Cablegate: Nigeria: Stakeholders Assess Impact of Port Reforms

DE RUEHOS #0154/01 1161116
R 251116Z APR 08





E.O. 12958: N/A
SUBJECT: Nigeria: Stakeholders Assess Impact of Port Reforms

Ref: 08 Lagos 132

1. (U) Summary: Nigeria's port reform program, which has turned over
state-owned and operated ports to private concessionaires, has
significantly improved efficiency of port operations and reduced
vessel demurrage and turn around time. However, delays in customs
clearance resulting from Nigeria's lengthy list of banned imports
coupled with the prevalence of fraudulent cargo declarations have
caused the cost of clearing goods to rise by 300 percent. Increased
access to the ports by improved roads and rail lines is necessary in
order for Nigeria to fully benefit from port reforms. End Summary.

2. (U) In February 2008 the Federal Ministry of Transportation (MOT)
organized a stakeholders' forum in Lagos to review two year old port
reforms. The forum, which was the first of its kind since the
sector reform began, was attended by major maritime sector
stakeholders including the Minister of Transportation, Diezani
Maduekwe, and her deputy minister, Okechukwu Emeka. Members of the
National Assembly committees on ports and maritime transportation
also attended. Terminal operators, shipping companies, freight
forwarding companies, truck drivers' association and other port
users were also represented.

Reforms Reduce Vessel Waiting, Turn Around Times
--------------------------------------------- ---

3. (U) Stakeholders acknowledged that the port reform had recorded
some successes including increased cargo throughput and berth
occupancy, and reduced waiting and turn around time. Average
waiting time for vessels has been reduced from 28 days to less than
24 hours, and container moves also improved from seven
twenty-foot-equivalent units (TEUS) per hour to an average of 19
TEUS per hour. Port working hours per day have increased from 12 to
24 hours. Cargoes that once took 18 days to clear now clear in
fewer than nine days.

Concessions Also Improve Efficiency at the Ports
--------------------------------------------- ---

4. (U) Port efficiency has also greatly improved post-concession.
The Director General of the Nigerian Shippers Council, Ify Akerele,
noted that in two years since the concessions, terminal operators
have cleaned up the ports, provided electric power and water
facilities and put up International Ship and Port Security
(ISPS)-compliant fencing. Clients no longer have to incur the
additional costs of providing security for their containers as
warehouses have also been refurbished and better secured. Improving
ship turn around time alone helped to eliminate about 200 million
naira (USD 1.67 million) in additional costs annually. Despite this
achievement, operators contend that a great deal of work remains to
be done on the terminals.

Port Costs Up 300 Percent

5. (U) Despite these gains in efficiency, the cost of handling
freight at the ports has increased by 300 percent post-concession.
According to Dr. Boniface Aniebonam, a freight forwarder, the cost
of clearing 1 TEU through Customs at the Apapa Port Terminal,
increased by 329 percent from 11,715 naira (USD 98) pre-concession
to 50,285 naira (USD 419), post-concession. Other costs such as
handling fees, the fees charged by shipping companies for handling
containers between the container terminals and the ships, and
deposit charges for containers, which belong to the shipping
companies, have also increased. As a result, Mark Walsh of ENL
Consortium, the private operator of Apapa Terminals C and D, said
cost increases are attributable to shipping companies and their
agents. DG Akerele insisted a ports and harbor bill must be passed
to create a regulator (National Transport Commission) to monitor
costs in these areas and prevent untoward price increases.

Government Agencies at Ports Undermine Reform

6. (U) Over 15 government agencies are represented at Nigerian
ports. Nigerian Custom Service Comptroller Rasheed Taiwo said
although port reform has resulted in a reduction of government
control, multiple government agencies still have control over some
aspects of port operation, including police, military, drug
enforcement agencies, immigration and customs, among others. Taiwo
noted that while most of these agencies have a legal basis for
operating at the ports their activities are a constant interference,
creating bottlenecks, increasing cargo clearance costs, and
undermining port reform. Taiwo said that the number of government

LAGOS 00000154 002 OF 002

agencies operating at the ports should be limited to those whose
duties must be conducted there, for instance the Nigerian Custom
Services (NCS), Nigerian Port Authority (NPA), Immigrations, Port
Police, and designated custom agents.

7. (U) Although Nigeria has customs policies in place designed to
reduce the amount of cargo that needs to be screened, the country's
long list of import-prohibited items coupled with incorrect
declaration of goods by importers results in 95 percent of
containers being physically examined. Notwithstanding the increase
in operational and services efficiency introduced by the
concessionaires, custom inspections taking place outside the
terminal gates drastically delays the clearing process and
exponentially increases costs. According to Taiwo, these delays
have resulted in the diversion of 70 percent of Nigeria-bound cargo
to Benin, Togo and Abidjan for offloading and transport via road.
(Note: The border station along the Lagos-Benin Republic highway is
notoriously choked with trucks awaiting customs clearance. End

Neglect of Other Transport Undermines Reform

8. (U) Stakeholders also criticized the lack of development of road
and rail transportation which could enhance the results of port
reform. Even if cargoes are cleared within 48 hours, it takes much
longer for the cargo to get from the port to its final destination
due to poor road conditions and the lack of rail service.
Stakeholders urged the government to improve basic infrastructure in
and around the port to help terminal operators.

9. (U) Comment: While the concessioning of the ports was a positive
step by the GON, rising port costs are of concern. From the
meeting, it is not clear if the rising costs are the result of the
market seeking its natural price after years of inefficient
government operation or the result of rising worldwide costs and
customs delays as noted by some stakeholders. Rising costs may
reflect a shift in the mix of goods now using the port and the value
shippers place in being able to offload more rapidly. Though
privatization has revitalized Lagos' once decaying port
infrastructure, more must be done in order for Nigeria to fully
benefit from port reforms. End Comment.

10. (U) This cable has been cleared with Embassy Abuja.


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