Costs of Maritime Port Challenges in Nigeria
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Costs of Maritime Port Challenges in Nigeria September, 2018 Contents Executive Summary 4 Introduction 5 Port Challenges 7 Feedbacks From Stakeholders 14 Cost Implications of the Ports Crises 17 Suggestions 20 Conclusion 23 References 31 EXECUTIVE SUMMARY The size (largest economy in Africa with The research finds that the economy is GDP of $413 billion in 2017) and potentials currently losing about N600 billion in customs (large market with approximately 200 million revenue, estimated $10 billion for non-oil export people) of the Nigeria economy continue to and about N2.5 trillion corporate revenue in elicit interest among local and global investors. the industry on an annual basis. Capacity It is also a well-known fact that efficiency in utilization stands at 38-40% and approximately ports operations has become an incentive and 40% of businesses located around the ports one of the major drivers of trade and investing communities have either relocated to other activities across countries. Yet, the Nigerian areas, scaled down operations or completely ports are currently classified among the worst closed down. These developments have very ports in the world due to challenges bordering huge adverse implication to tax revenue, job on delay of import/export processes, heavy creation and real economic activities with human and vehicular congestion around downside effect of about 3% on the country’s the ports, difficulty in gaining access to the GDP. ports due to bad roads, security concerns and incidence of corruption and infractions The report also highlights the ports reform among the players – government officials and measures that yielded positive outcome port users. in selected other countries and outlines suggestions by the Organised Private Sector Crises in the Nigerian maritime sector is a (OPS) on policies, processes and infrastructure popular and well reported phenomenon. The enablers for the ports. World Bank 2015 - 2017 Ease of Doing Business indicator for measuring the effectiveness of We believe that with dedicated, inclusive and ports, “Trading Across Boarders” ranked Nigeria consistent implementation of the reform at a depressing 182/183 out of 185 countries. measures, the Nigerian ports will begin to Significant efforts were made in reforming the move on the path of efficiency and growth. Nigeria’s maritime sector through the partial It is widely acknowledged that coordinating privatization of the ports in the mid-2000s port reforms is a herculean task due to multi- and other subsequent interventions. However, level fragmentation of stakeholders, vested more than two decades after, the results of the interest and the diversity of the Ministries, reforms are not impressive. Departments and Agencies (MDAs) involved. Overall, political will, active enforcement and Consequently, operators, users of the Nigerian monitoring framework that flows right from ports and industry players are increasingly the Presidency down to the MDAs is the most faced with bureaucratic red tape, constant essential enabler to succeed and sustain the delays and illegal charges leading to high costs present ports reforms. of operations. This study therefore attempts to profile and estimates the economic and business costs induced by the inefficiencies in our ports. 4 Costs of Maritime Port Challenges in Nigeria INTRODUCTION The International Monetary Fund (IMF) Ministries, Departments and Agencies (MDAs) Economic and Country report shows that operating at Nigerian Ports and high incidence of Nigeria is the largest economy in Africa with infractions by the MDAs. No doubt, this situation GDP of $413 billion in 2017. Yet, it trails far behind has created avenues for gross misallocation of many smaller economies in Africa in terms resources and imposes tremendous costs to the of ports and maritime activities. For instance, economy; distorting development policies and Nigeria’s maritime sector contribution to GDP undermining confidence of foreign and local stand at 0.05% compared to 1.4% in South Africa port users in the Nigerian port operations. and 3% in Kenya. The Nigerian port is currently classified among the worst ports in the world According to the World Bank in its 2017 Annual due to challenges such as delay of import/export Ease of Doing Business Report, Nigeria ranks processes, traffic congestion, poor access roads 145 among 185 countries with Mauritius ranking and security concerns. 32 as the best in Africa. From the report, Trading Across Boarders, an indicator for measuring a Unfortunately, over the years, users and country’s ports effectiveness ranked Nigeria very operators at the Nigerian Ports have been facing low at 183 out of 185 countries. This underscores lingering challenges and bottlenecks namely, the need to urgently take steps towards infrastructure and logistics shortcomings, policy reforming port operations in Nigeria. and regulatory inconsistencies, overlapping functions and duplication of roles among the Maritime Sector Contribution to GDP 7% 7% 3.5% 3% 0.05% UA SINGAPORE NETHERLANDS E KENYA NIGERI A Costs of Maritime Port Challenges in Nigeria 5 Crises in Nigerian Ports is Widely Published September 25 2017 March 23, 2017 Nigeria loses N140b weekly to Apapa APAPA GRIDLOCK traffic gridlock AFFECTING PRODUCTIVITY TWO MILLION CONTAINERS October STRANDED IN LAGOS PORTS 23, 2016 31 July 2017 Inefficiencies, Corruption in Ports Cost Nigeria N1trn Yearly - Report Mar 8 2018Dangote group loses N2bn monthly to Apapa gridlock June 29 2018 July 31, 2017 NINE KILLED AND 54 VEHICLES BURNT IN APAPA GRIDLOCK: PORT OTEDOLA BRIDGE FUEL TRUCK ACCIDENT USERS’ COSTS RISE BY 400% June 21, 2011 July 30 2018 MARITIME SECTOR NEEDS OVER Nigerian exporters lose $10bn $500M BAILOUT FUND TO BE annually to Apapa gridlock REVIVED Significant efforts were made in reforming the tape, constant delays, high costs, and Nigeria’s maritime sector through the partial illegal charges. These governance deficits privatization of the ports in the early 2000s. including infrastructure shortcoming However, the results of the reforms are below and inadequate facilities at the port expectations more than a decade after. The translate into real costs for Nigerians. regulatory landscape appears complex; with We understand that the unhospitable about 14 different public agencies regulating operating environment in our ports will private terminal operators and a myriad of continue to hurt government’s aspiration businesses in freight forwarding, logistics, and to grow the non-oil sector and reduce the trade. Consequently, operators and users of the nation’s dependence on oil revenues for Nigerian ports are faced with bureaucratic red national development. 6 Costs of Maritime Port Challenges in Nigeria PORT CHALLENGES Fact Sheet POOR RANKING ON POOR AVERAGE POOR TRADING ACROSS TIMELINE SECURITY BORDERS FOR CLEARING TEUs INDEX 183 14 Days 149 out of against out of 185 48 Hours 163 2017 World Bank Ease of Global standard for Transparency Doing Business Ranking clearing TEUs is 48 hour s International NO. OF GOVERNMENT COSTS ATTRIBUTED NO OF REQUIRED DEPARTMENTS TO ILLEGAL SIGNATURES IN THE PORT PAYMENTS 14 50% 20 instead of for imports for imports 8 60% 30 for exports for exports 8 MDAs are prescribed Costs of Maritime Port Challenges in Nigeria 7 Port Performance: Nigeria Vs Others 9.4 Million TEUs 86% 5.3 of inward laden Million TEUs containers departs Nigeria Ports empty 3.8 Million TEUs Nigeria lags far behind smaller Countries in Africa in terms of T 1.5 volume and value of ports activities. EGYP CA Million TEUs FRI H A CCO UT RO IA SO OR ER M NIG Source: UNCTAD (2017) Trade Report Cumbersome Cargo Clearance Process Process starts with Boarding ship berthing 30 24 mins hrs Pay Duties and terminal charges Up to 90 days Release Containers Conduct Inspection Process ends with containers leaving the Port. 2 24 hrs hrs 8 Costs of Maritime Port Challenges in Nigeria Process & Operational Issues No Integrated Advance Absence of National Cargo and Customs Trade Data Centre Clearance System at the Port While some level of The National Trade container scanning is Data Centre has been currently in place, the established but not proportion of activities accessible by most for which scanning stakeholders in the port. (estimated at about 10%) This has continued to fuel is used is too small to have valuation arbitrariness any meaningful effect. and inherent abuses by many public officials and importers. importers. Poor Delays of Implementation import & Export of Single Window Processes Platform For now, only the customs About 10% of cargoes are duty is currently being presently cleared within paid through the window the set timeline of 48 as other relevant agencies hours while majority of remain reluctant to key the cargoes take between into the Single Window 5 to 14 days to clear, some initiative. take as long as 20 days or more days to clear. We believe that a sweeping enforcement Deliberate Man-Made of the single window (Artificial) by MDAs official platform will reduction/ currently accounts for elimination multiplicity of approximately 65% and agencies and stand as the 80% of import clearance most vital reform measure and export processing with an immediate cross- time respectively. cutting positive impact in the port. Costs of Maritime Port Challenges in Nigeria 9 Regulatory and Legal Issues Multiplicity of Delay in approving MDAs and Security Ports Reform Bills at the formations at the National Assembly and Ports the Presidency The number of public About five (5) important sector agencies/ bills that are capable of departments at the ports driving the much-needed is now 12 and need to be reforms and investment reduced to 8 in line with in the maritime and Presidential Order and transport sector are still best international port awaiting passage by the practice. National Assembly for over the last 10 years. There is also a need to streamline the number The bills are: National of security agencies, Transport Commission currently between 6 Bill, Port & Harbours Bill and 10, involved in port (PHB), National Inland operations with different Waterways Authority levels of involvement (NIWA) Bill, Coastal in the cargo clearance and Inland Shipping processes.