Port Projects in Nigeria: Historic Port Developments & Greenfield Port Projects MIKE IGBOKWE, SAN MIKE IGBOKWE (SAN) & CO.

Transcription

1 Port Projects in Nigeria: Historic Port Developments & Greenfield Port Projects MIKE IGBOKWE, SAN MIKE IGBOKWE (SAN) & CO. PRINCIPAL PARTNER

2 OUTLINE Introduction History of the Development and Management of Port Projects Nigeria. Port Concession Issues Greenfield Port Projects Regulatory and Legal Requirements for Greenfield Port Projects Necessity of the Commercial Regulator Challenges of Greenfield Port Projects Benefits of Greenfield Port Projects in

3 INTRODUCTION Facts about Nigeria: Population 186 million last Census. Located in West Africa. Coastline 853km Territorial line 12 nautical miles from the baseline and 200 nautical miles of exclusive economic zone Length of waterways 8, 500 km GDP - $1.089 trillion; largest economy in Africa. Mainstay of Economy: Oil & Gas but now diversifying into agriculture and the export of agricultural products. 6 major ports, but 3 ongoing Greenfield ports Badagry, Lekki Free Trade Zone in Lagos and Ibom Deep Sea Port in Akwa Ibom State. A Port is a sheltered place from the open sea where a ship can enter to load and unload its merchandise. - Eric Sullivan s Marine Encyclopaedic Dictionary 6 th Ed. P. 343

4 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA Pre-1954 Ports Act era Ports were constructed merely to facilitate trade and export of local minerals and agricultural products. Lagos port for export of cocoa, rubber, groundnut; Port Harcourt port for coal etc. Ports Management shared between Nigerian Marine, Nigerian Railway Service, Customs Service and private ports Owners such as John Holt and Compaignie Francaise de I'Afrique Occidentale (CFAO) Ports Act era Establishment of Ports Authority to control and manage all public ports in Nigeria. See Section 10 of the Ports Act, 1954.

5 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA 1969 Selective Nationalization era All private ports (including Burutu, Warri and Calabar ports) were nationalized by the Federal Government. New ports in Warri, Tin Can Island and Onne built and developed by the Nigerian Ports Authority (NPA) Commercialization era Change from Nigerian Ports Authority to Nigerian Ports Plc with Federal Government of Nigeria as sole shareholder, due to inefficiency, severe congestions and poor management of ports.

6 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA 1999 NPA ACT ERA Enactment of Nigerian Ports Authority Act, which reversed commercialization. To become a port, the Minister of Transport must so declare any place in Nigeria and any navigable channel leading into that place and likewise declare the limits of a port and navigable channel. (S.30 NPA Act). Creation of Nigerian Ports Authority vested with powers to: provide facilities in, manage and regulate the use of all ports in Nigeria (S.7 NPA Act); construct, execute, improve, work and develop ports, docks, harbours, piers, wharves, canals, water courses, embankments and jetties. enter into agreement with any person for the operation or the provision of any of the port facilities which may be operated or provided by the NPA. (S.8.NPA Act). Port Concession was based on this Section. regulate traffic within the limits of a port or the approach to a port; regulate the berths and stations to be occupied by ships and the removal of ships from one berth, station or anchorage to another berth; keep free passages of such width, within any port and along or near to the piers, jetties, landing places, wharves, quays, docks, moorings and other similar works in or adjoining the port and for marking out the spaces to be kept free. (S. 32 NPA Act).

7 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA 2001 PORT PROJECT BONDED WAREHOUSES OR TERMINALS Also often called off-dock cargo handling facility or cargo terminal operation. Approved by the NPA and licensed by the Nigerian Customs Service (NCS). Arose due to port congestion caused mainly by the implementation of Destination Inspection of imported cargo by the NCS and the deficient and malfunctioning cargo handling equipment of NPA. Procedure: Agreement with bonded warehouse owners to stem shiploads of containers to their bonded warehouses to store and handle cargo and deliver them to cargo interests under Customs clearance. Operator obtains final approval of licence from the Customs Comptroller-General of the (NCS) to operate a General Bonded Warehouse. See Section 82 of the Customs and Excise Management Act (CEMA). Operator posts a bond with the NCS as security to indemnify NCS if the goods are released improperly without the proper Customs examinations and custom duties and other related taxes. Section 144 of (CEMA). Excluded from the meaning of off-shore cargo handling facilities and ports in the Interpretation Section of the Ports and Harbour Bill awaiting enactment by the Legislature.

8 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA 2005/2006 PORT CONCESSION ERA Bids were received by the Bureau of Public Enterprises (BPE) from the private sector for the concession and subsequent management of the Federal ports. Involved the leasing of Nigerian Ports Authority s terminals and equipment to private operators for 15 to 40 years on terms that would ensure improvement of infrastructure and efficient operations. It is not ports privatization whereby ownership of the entire land, water area and assets of the ports are transferred to a private company for a fee See Port Concessioning, Legal Framework and Challenges, by Chief A.B. Sarumi, Managing Director, NPA at the 9 th Maritime Seminar for Judges, Abuja, 4 th -06 th July, The NPA alone and in some cases along with BPE executed build, operate and transfer (BOT) concession agreements with the private terminal operators in respect of the concessioned Federal ports e.g APTML, PTML, ENL., APM Terminal All Federal ports in Nigeria including Port Harcourt, Lagos, Tin Can Island, Calabar, Sapele, Warri, Federal Ocean terminal, Onne were owned by the Federal Government and managed through the Nigerian Ports Authority.

9 HISTORY OF DEVELOPMENT AND MANAGEMENT OF PORT PROJECTS IN NIGERIA 2005/2006 PORT CONCESSION ERA cont d The Concessions adopted the Landlord -Tenant model of ports administration: NPA owned the ports with the land and infrastructure and leased the port infrastructure terminals to private entities which are responsible for developing the superstructure required for their port service delivery responsibilities. Every terminal operator must also register with Nigerian Maritime Administration and Safety Agency ( NIMASA) for that purpose. (S.27(1) NIMASA Act, 2007.) The former eight (8) Federal ports were reduced to six (6) major ports, with two (2) ports in Lagos and four (4) in the east namely; Lagos Port Complex, Tin Can-Island Port Complex, Calabar Port, Rivers Ports, Port Harcourt, Rivers Ports Onne Ports Complex Delta Ports Complex.

10 PORT CONCESSIONS - REASONS Unsatisfactory and inefficient performance of the ports in providing services. Long ship turnaround time needing reduction. Inefficient and delayed discharge of cargo thereby congesting ports and increasing costs. Dilapidated ports infrastructure needing upgrading and modernisation. Archaic cargo handling equipment needing upgrading. 100% physical destination inspection regime thereby boosting the economy. Need for job creation and experience for skilled and unskilled Nigerians. Pilferage, vandalization and damage to cargo due to inadequate security at the terminals. Port-unfriendliness due to administrative bottlenecks in cargo handling and clearance and long ships turn-around time. Decreased revenue for NPA and NCS due to cargo handling/storage charges and Customs duties.

11 PORT CONCESSION - ISSUES Bonded terminals gradual extinction after the port concession by the Federal Government. High cost of port services causing consignees to ship their goods to neighbouring foreign ports at the expense of Nigerian ports. Investment in port improvement and cargo handling equipment not up to expectation. Complaints of multiple and exorbitant charges for similar services. NPA s conflict of its interest in: its role in technical regulation and Landlord of the Concessionaires/Terminal Operators ; vis-avis its role as a commercial or economic regulator of the Concessionaires/Terminal Operators and; its inability to fully commercially or economically regulate concessionaires. Lack of an organ or agency which would regulate, monitor or supervise the commercial activities of the port terminal operators as distinct from the technical regulation by Nigerian Ports Authority. Inadequate legal framework for the regulation and operation of the port concessions.

12 PORT PROJECT INLAND CONTAINER DEPOT/CONTAINER FREIGHT STATIONS Inland Container Depot ( ICD ):. a common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under Customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admission, re-export, temporary storage for onward transit and outright export. See Regulation 2 of the Nigerian Shippers Council (Inland Container Depot) Regulations, Container Freight Station ( CFS ): a place where containers are stuffed, unstuffed and cargo aggregations and segregation take place. Regulation 2 of Nigerian Shippers Council (Container Freight Station) Regulations, ICDs and CFSs allow speedy flow of goods away from the seaports to the strategic inland ICDs and CFSs thereby decongesting the seaports. They rely on critical transport infrastructure such as rail, inland waterways and road which would connect to the seaports. Their functions include receipt and dispatch/delivery of cargo, transit operations by rail/road and inland waterways to and from servicing ports, Customs clearance, Consolidation and desegregation of less than container loads cargo, temporary storage of cargo and containers.

13 PORT PROJECT INLAND CONTAINER DEPOT/CONTAINER FREIGHT STATIONS cont d ICDs and CFSs reduce port congestion, reduce demurrage and lower door to door freight rates. Federal Government granted some companies concessions to operate ICDs in 4 States (Abia State; Plateau State, Kano State and Oyo State) and 2 concessions to operate the Zamfara CFS and Bulunkutu CFS. The Nigerian Shippers Council (NSC) is charged with exercising regulatory powers over ICDs and CFSs (Regulation 6 of both the Nigerian Shippers Council (Inland Container Depot) Regulations, 2007 and Nigerian Shippers Council (Container Freight Station) Regulations, 2007). The ICDs are to be private sector-driven, operated and managed by private companies or such as may be added from time to time. ICD concessions are on a build, own, operate and transfer (BOOT) basis with the concessionaires making substantial investment in the ICDs. Operators apply to NSC for and are granted licenses to operate ICDs. Every terminal operator and jetty operator now has to register with NIMASA in the register kept and maintained by it for that purpose.

14 GREENFIELD PORT PROJECTS Defined as one that lacks constraints imposed by prior work. (Gupta Rajeev in Project Management). A Greenfield port project is the development of a new port project from the scratch. The design and construction on a new project implies a capital intensive endeavour. On-going Greenfield seaport projects being developed in Nigeria:- Lekki deep seaport, Lagos State in the commercial heartbeat of Nigeria, Ibom deep seaport, Akwa Ibom State in the oil rich Niger Delta, and Badagry deep seaport, Lagos State. They are deep seaports, ambitious in size and in depth, enclosed and operating within an export processing free trade zone.

15 GREENFIELD PORT PROJECTS LEKKI DEEP SEAPORT The Lekki deep seaport will have a capacity of 2.7 million TEU as well as 3 terminals for dry cargo, liquid cargo and container with draft of 16.5 meters. Operates a Private Service Port Management model, where the port is wholly owned, managed and operated by the private sector but regulated by Government. State and Federal Governments have acquired equity in the Greenfield port projects currently being developed e.g. the Build, Operate and Transfer Concession for 45 years granted to Lekki Port LFTZ Enterprise has Lekki Port LFTZ as a special purpose vehicle registered with Nigerian Export Processing Zone Authority as a free trade zone enterprise, with a proposed equity structure of 18%, 20% and 61.5% to be held by the Lagos State Government, Federal Government and Tolaram Group respectively. Tolaram Group is a Singaporean company with long term investments in Nigeria in various industries. It has the requisite expertise in port development and management. The Federal Government would be investing through the NPA while the Lagos State Government contributed the land required for the project. There are said to be plans by Federal Government to scale down its investment in the said port project midway into the construction phase of the port project while the Lagos State Government has made an initial payment of N1.42 billion towards the project. ( The construction is being undertaken by EPC Contractors and China Harbour Engineering LFTZ Enterprise under a turnkey construction agreement.

16 GREENFIELD PORT PROJECTS BADAGRY DEEP SEAPORT The Badagry deep sea port, estimated at US $2.6 billion. Developed by a consortium led by APM Terminals, (a part of the AP Moller Maersk Group), an expert operator of 65 operational ports, 7 new ports in construction, 16 ports being expanded and 165 inland services spanning 68 countries that serve customers, governments and the entire global supply chain. ( The members of the consortium include Oando Plc, Orlean Invest, the Macquarie Group, Chagoury Group and Terminal Investment Limited.

17 GREENFIELD PORT PROJECTS IBOM DEEP SEAPORT The Ibom deep seaport project is promoted by Greenfield Assets Limited (with plans to invest US $900 million) and the Akwa Ibom State Government is also in the project. Key Players: Dar Al Handasah, an international project design agency, is responsible for the design of the deep sea port and the adjoining industrial city. Global Maritime and Port Services Pte Ltd, a Singaporean firm, as Transaction Adviser for the project; and Pricewaterhouse Coopers is the Programme Manager. The NPA s build, operate and transfer concession to the Greenfield port concessionaires is in effect an assignment of all NPA s statutory functions and powers in section 7 and 8 respectively. Greenfield port project differs from NPA s concession with the terminal concessionaires because the Greenfield port concessions extend to design, construction, execution, equipment, improvement and development of ports, docks, harbours, piers, wharves, canals, water courses, embankments and jetties within the declared port area at its own costs and risks.

18 Regulatory and Legal Requirements for Greenfield Port Projects The Federal Ministry of Transport/Nigerian Ports Authority. The State Government where the Port will be located. The Federal Ministry of Environment. The National Environmental Standards and Regulations Enforcement Agency (NESREA). The Nigerian Maritime Safety and Administration Agency (NIMASA). The Ministry of Petroleum Resources. Nigerian Export Processing Zone/State Free Trade Zones. Board of Customs and Excise. Ministry of Interior/Immigrations. The Nigerian Civil Aviation Authority (NCAA) They are some relevant Agencies to be dealt with and they all have laws with requirements to be met by investors in greenfield port projects in Nigeria.

19 THE NECESSITY OF THE COMMERCIAL REGULATOR The Nigerian Shippers Council is empowered by the Nigerian Shippers Council (Port Economic Regulator) Order 2015 to act as an interim economic regulator for all Nigerian ports to inter alia: Regulate Nigerian Ports concession agreements and Set and enforce standard operating guidelines for Nigerian ports. The Order intends to effect a regulatory regime of the Nigerian Ports for enhanced efficiency and to address the negative impact of port concession activities. The standard Concession Agreement also envisages a situation where a substitute regulatory authority may perform the regulatory role over ports management and administration if the NPA loses its powers to regulate and control the Nigerian ports. A Bill has been passed by the NASS to establish the National Transport Commission as an independent multimodal transport sector regulator and transmute the Nigerian Shippers Council to National Transport Commission to provide efficient economic regulatory framework for the transport sector, mechanism for monitoring compliance of government agencies, transport services providers and users in the regulated transport industry with relevant legislation and to advise government on matters relating to economic regulation of the regulated transport industry.

20 CHALLENGES OF GREENFIELD PORT PROJECTS: Challenges Multiplicity of Legal Requirements, Bureaucracy and attendant costs. Multiplicity of Agencies instead of one-stop Agency for compliance. Finance and access to finance even though private capital and finance are recognised. No stabilization clauses to shelter the concessionaires from adverse legislative changes to the legal/regulatory regime.

21 BENEFITS OF GREENFIELD PORT PROJECTS: Benefits Massive development and multiplier effect. Employment opportunities. Infrastructural development. Increased TEU due to bigger ships and port expansion. Technical know how transfer.

22 CONCLUSION Ports development and management in Nigeria before and after its independence in 1960 had taken different forms at different times in order to achieve different useful purposes. The critical growth path of the Nigerian economy is to be more exportoriented than import-oriented. Ports would serve as vibrant catalytic agents in achieving such economic growth whereby freight rates are reduced by the entry of bigger vessels that the deep sea greenfield ports would accommodate. It will also create employment and business opportunities in the shipping industry. The desire to make Nigeria the transport hub of South-West African subregion can be achieved through an effective development and management of port and greenfield port projects in Nigeria.

23 THANK YOU Mr. M.I. Igbokwe, SAN, FCIArb. Mike Igbokwe SAN & Co THE HEDGED HOUSE 28A, Mainland Way, Dolphin Estate, Ikoyi Lagos P.O. Box 74336, Victoria Island, Lagos. Tel: +234(0) Mobile: (+234) Website: