Private terminal operators have brought significant changes to the port – Russo

Ascanio Russo
Ascanio Russo

Ascanio Russo, whose company, PTML, controls a large percentage of the terminal operations in Nigeria, is convinced that the country holds a huge potential for the maritime industry. But he regrets that such opportunities are not being maximised due to dearth of infrastructure and sustainable legal framework to attract private investments. In this interview, he speaks on the impact of private terminal operators at the port and why government should institute the right policies to boost economic growth.

 

If you were to make an assessment, how would you describe the sector?

I have been in this country for many years. Actually, I’m a proud Nigerian passport holder. I have lived here for so long, and I have seen a lot of changes in the maritime industry. When I first arrived here, the ports were managed by the Nigerian Ports Authority, and at a time when situations were quite tight; I mean operations lasted for weeks, you have to wait for weeks for your cargoes to be released because of congestion at the ports. Inside the port is another issue, many people are accessing the port, and there is not really an access control system in place, and so in terms of security and safety standards we’re just relatively average.

When the concession exercise started in 2006, we at Grimaldi had already approached the Federal Government to build a new terminal because the type concession we have is quite different from any other concession in the Nigerian port sector. Our own is a build-operate-and-transfer model. What we did in 2003, was to approach the federal government, and proposed to build a new terminal at TinCan Island, an area that was used as a residential area, but was greatly underutilised, and we signed our BOT agreement. Although the concessionaires all started more or less at the same time, but our model was different from all the others, because all the other terminal operators basically took over existing facilities from the NPA, they upgraded and invested a lot. In our case, we built a port from the scratch, and we built it to the best international standard, and streamlined our exigencies because our terminal is a multipurpose terminal, specifically designed to receive ships and vehicles. Grimaldi is mainly known for cars, we’re the largest importer of vehicles in Africa.

But we also have a strong shipping line, and the terminal is used for containers, project cargo and general cargo.

To go back to your question of how do I see changes in the industry; there have been tremendous changes. The private terminal operators brought significant investments and in those investments, a much higher level of productivity and efficiency. The turnaround time of the ships has improved dramatically, and even the management of the terminals has improved very significantly. This means that as a result of this improvement, the volume of cargoes which the ports, especially Lagos, could have increased many folds because of the efficiency that was brought by the terminal operators. At the same time also, the governmental agencies, they upped their game, mainly Customs for example, there was a significant process of digitalisation, and now many operations that were managed manually are done electronically.

But we must nonetheless acknowledge that the level of infrastructure around the port areas have not moved at the same pace with the level of development inside the ports, and this is why we are now experiencing this crisis around the port areas. I guess that you are aware of the chaos around the port and all the terrible conditions of all the roads leading to the port areas, be it TinCan Island or the OshodiApapa Expressway. I mean there is no significant work being done there. It’s very sad in a way because while the port operators have invested in the ports, and as a result have been able to increase the capacity inside the ports, most of the infrastructure around the ports have not been upgraded. That is why we are now experiencing this complete chaos, because basically, the roads have fallen apart, and accessing the port area is really becoming a nightmare.

But this is not the only factor because if you look at the congestion around the port area, it’s as a result of many causes, not only infrastructure. There is also the condition of the vehicles, the condition of the trucks accessing the port areas. If you look at the trucks coming to the ports, you are looking at vehicles which are maybe 40 to 50 years old, and they are falling apart all the time. This is part of the industry that is highly fragmented, and so it is difficult to interact with the players of the industry. We are not talking of the big haulage companies, which you can easily talk to and try to coordinate the moment cargoes go in and out of the port.

To go back to your question of how I see the industry in the last 15 years or so, I may no doubt have seen big improvement in the turnaround time of the vessels, and the dwelling time of the cargoes. Before, the containers would stay in the port for about one month, but nowadays, that range of time have gone down to probably two weeks. Perhaps in the last few months, it has gone up again because of the congestion. In our terminal, the cargo stays less than 10 days, and this is because of the peculiarities of our facility and the location. We have a number of advantages, which make our terminal easy to transact business with. So, in a way we are not really suffering the same level of difficulty to access like the others.

 

If you take assessment of all that you have described that now characterise the Nigerian maritime sector, would you say that we are competing effectively with our neighbours within the region, within the continent and even the larger world?

The main problem I see aside from the infrastructure around the port areas is the fact that we don’t really have a well-functioning rail system, and we are now developing transportation cargoes using the waterways barges. Even in our own case, we have been using barges for the past 12 years. We are pioneers in using barges to move cargoes to the port. All these infrastructural problems, I think, put the Nigerian ports at a disadvantage compared to other ports in the region, because at the end of the day, we benchmark against our competitors, which of course first is the region.

Second is the high cost of calling the Nigerian ports. I mean for a ship owner to call at the Lagos port, or Onne, or any other port in Nigeria, it is extremely expensive. Well I dare to say that probably Nigerian ports are amongst the most expensive in the world. I know this may be a bit controversial, but it’s a reality. We are part of a larger logistics group which is the Grimaldi Group, and we have operations all over the world, so we know how much it costs to call at a port in Norway, U.S. in Europe, North America, or even in the Far East. The costs are definitely extremely high. So in a way, this puts the Nigerian ports at a disadvantage when compared to the neighbouring ports, like the ports of Lome, Cotonou, or Abidjan. This is because all these ports are developing the model of a Hub Port; they want to receive bigger and bigger ships, and from their own base they want to fill their cargoes to other ports in the region.

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Unfortunately, in Nigeria this has not been possible. Also, not only because of the infrastructural problem, and the high cost of doing business here, but also because the trade policies have been not particularly friendly to the development of additional volumes of cargoes. So in a way, I will say we are less competitive with the other ports in the region in terms of the cost of calling at the Nigerian ports. Of course, the advantage we are having here is that we are serving a big country and a huge economy, and as such, the volumes of cargoes that we are handling are still bigger than our neighbouring ports. But the potential of this country is much bigger than this, and we know that if you look at the volume of cargoes coming, and you compare this with the population of Nigeria or with the GDP of Nigeria, it’s extremely low.

A country like Nigeria should import much more than we are currently importing through the ports, and the problem is that most of these cargoes go through the neighbouring ports and we know that. Ports like Cotonou for instance, is basically acting like a Nigerian port in another country, and goods find their way to Nigeria through the very porous borders between the two countries. Honestly, it’s a pity because at the end of the day, all these cargoes that turn up in other ports belong to Nigeria, and in the end, the federal government is losing huge amount of custom duties; it’s losing in terms of revenue. Also, the Federal Inland Waterways is losing; the masses are losing; and so the whole economy is losing not only because the ports are expensive, but also because some trade policies force importers to use other ports.

Ascanio Russo (1)
Ascanio Russo

Look at the type of cargoes that come calling, would you then say there is now a trend or an already existing incidence of dumping of accident vehicles in Nigeria? 

Yes there is a trend, and the quality of vehicles has deteriorated over the last four years, this is also a result of the recession in Nigeria. Of course the purchasing power of the people has shrunk, and not everybody can afford a very expensive vehicle, and so other people are importing older vehicles or accident vehicles, which are clearly cheaper. This is as a result of the new auto policy, because of course if you increase overnight the level of duty by over 100 per cent, it would make the importation of vehicles into Nigeria much more expensive.

Also, there is the view that used vehicles are very polluting; and maybe we should not use used vehicles in this country, but the reality is that used vehicles is not a luxury. I mean that people are not buying used vehicles because they prefer them to new cars; it’s a matter of price and some requirements. We need cars in this economy, and this leads to what we discussed earlier about trucks coming to the ports. I mean that trucks in Nigeria are probably about 40 years. One of the reasons why we are having this congestion is because we have these very old trucks, so the trade policy, which makes it very expensive to import goods and trucks into Nigeria, is not helping matters.

If you make duty very expensive, people will try to fix their trucks as much as they can; even fleets of trucks in this country are so old. It increases the level of pollution, it increases the level of congestion, increases the number of accidents, and so forth. These are all economies of scale and negative externalities, which are very difficult to measure, because people at the end of the day, will just look at how much it costs to reduce the level of duty. Do we know how much it costs, all these congestion that we are experiencing, all the pollution that we are living with, and all the people who are dying every day in accidents because we are importing all these very old vehicles?

Probably, if we really want to help the automotive industry, rather than making less competitive the used second-hand cars, you should try to make more competitive the locally manufactured vehicles. To do that you should look probably at incentives for the local producers who agree that we should try to develop this industry, but where you want to make this industry strong, then you should support the industry from the beginning with incentives like tax holidays. This is so people can come and invest, but you can’t expect to protect the market just by increasing the level of duty. Also, because at the end of the day, people need cars; you cannot tell them that you can’t drive or buy cars any more. They will always find a way. No matter how much you close the borders, and put all sorts of control, people will always find a way to smuggle what they require. So rather than making things difficult for the people, and making things more expensive for them, you would want to help people to import good second-hand vehicles, which is not a luxury. This will help reduce the pollution, and help also in terms of congestion, while at the same time also supporting the local industry but in a different way. Not just blocking the importation, but also helping the local industry with incentives and tax holidays.

 

Can you identify some of those policies that you would like to see changed? 

One of those policies which we have been particularly focused on because we have been directly affected is the car automotive policy. That was a policy introduced by the previous administration in 2013, and became effective in 2014, and the purpose of this policy was to develop the automotive industry in Nigeria. A very ambitious goal, and of course we all support any policy which makes the economy better. Unfortunately with this policy, to achieve that goal, it distorted the trade to Nigeria. One of the instruments they used was to increase the level of duty on used vehicles, making them more expensive.

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The logic was that the vehicles produced in Nigeria will become more competitive, but unfortunately, what we saw immediately this policy was introduced was that duty was increased. We saw an immediate diversion of cargo to Benin Republic, and you know that Cotonou especially has always been known for used vehicles, which are smuggled to Nigeria.

This auto policy made things worse, because historically, let’s say that 50 per cent of the cars were going to Nigeria, and 50 per cent to Cotonou, even if the all cars were for the Nigerian market. After this policy, the volume of cars increased to 70 per cent all going to Cotonou. Almost overnight, we saw a collapse of the number of vehicles been discharged in the port, and it’s almost five years since this policy was introduced, and it has not helped the automotive industry in Nigeria, because at the end of the day, this is a market which requires these vehicles. What we have seen rather is that used vehicles are still coming to Nigeria through the border, one way or another, and the sad thing is that the good quality vehicles are coming through Cotonou, the level of duties is much lower and so they can afford for them to be discharged there, while the old vehicles, the accident ones are coming to Nigeria.

 

Still on operations, you talked about pollution, you talked about congestion, and you also talked about accidents on our roads. Let’slook at the pollution of our marine waters. How do you think that it has impacted on operations here, and wreckage and ship abandonment that are causing obstructions on our seaways? 

That is an interesting topic. You know that as an international shipping line we are abiding by the highest international standards. Our ships are not involved in any manner or act of pollution, but of course the area which I would like to highlight in terms of pollution of the marine waterways especially, is the inland waterways like Lagos for example. We know how congested Lagos is, and that is because of the decay on road infrastructure. But one area which has not been given enough attention even when some people have started delving into it is the use of the waterways. This city is blessed with all these channels, the lagoons and so forth, and we should take advantage of these waterways to move cargoes around. One of the problems is that these waterways are not well kept. They are not dredged and they are regularly polluted. So you cannot just move barges or boats from one point to another. Sometimes, the water is so dirty that you can’t even go with a boat or perhaps because it is not dredged.

People are dropping all sorts of refuse and rubbish in there, and we are particularly sensitive to this because as I mentioned earlier, we have been operating with barges for the last 12 years, and we have been pioneering this. As you may know, we are the largest shipping line bringing vehicles to West Africa, and it is one of the largest operators in the world, and in Nigeria, we are also leader. The moment we built the terminal at TinCan Island, we believed the capacity of the terminal is not enough to cater for all the influx of cars, even when there is the crisis because of the automotive policy. The first thing we did after we started was that we needed to expand, but there was no land available at the port anymore, because all the lands were already occupied.

We started looking for land close to the water but we could move cargoes using barges, and we developed this facility on the OshodiApapa Expressway, actually it’s between the OshodiApapa Expressway and Badagry Expressway. That was a land which used to be vacant but now a proper terminal, which we have developed. Over the years, we acquired lands from different owners. It was not like a big piece of land that we acquired in one shot; there were different pieces of lands, and we know how competitive it is with lands in Nigeria, and over the years we have developed this terminal. Now we are running over 150,000 square meters of dock terminal, where we move vehicles using our barges; and this ways basically, we have eased a lot to the congestion around the port. You can imagine if all these vehicles had come to the port area, of course there was no space, and that would have been an additional congestion.

The beauty of this is that importers do not need to come to the port to pick their vehicles from because we have Customs there, and that office is already connected wireless with our main office, it’s connected to ASYCUDA, customer ASYCUDA and so forth, so it’s basically an extension of the port. You are coming to the port without coming to Apapa and TinCan Island. These are the kinds of solution that people have started looking at for containers, and for general cargoes. The whole system would have collapsed, and we see more and more people doing barging operation. I see more and more of these barges but of course we are at the early stage and they are not properly structured business. In a way, it’s good because it shows that people are exploring different avenues, because a port like Lagos that is growing, needs different ways to evacuate the cargo. We cannot rely only on the road infrastructure. Of course the road is very critical, and we hope that eventually all the roads leading to the port would be fixed, but we can’t rely on the roads. We need the railway, we need the waterways here in Lagos, because we have potentially all these opportunities. It is a good thing that now, people are looking at barges, and we too we are also looking at expanding our barge operation even beyond what we are doing now.