A report published in March by top global accounting and audit firm, Deloitte has revealed that Terminal Handling Charges (THC), which is the main revenue stream of terminal operators, declined by 22.4 per cent between 2006 and 2016 as a result of depreciation of the naira and inflation.
The report revealed that at the beginning of port concession in 2006, THC collected by the operators stood at $232 per TEU but declined to $180 per TEU by 2016.
According to Deloitte, “The Terminal Handling Charges is the main source of revenue for the Terminal Operators. This is the payment received from transferring cargo from ship/quay side to the yard for release to clearing agents/customers.”
According to the report titled “Public Private Partnership (PPP) as an anchor for diversifying the Nigeria economy: Lagos Container Terminals Concession as a Case Study“; during the same period between 2006 and 2016, the Terminal Operators business was adversely impacted by the rise in Consumer Price Index/Inflation, with the CPI Nigeria rising to over 177% since 2006. It said foreign exchange (FX) fluctuation also impacted the value of the THC with over 224% FX depreciation between 2006 and 2016.”
The report, which was released by Deloitte Nigeria’s Director of Strategy and Operations, Bola Asiru; Senior Manager, Oladotun Bamigbetan and two others, stated that if the terminal operators were to adjust the THC yearly in line with changes in foreign exchange and Nigerian CPI (Consumer Price Index), the rate should have increased to N185,112 per TEU.
“In real economic terms, the operators are losing revenue by not adjusting their THC in line with market realities,” Deloitte stated.
The firm said the foreign exchange challenges that Nigeria faces as a result of the fall in global oil prices is further pronounced for terminal operators as a large part of their capex (capital expenditure) and operational costs are in US Dollars. It said the operators’ dollar denominated costs includes equipment acquisition and maintenance costs and payment of lease fees to the Nigerian Ports Authority (NPA).
It said, “83% of Terminal Operators revenues are received in Naira, 17% is received in US dollars. Terminal Operators have to constantly source for US Dollars through the parallel market at very high rates in order to meet their statutory and operational cost obligations.”
The firm further stated that Terminal Operators face huge challenges in the area of storage as the terminals are used as “cheap storage warehouse alternatives” by cargo owners.
“The current policy provides for a free 3 days storage after which a charge of N900 is applied per day and regulated by the NPA. Importers take advantage of the low storage charges offered by the Terminal Operators to store their imported goods at the terminal as opposed to offsite warehousing facilities that charge as much as N60,000 per day. This leads to congestion at the terminal and hinders the productivity and storage capacity of the terminal,” the report said.
Deloitte further stated that during the ten-year period under review (2006 to 216), Terminal Operators made huge investments on the acquisition of modern cargo handling equipment; development of port infrastructure such as buildings, quays and storage yard; lighting; automated tracking system; trainings and supply of electricity.
It said, “As a direct impact of these investments, the ports have witnessed increased ship traffic and throughput which has led to a 400% rise in container throughput from 400,000 TEUs in 2006 to 1.6 million TEUs in 2014.
“The investments have also led to the eradication of ship waiting time at the container terminals, as ships now berth on arrival.
“Vessel turnaround time has been reduced to from 5 days to 41 hours while average dwell time for cargo clearance went from over 30 days to just 14 days.
“In addition, due to improved security and lighting of the terminals, the ports now run 24-hours (daily) and 7-days-a-week operations.
“There has also been some major investments made by the NPA on behalf of the government to increase traffic at the ports. Most laudable is the dredging of the channel from 9m to 13.5m water depth.
“The NPA also invested in the provision of larger tug boats to service shipping companies. This has led to larger ships calling particularly at the Lagos port and Tin Can port thereby increasing the throughput.
“The NPA has been a positive partner in the concession process but there still exists opportunities to further optimise the existing Lagos port infrastructure to meet medium term needs of the sector.”
More from Ships & Ports
We pay for your stories! Do you have a story for Ships & Ports? Email us at firstname.lastname@example.org or call 0810 359 4873. You can also WhatsApp us here. We pay for videos too. Click here to upload yours.
Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.