In the News:
Rapid Development of Niger Delta: Is Dredger scarcity looming...as NDDC, State Governments award huge construction contracts?
The Niger Delta Development Commission as at mid-September rolled out a deluge of 47 separate dredging and related projects scattered all over the nine states under its purview. They were worth at least N45 billion according to reliable sources familiar with the development.
DDH investigations revelaed that major road contracts involving bridges were included in this flurry of activities. One of the roads was said to be 70 kilometres long, with about 7 bridges!
The problem NDDC will likely face with the delivery of these jobs include a rising scarcity of effective dredgers as more and more projects hit the market. Many of the contractors who land these jobs do not have ready dredgers to deploy to site, leaving the marketplace full of hustlers and runners who scamper about trying to secure the scarce machines at good prices.
Even when dredgers have been located, the price regime is right now problematic because the jobs come out of the bureaucracy heavily mortgaged by bribes and graft. A contract publicly announced as worth N2 bilion may reach the executing contractor at about 50% of the sum. This leaves him in a life-and-death bargaining position where he tries to lean on the dredge owner who will finally execute the job to take less than prevailing market prices for dredging jobs. For example, whereas the market place is asking for sand stockpile jobs at the minimum rate of N900 per cubic metre, some contract awardees can scarcely afford to pay more than N650 or N700 per cubic metre to the dredge owner, if they must turn any profit at all. In many cases, the comfortable margin for these jobs should be around N1,100 per cubic metre but at the same time only very few contract awardees get this princely sum in tact. The contract brokers, popularly called briefcase dredging companies, most of the times, cream off a handsome premium from the contract, leaving the executors to carry the can and go beggarly to the field. This explains some of the shoddy delivery usually found at many project sites: the executors were not the original contract awardees and eventually do the job with a spirit of vengeance.
In the present case of many jobs being given out by the NDDC, the high number of dredging projects is further enlarged by other dredging and construction projects being awarded by the major riverine states of Delta, River and Bayelsa states. These range from reclamation, shore protection of several villages to state highways being made in response to the rising clamour against past governmental inactivity. Again, the drawback is scarce availability of dredging equipment.
The entrance of some heavy weights in recent times may prove a slight help. For example, DDI, a dredging outfit being promoted by Oceanic Bank has taken delivery of some dredgers recently while DDH gathers that about 4 Ellicott dredger are on their way to being delivered to some Niger Delta consignees before year’s end. The total compliment of DDI’s order is said to be about 8 dredgers while a few other dredge orders are also on their way to the region according to various reliable sources.
Many other dredge orders from Europe and the USA have been revealed to DDH but one short term snag for the marketplace is the usual delivery lead time of around 6- 9 months which manufacturers can’t seem to overcome as yet. Ellicott is said to be planning some measure to assemble closer to the Nigerian market though. Till then, however, the market situation remains with anxious moments: as is widely known about the Nigerian prospective dredger buyer, once the contract being expected clicks, he goes for the dredge as if it was on a shelf…only to be told of the essential lead time necessary for assembly and delivery.
On the other hand, however, some of the facts on the ground of the Nigerian market are worrying to many operators. Many contractors confided in DDH about the discouraging trend posed by the persistence of corruption being used by briefcase dredging contractors to corner available contracts. Who are these men, anyway? These are the army of socially and politically highly connected interlopers who see a buck being turned by just interposing in the contract award process. They are attracted by the famed lucrativeness of the trade. They do not possess dredgers; nor do they seem to possess the patience or the money to go through the rigours of acquiring one in the here and now. Some of them are well-heeled politicians who convert political IOUs into contracts, sometimes dredging contracts. Once secured, they pay off top government bureaucrats and their apparatchiks and grease every essential palm. At times, the contracts’ worth is cut down the middle, and the briefcase man makes something for himself by re-selling the contract to a dredge-owning or dredge-operating contractor at a further depleted rate.
Only in August, the chairman of MFW Dredging, Chief Shahimi Jamal decried the rampant dominance of briefcase dredging contractors, saying that they end up with majority of the jobs while dredge-owning but less connected operators struggle to make ends meet. How the future plays out with this scenario is anybody’s guess but the rising scarcity of dredgers might compound the problem or force matters against briefcase men, since dredge owners may decide to stick to higher rates in view of the scarce dredging equipment. In fact, some dredge owners are now rising up to this challenge by insisting on getting good rates for their dredgers. For sure, briefcase contractors sometimes cross the threshold and own dredgers, but the change is unceremonious and unpredictable.
For now however, the looming scarcity of dredgers will soon come fully into the open. Will dredge makers shorten the lead time? Can they? Will bankers facilitate more dredge purchases? Will financial governance and management improve to the extent that bankers can feel comfortable to partly own dredgers and collect their share of the equity at the sand stockpile or project site? For that matter, how many dredgers are ultimately needed to meet the market’s demand in Nigeria? Can 80 medium-range dredgers fill the gap and satisfy the Niger Delta and Lagos axes? Will 100? Only time will tell.
