Cost of monopoly at Nigerian ports By Dokubo Tare-Johnson

In 2006, President Olusegun Obasanjo carried out a concession exercise to save the ports from total collapse. The concession was conceived to break the monopoly of Nigerian Ports Authority, NPA, increase efficiency of the ports through promoting competition on level playing fields; decrease cost of port services to users and also reduce the cost of support of the port sector to the government and to attract foreign direct investment, FDI.

The post-concession era had hardly taken off when NPA brought a storm to bear on the smooth sail of the vessels. Without any official pronouncement or change in the agreement between government and concessionaires, NPA began to divert vessels carrying a class of cargo known as General Cargo to Intels terminal at Onne, Rivers State. This was irrespective of the importers’ port of preference for the discharge of their cargo.

These cargoes which include pipes, steel pipes, dismantled rigs and so on were classified by NPA as ‘oil and gas cargo’, a nebulous term that was neither in the concession agreement nor in maritime lexicon anywhere in the world. Obasanjo could not understand where this impunity sprang from. Having set up a panel to investigate this odious arrangement, he suspended Intels, one of the concessionaires, from Nigerian ports after its indictment by the panel.

The oil and gas cargo invention made another stormy appearance on November 7, 2007 under President Umaru Musa Yar’Adua and without any government policy supporting this resort to private monopoly, the Minister of State 2, for Transport, Prince John Okechukwu Emeka issued a directive that all ‘oil and gas cargo’ should be routed through the oil and gas cargo terminal in Onne. The ‘oil and gas terminal’ was a strange cook up to Yar’Adua as it was to the concessionaires whose businesses were beginning to emaciate fast. Miffed by this impunity, Yar’Adua fired the minister after the infamy of compelling him to reverse his directive on the pages of national newspapers.

It is important to note that Yar’Adua’s family held shares in Intels. But after a critical examination of the huge negative impact of Prince Emeka’s directive which was crippling the maritime sector and driving investors out of Nigeria, Yar’Adua had no choice but to reverse the directive and sack the minister, a clear statement in patriotism.

The death of Yar’Adua again saw the irrepressible oil and gas cargo issue loom even larger than ever. Once again a letter with the reference number EP/AGM/OPTS/034 dated March 18, 2013 from NPA and another dated November 8, 2013 from the Ministry of Transport ordered all vessels carrying ‘oil and gas cargo’ to be diverted to Intels terminal.

From now on, the battle to exterminate the siege of the oil and gas cargo cabal and end private monopoly in Nigerian ports would rage and simmer for some years to come. Battles were fought in court and from the House of Representatives to the Senate, with committees of the National Assembly cancelling one another under extraneous influences.

The cost of these battles is almost incalculable. Between November 15, 2007 and August 8, 2008, an estimated US$150 million was lost to neighbouring countries and about US$3.8 billion in the next eight years.

The Board of Schlumberger, an oil and gas multi-national company which approved US$125 million investment into a new facility in Lagos moved the investment to Ghana after learning of the compulsory diversion of oil and gas cargo bearing vessels to Onne.

A Senior Advocate of Nigeria, SAN, Femi Atoyebi, a lawyer to Ports and Terminals Operators Limited, PTOL, in a paper presented before the Senate on the occasion of the Public Hearing on the Act to Amend the Oil and Gas Export Free Zone Authority Act (OGEFZA) to Provide for the Designation and Establishment of Oil and Gas Free Zone and Special Investment Areas and Related Matters, captured the huge costs the concessionaires paid and were likely to lose due to monopoly. In his words, “the terms, tenure and amounts of the yearly lease ranged from US$1.25 million to US$10 million and later up to US$12 million”. Some of the concessionaires, having lost the most lucrative cargo, which is General Cargo that includes pipes, dismantled rigs and so on, now dubbed oil and gas cargo, could not continue with their businesses after seven years while many struggled and could not meet their financial obligations to government in terms of lease, throughput fees and taxes. Indeed the government is said to have lost well over US$2.1 billion by the beginning of 2017 in lease, throughput fees and taxes.

The Managing Director of PTOL, Mrs Lizzie Ovbude, a fierce opponent of monopoly at the ports and a resilient advocate of the concession agreement lost three vessels carrying her cargo to the monopolistic directive in quick succession. Due to the diversion of these vessels, MV Kota Berlain, MV Kota Bakti, and Cosco Jing Gang Shan among others, her company lost millions of dollars.

A lawyer, with focus on maritime stated unequivocally that “Nigeria’s economy must have suffered a loss of over US$7 billion due to the monopoly squabbles at the ports”. Expatiating, he argued that the colossal loss of revenues to neighbouring countries, the massive losses due to stunted investment and development of the ports and terminals, leakages, tax evasion and shedding of employees due to skeletal finances, all these he affirmed were far more than the estimated US$7 billion the government must have lost due to the heinous activities of the oil and gas cargo syndicate.

Continuing, he added that “government is paying one concessionaire US$5.2 billion which it claims is “reimbursement” for construction of facilities at Onne, Warri and Calabar. My worry about such claims is that there have never been any reputable Quantity Surveyors to independently verify these claims and I guess too, that there is no Engineering, Procurement and Construction, EPC, or similar agreement between the concessionaire and NPA, to make auditing of the construction possible. So there are no checks and balances. And despite having their money refunded with interest in dollars, this concessionaire will still have exclusive use of the facility for 25 years. Quite hard to believe that this is happening in Nigeria in this age”, he lamented.

Another maritime close observer adds that the role of NPA and government at the ports defeats and indeed perverts the whole essence of the concession. “How, for instance, can the tariff regime not be regulated”, he asked.

“The concessionaires clearly negotiated with the government and agreed on a flat tariff regime to ensure a level playing field. How is it that the same government now allowed one company to charge much higher tariff? Why is it that while 25 concessionaires charge US$7.40 dollars per tonne for discharge and loading of cargo and pay US$1.12 to the government, one single company and a concessionaire like others, that is Intels, charges US$65 per tonne and pays US$5.8 to NPA? This simply defeats the whole idea of reducing cost of doing business at the ports, one of the cardinal reasons for the concession. And that was why a lot of our importers turned to neigbhouring countries. So it becomes penny wise, pound foolish”, he concluded

This was the cloudy situation at the ports when on April 27, 2015, President Goodluck Ebele Jonathan gave the unintelligible directive that legitimized monopoly. Jonathan’s directive signed by a certain Engineer David Omonibeke, Executive Director, Marine and Operations, requested that all oil and gas related cargo must be handled only at the designated terminals at Onne, Warri and Calabar, three terminals operated exclusively by Intels. The same directive also instructed LADOL Integrated Free Logistics Zone Enterprise to relocate its US$500 million fabrication and integrated yards in Apapa, Lagos, South West Nigeria, to Agge in Bayelsa State. It was one directive that instantly put at risk over US$5 billion projects, 70,000 jobs and further cast an ominous cloud over Nigerian Content, a revolutionary edict that had attracted over US$5 billion investment in Nigeria’s petroleum industry since its signing in 2010, with a projection of another US$10 billion by 2016.

Buhari’s recent counter directive that restored the concession agreement of 2006, saved Nigeria from an avoidable home-grown economic catastrophe.

Tare-Johnson writes from Port Harcourt.


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