Why we concessioned terminal operations at the port – BPE

Trade is critical for the development of Nigeria and the ports play a crucial role in this regard. Accordingly, it was the need to reposition the ports as a modern and efficient port system to service the demands and exploit the opportunities of modern trade and sea freight that government initiated and implemented the Ports Sector Reform. The Reform is among the top three priorities of Nigeria’s privatisation programme. Ports Concessioning is considered to be highly strategic as the nation move further towards a robust, private sector-led market economy.

 

PRE-REFORM STATUS

Prior to the Ports Reform Programme, the Nigerian Ports sector was characterised with infrastructure deficit with minimal private sector participation and dominant public monopoly in design, development, maintenance and operations. Ports system up to the eve of the reform process was an impediment to efficient transfer of cargo and hence facilitation of trade. NPA’s governance framework was characterized by:

• Unusual degree of centralization

• Limited autonomy

• Government interference

• Burdensome bureaucratic structure

• Excess labour force

• Conflicting role as a regulator and an operator

 

The result of these was inefficiency in the ports operations with the attendant high cost of processing imported goods and the inability of Nigeria’s exports to compete in the international market. The ports were inefficient and unattractive to shippers and were characterized by:

– Long turnaround time for cargo and ships

– Insecurity of cargo

– Low productive labour force in NPA

– Multiple government agencies in the ports

– Corrupt practices

– Excessive charges

 

OBJECTIVES OF THE REFORM

It was against this background and the recognition of the role of transport and ports in modern economic growth and development that the Government undertook to reform the transport sector to bring it in line with international best practice. The objectives of ports reform are located in the overall desire to achieve fast clearance of cargo, quick turn-around time for ships calling at our ports, removal of duplications in the functions of security and related government agencies, and the facilitation of trade. Specifically, the Ports Reform sought to achieve the following objectives:

• To increase the efficiency of port operations

• To decrease the costs of port services to port users

• To decrease the costs to government of supporting a viable port sector

• To boost economic activities and accelerate development

• To make Nigeria the hub for international freight and trade in West Africa.

 

THE REFORM INITIATIVES

To achieve these objectives, NCP established the Transport Sector Reform Implementation Committee (TSRC) in September 2000 under the chairmanship of the Honourable Minister of Transport. In turn, TSRC constituted a Sub-Committee on NPA in October 2000 that deliberated and recommended the adoption of the Landlord Port Mode. Furthermore, two preliminary studies were conducted to ascertain precise problems and identify the appropriate reform strategies:

• International Consulting Services Limited (ICS), engaged by BPE in 2001, undertook a Quick Assessment of the Ports, and proposed a more detailed study; and

• The “Ports Modernisation Project Study” was commissioned in November 2001, by the Federal Ministry of Transport (FMOT) through the World Bank Public Private Infrastructu.re Advisory Fund financing mechanism.

The study was undertaken by a consortium of consultants led by Royal Haskoning BV, and included Dynamar Consultancy, Amsterdam Port Authority (all of the Netherlands) and Challenge International Associates of Nigeria.

 

The recommendations of these studies were subjected to adequate study and consultations among all stakeholders including Federal Ministry of Transport (FMOT), NPA, Joint Maritime Labour & Industrial Council (JOMALIC now NIMASA) and the BPE to ensure that adequate information was gathered and informed decisions made based on international experience, best practice and local peculiarities.

 

The reforms and modernisation plans proposed a new institutional framework that introduced the Landlord ports concept, a decentralised and unbundled NPA, separation of responsibilities between the major actors in the system; restructuring of NPA; and prescription of a new legal and regulatory framework. The guiding principle in all the recommendations for port reform that were considered and agreed on by major stakeholders was to promote private sector participation, while safeguarding the public interests relevant to the port sector.

 

National Transport Policy:

A major component of the reform in the Transport Sector is the development of new sector policy direction to bring it in line with the general government policy direction of a private sector led development through a public-private partnership in ports, rail, aviation and roads operation and infrastructure development in general.

 

Landlord Port Concept:

Government strategy for adopting the Landlord Port Model was premised on the tremendous multiplier effect it will have on the economy. Comparative evidence from other countries that have undertaken similar reforms clearly demonstrated that more cargo was moved more efficiently through ports run by the private sector when compared to state-run facilities, and with considerable follow-on economic benefits. The Landlord concept in port sector reform is defined by a clear separation of the roles and tasks of the Public Sector and Private Sector. It essentially entails government ownership of the ports and port infrastructure, but the private sector manages the port operations. Private sector participation is achieved via the grant of concessions of terminals for a defined timeframe. The model envisaged PA being transformed from an operator and the regulator of the sector (as it was), into a technical regulator and landlord. Thus it will be responsible for port planning and development, regulatory tasks (safety, security, environment, rules of the game), nautical management, owner and concessionaire of port land and infrastructure.

 

On the other hand the private sector is responsible for terminal operations, investments and maintenance of superstructure and equipment. The main advantage of this separation is that each party does its work in accordance with its specific expertise.

 

This concept is predicated upon the fact that in a Iiberalised sector, it would be unfair to have an entity performing the dual responsibilities of regulator and operator.

 

Restructuring of NPA:

The reform initiatives also provided that NPA would be restructured in order to make it more effective and efficient in carrying out its new role. It would be unbundled to clearly separate Regulatory and Operational functions. The restructuring was aimed to introduce modern methods of public sector management to the ports system by reducing government interventions in port affairs and increasing private sector participation in operational tasks. It would entail the decentralisation of operations and granting greater operational and financial autonomy to NPA’s existing zones.

 

Legal framework:

Despite the fact that the Nigerian Ports Authority Decree no 38 of 1999 did not envisage Landlord Ports, there is adequate provision for “Concessions” under Section 8 (j, I, x) of the NPA Act and there was already a considerable basis of de facto Concessioning of port facilities that had been conducted under the provisions of the Presidential authority as provided in the Act. It was within this legal window that the ports concession was undertaken. However, to enhance and give effective legal backing to the adoption of the Landlord Model, and to properly reflect NPA’s new role as a technical regulator and to clearly define the new role of the stakeholders and provide the required protection for the private investor, a new Ports Act was proposed for enactment. Furthermore, as part of the unbundling process of the NPA, the economic regulatory functions of NPA will be transferred to an independent regulatory body in line with the Landlord Port Model. The suitable legal framework for the existence of this body is embodied in the proposed National Transport Commission (NTC) Bill. NTC when enacted will serve as independent economic regulator for the entire transport sector with the exception of Aviation.

After going through series of stakeholder review and consultations, including its consideration by the Federal Executive Council, the Bills along with other Transport Bills have been presented to the National Assembly for consideration and enactment.

 

CONCLUSION

Nigeria’s privatisation programme rightly focuses on the big picture, that is, the whole economy, and ultimately on doing the greatest good for the greatest number of Nigerians. Opening up hitherto government-dominated sectors to the private sector and simultaneously divesting government interest in those sectors paves the way for innovative, hard working Nigerian entrepreneurs to grow the economy. This will nurture strong private sector foundation that we need in a bid to increase overall efficiency and raise standards of living of Nigerians.

 

Excerpts from a speech delivered by the Director-General, Bureau of Public Enterprises (BPE), Mr. Benjamin Dikki at a Ports Compliance Conference organized by the Nigerian Ports Authority (NPA), in Lagos on Thursday 12th March, 2015.



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