regulator does not only regulate costs. It will also have to do with licences and permits for who should be at the port. Here now, everybody just assume whatever he wants to be, but it?s not supposed to be so. Your nature of operation at the port must be specified.
The Nigerian Shippers? Council on the other hand is an arbitrator, that is, it is an organisation to solve problems between the importer and provider of shipping services. The importers lay complaints regarding high rent charges by the shipping company, or demurrage. It is also supposed to be the custodian of freight charges. I?m talking of ocean charge for freight on container coming from overseas.
But over time, the issue grew because all the shipping lines put surcharges on Nigerian cargoes. The freight charge may be $100 and the surcharge $150, because they now surcharge based on a variety of issues: if there is a report of congestion at the port, the shipping companies increases container surcharge by 30 per cent.
Tomorrow, they hear there is a fight in the Niger Delta, they add another 30 per cent surcharge without considering whether such affects Lagos where the cargo is coming. They will call it warring surcharge. The NSC is supposed to be in continuous negotiation the shipping lines on their charges.
By your explanation, the functions of the NSC already befit those of a commercial regulator.; so why can?t the government just observe some amendments of the NSC laws to make it fully in charge of port commercial regulations?
No, it won?t work that way. What we are talking about is not freight, but local port charges; operating cost in Nigerian ports, not on ocean. A fresh regulator is what is needed, because the Shippers? Council is not mandated to control local port charges. I wish you knew how strong all this can be.
Even up to a few days ago, we have also been involved in this issue at the presidential committee that is looking at fast-tracking general improvement of the maritime sector. President Goodluck Jonathan himself was there throughout the meeting. We have to, within a few days, settle this matter.
What is happening to concession? What is delaying container clearance? You must know that delay costs more than initial port charges. Delay induces demurrage, land rent and many charges. The Shippers? Council is not, by its Act, mandated to have a control over local port charges, even though they have some times intervened in such issues as regards to local shipping charges. Over time, however, it?s like persuading people to accept the position of the council whatsoever.
The NSC has done a lot of work on local shipping charges, but the shipping companies, terminal operators, the Customs and even the clearing agents are not willing to comply with the position of the council. A lot of agencies levy port charges ? the NAFDAC, the Quarantine, SON, charge. Are they ready to listen to Shippers? Council?
For a long time now, oil theft has been a plague on the country?s economy. As a port advisory body, what would you advise the federal government to end oil bunkering happening at some of the nation?s ports?
I have always said in my presentations to the presidency and to various committees that we need to remove the opportunity for oil theft and the menace will stop. Even if you are going to kill everybody operating in the maritime sector, there will still be attempt to re-evolve misdemeanour in oil operations because the opportunity is still there.
You see, it?s just like when you put a bowl of sugar here and ants are coming for the sugar, you may kill a million ants today, but tomorrow more ants will still come for the sugar. But if you remove the sugar, you have to get an insecticide, because the ants will no longer be there. Remove the opportunity. What are we calling the opportunity? The challenge we have in oil theft is part of the problems that arose from the oil subsidy regime.
Oil products are being transhipped in the wrong places. There is a mothership, there is a feeder vessel coming to carry from it. You put a ship in the sea and then you send one boat to be taking oil from it ? nobody knows the quantity it is taking. Nobody knows whether they are loaded at all. You see, when we talk about oil theft, people should look at the system that create that opportunity. We should look at the documentation process that creates that opportunity, because oil theft is not stealing physical oil alone.
It also happens when you claimed to have lifted oil for Nigeria when you have lifted nothing and you are collecting money for a job you did not do. The system is what is important. If we have a system that makes it possible for interconnectivity, players will know when crude oil is being loaded.
The NPA, Customs and the NNPC will know the day the ship arrived because it will be within the system in the country and it will know when the ship is leaving Nigeria. They will know what quantity of cargo came in. The Customs officer or NPA officer may have to be there to collect duties.
Even when ships come in legally these agencies may not even have the information. So we need that information and that information system is in the interconnectivity. The ports information system must be established, such that it connects the whole