When Nigeria’s economy was rebased in 2013, she became the largest market in Africa with the biggest GDP of N80.22 trillion (about $510 billion). As an import dependent nation, the effect of this expanding market was reflected by increased throughput at her seaports where 76.9 million tonnes of cargoes were handled in 2013. Even for her exports, mainly crude oil and gas, the smooth replacement of the US with European buyers of Nigeria’s crude petroleum, means that her export terminals (which load about 2,400 oil tankers annually) continued to be busy as ever, with 800.3 million barrels of crude oil lifted in 2013 (about 2.19m barrels per day), according to the NNPC.
However, for the Nigerian Ports Authority (NPA), the significance of the market expansion is that without sufficient draught at the approach channels and the berths, half of the shipping tonnage (5,185 vessels) that called at the regular Nigerian ports in 2013 and the busy traffic at the crude oil loading terminals would not have made it.
Managing the Port Systems…
NPA has about six active port systems located in Lagos, Warri, Calabar, Port Harcourt and Onne; almost all are river ports built several nautical miles inshore from the Atlantic Ocean. Therefore, huge amounts of harbour dredging must be done regularly to clear the channels of siltation, remove wrecks and sand shoals or to expand the channel widths to accommodate bigger ships. With the emplacement of the channel management companies, essential add-on services like aids to navigation (buoys, lighting and bathymetric surveys), must be constantly done to maintain advertised draughts or to achieve new targets that will satisfy the clientele.
Last year, for example, Lagos Channel Management (LCM) dredging campaigns aided the hitch-free berthing of the biggest ship to call at the Lagos ports system so far, Maersk Cadiz. The Bonny Channel Company (BCC), on the other hand, this year achieved new depths at the Bonny channel up to Onne and facilitated the entrance and berthing of the Cadiz and other Maersk WAFMAX vessels to begin calling at Onne Port, the first time in history for such big container vessel operations.
NPA’s managing director, Alhaji Habib Abdullahi, in a recent interview to mark achievements made by his management team in two years, said the WAFMAX vessel’s exclusive call to Apapa, Tin Can Island and Onne ports attests to the unique position of the Nigerian market in the sub-region and to the efficacy of solutions his administration has brought to the port industry. Before the inception of LCM and BCC, NPA’s management of the channels was hobbled by bureaucracy whereby ministerial approvals for even small routine jobs took weeks or months to get through. This used to be a joke on the organization when viewed against international best practices of smart decision-making and fast turnaround times.
The Birth of Channel Management Companies
During the 1990s when these problems were rampant, some frustrated ship owners diverted their ships to neighbouring West African ports such as Cotonou, Lome or Tema. But the coming of LCM and BCC to manage the channels at optimum levels changed the tide and put Nigeria back in contention to claim her natural right as a hub port nation for the sub-region. The Port of Abidjan which competes for that role is challenged by the size of the Nigerian market at over 165milion population and the steaming distance to her ports at not less than 2 to 3 days.
Thus, about 70% of the shipping traffic in West Africa has Nigerian addresses of origin or destination even though the potentials of this natural endowment were formerly diminished by red tape in her port industry. But with the port reforms that began in 2001, the sector was massively transformed. Private port operators came in as concessionaires to manage cargo handling and terminal operations, cutting off the previous unruliness in dock work and cargo insecurity. The Nigerian Customs Service was also improved while the channel management JVs, with 60%:40% stake-holding in favour of NPA, were introduced to overhaul the dredging regime and allied services.
At the two-year anniversary of the Habib Abdulahi administration, the drums are being rolled out for some milestones the management team are proud about. One of these is an e-payment solution which skirts the previous delays in relaying payment information to the ports from the banks. Formerly, the payment slips were scanned and emailed to headquarters which then emailed them to the target ports, a process that took at least two days or more. Now, with e-payment solution, the information is relayed simultaneously, ATM-style to all the recipients in real time. Mr Olumide Oduntan, Executive Director of Finance and Administration maintains that this has seen revenues increase by 50% since its introduction less than one year ago. He predicts a doubling of revenues soon and argues that the system also eliminates other human-interface problems like fraud or other manipulations.
Nevertheless, the most impactful developments seem to be at the waterfronts where cargo throughput is the concern of the chief port industry stakeholders. Here, the joint venture channel management companies hold the ace and the seriousness of emplacing them was apparent in the level of rigour adopted for their selection. This began in 2005. First, international adverts were placed for the pre-selection of channel management companies for Lagos, Warri, Calabar and Bonny channels. The bids from 49 companies were screened for technical and financial competences by Mobotek of Holland. The successful bidder-consortia were led by Forby Engineering for Warri channel, Dredging International for Bonny channel, Depasa Marine for the Lagos channel and Niger Global Engineering and Technical Company Ltd (Niger Global) for Calabar channel. Only two of these winners, Depasa Marine and Dredging International, were mobilized to site immediately in Lagos and Bonny respectively.
In their work plans, not just capital and maintenance dredging of the approach channels are prioritized; the draft alongside the berths and the turning basins are also deepened on an incremental basis or as the need arises. For example, the operation that facilitated the calls of the 4,500-TEU WAFMAX vessels to Nigeria, especially to Onne port, required a special dredging campaign by BCC in close collaboration with NPA and Maersk Line, the vessel owners. The WAFMAX vessels arrive Lagos ports fully laden with containers and drawing a draft of 13.8m. The containers are progressively offloaded at Apapa and Tin Can Island ports to lighten her for the Onne port run. The remaining containers are then taken to the Bonny River and Onne port when the vessel is drawing a draft of 11m.
However, due to the contours of the Bonny River up to Onne port, engineering studies identified some essential capital dredging works that should straighten the bends to enable vessel maneuverability. Electronic simulations of the voyage at a South African marine facility showed that these changes were mandatory to ensure success of the trips. The execution cost extra money and months of toil. Other contingency mandates included extra training of the river pilots, buoy relocations, enhancement of the turning basin and provision of tug boats for the berthing exercises.
Moreover, to achieve the entrance of the WAFMAX vessels, BCC’s wreck removal campaign was redoubled, whereby five wrecks were cleared from the channel in 2013 and another five between January and July 2014. In fact, one large wreck of a sunken oil tanker took six weeks of cutting and lift-out to completely remove from the riverbed, according to the company’s General Manager, Bart van Eeno. To begin the special operations, a trial run as made by Maersk Copenhagen (carrying mere empty containers) on December 3, 2013. The successful berthing and operation of the fully loaded sister ship happened on May 14, 2014 when Maersk Cadiz entered Onne port drawing 11m at high tide. This began the weekly run which is continuing.
In total, BCC removed 11 million cubic metres of spoil from the Bonny River in 2013 in the course of its work to keep the channel open and navigable to traffic. LCM on its part scooped out 12.1 million cubic metres of spoil and removed five wrecks in its work at the Lagos channels in 2013. Industry observers believe that the success of the two JVs encouraged the signing of Calabar Channel Management Company.
Calabar Channel Dredging issues
In January 2013, the JV contract between NPA and Niger Global was signed, setting the stage to kick-start activities for the new management of the Calabar channel by Calabar Channel Management Company, CCMC. The only problem, according to Alhaji Abdullahi, is the history of failed dredging campaigns at the Calabar River which must be sorted out before Niger Global can begin work. The 84-kilometre Calabar channel is subject to controversies. According to DDH findings, its location has been attributed to politics because it is too far inland, a factor that accounts for the problematic dredging issues in the first place. In fact, the magazine was told that Oron, at the mouth of the Atlantic Ocean, was the location initially selected by the technical assessment team before political pressure was brought on the authorities to shift the location to Calabar.
More importantly, the greatest burden for dredging the channel is the lack of commercial incentive. Unlike Lagos and Bonny channels whose cost of dredging is only a small fraction of the accruing income from shipping traffic levies, the Calabar channel enjoys a low volume of shipping traffic. For example, of the 5,185 ships weighing 131,674,337 gross tons that called at Nigerian ports in 2013, Calabar port recorded only 197 ships weighing 2,792,488 gross tons. Many importers from the port’s catchment areas of south-south, south-east and north-east still prefer to clear their goods at the Lagos ports. Port Harcourt ranks second, leaving Calabar port with insufficient throughput to justify its huge dredging costs which, in 1996 alone, cost the Federal Government N3b paid to China Civil Engineering and Construction Company (CCECC) to dredge the channel.
In the recent failed dredging campaign of 2007, the duo of Jan de Nul and Van Oord were paid a whopping $56m to dredge the channel to 6.5m deep at the mouth of the river and 10metres depth along the channel. While Van Oord was to dredge Km 0 -46 for US$26.5million, Jan de Nul was saddled with dredging Km 46-84 for US$30million. They were to scoop out 25 million cubic metres of spoil and achieve an overall draught of -8 metres. But the result was inconclusive because they demobilized from site before achieving the set target on the claim that the quantity of spoil specified in the contract had been attained. The rest of the channel was not cleared and remained silted and shallow, leaving the channel unusable by cargo laden ships.
In the subsequent attempts to re-do the dredging in 2012, considerable caution was deployed by NPA to ensure that not only competence but also integrity would be brought to bear on the job to avoid sharp practices. Consequently, robust debates in the national dailies, arguments and even petitions from all sides of the bidding table have been recorded on the problems of the project. Although Jan de Nul and Niger Global have raised petitions against various aspects of the project’s bid process, NPA has successfully defended its handling of the situation. But by far the most significant petition was written by no less a person than the NPA Board Chairman, Chief Tony Anenih. In the petition, he invited the Minister of Transport to peruse the disagreeable fine prints of the JV contract signed between NPA and Niger Global for the management of CCMC, laying part of the blame on negligence by NPA and Transport Ministry officials.
Was Chief Anenih spurred by vendetta or is this an act of bold self criticism? Some observers have reasoned that the PDP bigwig preferred to err on the side of caution instead of proceeding without rocking the boat at the head of an organization whose operating gangplank was at the risk of vulnerability through avoidable pitfalls. What were the complaints in the petition? Firstly, Chief Anenih queried why Niger Global which had no previous records of similar dredging works should be leading its JV consortium when a multinational dredging firm like Royal Boskalis was involved in the consortium but was not even in the management? Secondly, he found fault with the JV agreement which gave “absolute control of the finance and management” of CCMC to the consortium rather than to its Board of Directors. The upshot, in summary, was his call for a review of the contract for failing these and other points of due process.
Deep-sea Port Operations and the 25-Year Port Development Master Plan
For NPA, however, the palaver over Calabar dredging issues could have a salutary effect as a tutorial on how to manage the imminent switch to deep-sea port operations across the country which would involve high levels of multinational collaboration. Deep-sea ports look to be a game-changer for Nigeria’s port industry and West Africa’s maritime trade. NPA’s helmsman, Alhaji Abdullahi, told the magazine in a recent interview that the proposed 25-year port development master plan now at the design stage would solve the problems of running Nigeria’s current port systems in traffic-choked city environments. He said the coming of deep-sea ports will take port industry activities far out to sea where there is ample space for cargoes and where new road networks will be put in place. Furthermore, he foresaw a future use for fallow grounds opposite the Lagos ports complex such as Snake Island, Ogogoro Island and Takwa Bay. In that new day of green ports, the NPA helmsman saw the current Lagos port grounds as fit only for redevelopment as prime waterfront residential estates, permanently solving the present traffic malaise.
Presently, the petrol tank farms and factories within the Lagos port grounds patronize hundreds of trucks which deliver products to customers in the city and hinterland due to the failure of the pipeline networks and the absence of adequate rail services. Similarly, cargo-laden trucks from the ports pass through the commercial centres bordering the ports to reach consignees in the city and hinterland, thereby putting pressure on the road networks and clogging traffic flow. In view of galloping population and the attendant expansion of the shipping market, the over-stretch of current port infrastructure cannot be mitigated in the short term. In the long run, the solution is projected to be deep sea port complexes whose large areas can accommodate the factories, tank farms, petrochemical complexes and massive container stacking and warehouse spaces needed to cater to the increase in traffic volumes.
According to AP Moller, whose concession at Apapa port is the biggest container terminal in Nigeria, the current container traffic volume of about 1.7m TEUs for the country is projected to exceed 2.5m TEUs by 2020. In fact, port industry top executives were told in one recent investment forum that when deep-sea ports begin full operation, Nigeria’s current river ports will be good only for leisure fishing trips, according to one of them. Thus, there is a considerable ferment of opinion about the deep-sea ports and their multiplicity seems to suggest it might be a new silver bullet.
Deep-sea Port locations…
The tally of proposed deep-sea ports to date include the Lekki Deep-sea Port at Lekki Free Trade Zone and the Badagry Deep-water port, all in Lagos. Others are proposed to be sited at Olokola and Ibaka, not discounting the Federal Ocean Terminal (FOT) at Onne which has been in existence since the 1980s. In December last year, the Federal Government formally joined the ranks of shareholders intending to build the US$1.354b Lekki Deepsea Port on a PPP arrangement. Its contribution was said to be 20% while other investors include Lagos State Government, 18.5% and private investors, 61.85%. The project promoters, Messrs Lekki Ports LFTZ Enterprises were awarded a reviewed concession spanning 45 years, with a federal guarantee to compensate them in the event of any damages arising from expropriation, war, civil disturbance, breach of contract or any other defaults. The Federal Government stake is held in trust by NPA in the project whose revenue estimates amount to US$397b over the first 45 years.
Unlike the current river ports whose installed cargo capacities are 60,000 tonnes each, the Lekki Deep-sea Port has gargantuan proportions. Its total area is 90 hectares (with room for expansion), six kilometres in length, four million tonnes installed cargo capacity, with a channel width of 300 metres and draught of 17.5metres, the deepest in West Africa. NPA, by the project calculations, will receive an income of US$9.3b in marine services, royalties and profit share over the initial 45year period. Over 162,000 new jobs will also be created by the venture.
Nevertheless, if dimension is anything to go by, AP Moller Terminals’ proposed new megaport project and free trade zone at Badagry will put the Lekki Deep-sea Port somewhat in second place. When fully built, the ambitious project which was spurred, reportedly, by shortage of room to expand its Apapa terminal for an imminent 10% growth in trade, is being hyped to be one of the largest in Africa with 7 kilometres of quay, 1,000 hectares of dedicated yard, a barge terminal and state-of-the-art facilities for container, bulk, liquid bulk, Ro/Ro and general cargo as well as oil and gas operations support. The proposed infrastructures also include the construction of a power plant, oil refinery, industrial park, warehousing and inland container depot at the adjoining Badagry Free Trade Zone. During its first phase (the project will be built in three phases), it will feature a container terminal of two berths capable of handling one million TEUs even though depth alongside will be comparatively humble at 14.5m. The proposed kickoff date for the first phase is September 2016.
Peder Sondergaard, the chief executive of APMT’s Africa and Middle East region told Lloyds List’s Containerization International that the company had compared the Lekki and Badagry corridors before settling for the latter location because of the new 10-lane expressway being made by Lagos State Government. He said that the traffic congestions of Victoria Island and Lagos were considered a dampener for them. However, he revealed that the Badagry project enjoys support from NPA, Lagos State Government, the Federal Government and Royal Haskoning DHV. In the main, however, APMT’s consortium for the project comprises Terminal Investment Ltd, and indirectly Mediterranean Shipping Company (MSC), Australia-based Macquarie Group, Orlean Invest and Oando.
Although signing of the concession agreement and actual construction were supposed to happen in 2013, DDH findings indicate that things did not work exactly to that plan. How the delays will affect the projected opening date is open to question. Although feelers from the industry give the Badagry project high credibility ratings, doubts persist about the commercial viability of two deep-sea ports in the Lagos market despite its hyped expansion. Of the two, however, the odds seem to favour the Badagry port over the one in Lekki because of the availability of more road networks and the business interconnections of the core investors who are shipping and port industry operators. Conversely, the Lekki port’s core investors are venture businesses and facility prospectors who may have the added burden of attracting ship owners, importers and exporters to nominate Lekki as the destination port.
Another notable proposed deep-sea port is to be located at Ibaka. However, DDH findings show that apart from delineation of the project site and formal acquisition of the land by the Akwa Ibom State Government, not much else has been done. Governor Godswill Akpabio had promised in 2008 that before he leaves office in 2015 the port would be in operation. Not many people believe him, especially the indigenes of Ibaka who heard the promise firsthand. Okon Eyo Udotong, a community leader who lives adjacent to the proposed project site is disappointed that “Government is always deceiving Ibaka people”. He said that since the land was taken from them, no one from the Government had come back to do anything there or even to settle the issue of compensation which he said was the only indication he would recognize as a sign of seriousness.
Although the architectural drawings designed by CCECC have been submitted, the absence of any constructions at the site puts the 2015 promised date under question. But the Federal Government’s commitment to the project is not in doubt since a steering committee and a project committee had been set up by Transport Minister, Senator Idris Umar, since September 2012. Sequel to the committee’s activities, a Transport Adviser was appointed who worked on the initial due diligence report that was submitted to the Project Steering Committee in 2013. The initial Due Diligence Report is a requirement of the ICRC Act meant to verify a project’s feasibility from the perspectives of financing, technical and legal implications and to design a structured approach to its subsequent phases.
This report also detailed the vision of Ibaka Deep-sea Port, its commercial rationale, operational status, assessment of existing facilities, business opportunities, technical scope and main challenges. Subsequently, an outline business case and the procurement process were put in sequence though progress in these tasks has been slow in coming.
The other deep-sea port in the horizon for Nigeria is the Olokola Deep-sea Port and Free Trade Zone (OKFTZ), a joint venture of Ondo and Ogun State Governments. First proposed during the early years of the new millennium as an alternative to the Lagos ports, OKFTZ and deep-sea ports were advertised for their proximity to oil fields belonging to Agip (Abo N), Exxon Mobil (Erra 1 & 2) and SNEPCO (Bonga), all of which are closer to Olokola than ports and facilities at Lekki, Warri and Onne. However, although the two states conceived the project, there were reportedly initial disagreements about stakes during the Obasanjo Presidency.
In recent times, less of Ogun State is mentioned. For example, when Governor Olusegun Mimiko set up a Technical Committee on Deep-sea Port Development to work with NPA in fast-tracking the speedy development of the port, it was composed only of Ondo State commissioners. Moreover, the Governor revealed that Ondo State had committed N24b on the construction of “a 3-lane access road to the Zone” for the use of trucks serving the port. He regretted that the projected was behind schedule by more than ten years.
Olokola Deepsea Port and FTZ was projected to be constructed at a total cost of about US$400m based on 40% state government participation and 60% private sector investment. However, the seeming rosy prospects in the beginning appear to have lost some of their allure as bigger and stronger contenders began to arise in the Lagos axis a few years later. Whether the IOCs will prefer Olokola to the Lagos facilities is open to question. Nevertheless, the most cheery news for the OKFTZ was the announcement in 2013 that a refinery worth US$8b was being proposed to be sited there by Africa’s richest man, Alhaji Aliko Dangote. OKFTZ was said to have been chosen as the site for the 400,000 barrel-per-day refinery because of its proximity to the oilfields where crude oil feedstock would be sourced from.
However, although a deep-sea port was being promoted alongside the free trade zone, it appears that the most viable of the twin projects is the latter, as exemplified by the Dangote move. Thus, the refinery, if it materializes, would likely weigh heavily with the OKFTZ promoters to foreclose on the deep-sea port development since rival projects in nearby Lagos could render it unviable. In any case, NPA, as the port regulator in Nigeria would have to give its seal of approval or otherwise, depending on compliance with laid down rules.