Nigeria’s Ports: How Foreign Capital Took the Dinner, While Indigenous Businesses Got the Crumbs

SILHOUTTE

Recent concerns in Nigeria’s port economy over allegations of massive foreign takeover in the midst of an apparent regulatory lax, all resulting from a somewhat ports terminals concession default in 2006, has continued to agitate the minds of observers and stakeholders.

Everything put together, from terminal concessions to shipping, logistics and inland haulage, the real question is no longer who operates Nigeria’s ports, but who ultimately controls the value chain, who captures the wealth and whether Nigeria is quietly surrendering her strategic economic sovereignty.

Our editor, Eguono Odjegba in this edition, attempt to lift the veil that covers the unseen, darkling dynamics.

It was most unlikely that Nigeria’s ports were meant to become enclaves of foreign commercial power, at the time the decision was taken in 2006 for the ports to go through extensive reforms process that culminated in the concession of terminal operations and other key components of the port system.

One of the poignant defects that has so far been associated with why the concession has failed helplessly was the adoption of the landlord model as a means of operation.

But irrespective of this perception, the official position has always been that the Federal Government’s decision to concession port terminals under the landlord model was driven by a straightforward economic logic. To bring in private capital, improve operational efficiency, modernize infrastructure, reduce congestion, attract international shipping, create jobs and make Nigerian ports competitive.

It was not, at least in principle, an invitation to surrender the commanding heights of the maritime economy. Yet, almost two decades after the 2006 port concession programme, a disturbing question is increasingly forcing itself into public discourse.

Did Nigeria concession its ports to attract capital and expertise or did it inadvertently concession away too much of the economic value embedded in the port ecosystem?

That question has assumed renewed urgency as concerns mount over the growing presence and influence of foreign interests across terminal operations, shipping, logistics, inland transportation and related maritime services.

The issue is not whether foreigners should invest in Nigeria, they should. Indeed, Nigeria needs foreign capital, technology, managerial expertise and global connectivity.

The real question is whether foreign investment is producing a stronger Nigerian maritime economy or whether Nigeria is progressively becoming a market in which foreigners control the high-value end of the business while Nigerians are left scrambling for the lower-margin activities around it.

That is where the national conversation should begin, especially as the debate about whether or not the 2006 concession was properly articulated and implemented, has reemerged in full throttle. More importantly, the impending question of terminal concession renewals provides perhaps the most consequential opportunity in two decades not only to ask these questions but to interrogate the fallouts.

When the ports were concessioned, the fundamental bargain was relatively simple. The government would retain ownership of the port assets and land, while private concessionaires would inject capital and expertise into terminal operations.

The expected dividend was efficiency. While the concessionaires would make money, government would collect rents, charges, taxes and other revenues. Cargo throughput was expected to increase, port users would enjoy better services, and Nigerian businesses would participate in an expanding maritime economy. In simplistic terms, those were the permutations.

And, critically, the country would develop indigenous capacity capable of eventually competing at increasingly sophisticated levels of the industry. Unfortunately, nearly 20 years later, the relevant audit cannot be limited to revenue collected by the Nigerian Ports Authority (NPA) or the physical improvements at individual terminals.

Now, Nigerians are asking much bigger questions, for example, what indigenous maritime economic capacity has the concession regime created? How many Nigerian companies have graduated from subcontractors to principal operators? How much Nigerian equity controls strategic terminal businesses?

The questions are by no means exhaustive. How many Nigerian shipping companies have acquired meaningful market share? How many Nigerian logistics firms control substantial cargo corridors?

How much of the technology deployed in Nigerian ports is owned or developed locally? How many Nigerians occupy the highest operational and commercial decision-making positions?

And perhaps most importantly, what percentage of the enormous economic value generated every year by our maritime gateway remains within the economy?

As the debate hots up, those are the numbers that should really matter if they existed in proven gainful upwards curve or progressive proportion. It must not be assumed that the foreign investment question is inclined towards xenophobic bias.

These are important distinction that policymakers must take into account in the face of a necessary and foreseeable concession review.

While there is nothing inherently bad in foreign participation, the outcome of the Nigerian 2006 port reforms has created an atmosphere of distrust and disillusionment.

Perhaps, at the appropriate time, we shall have to call out the framers of the 2003 port reforms and those that engineered subsequent concession model that followed in 2006.

Nonetheless, countries like Singapore, Dubai, Rotterdam, London and other major maritime centres have all built globally connected port economies through international capital, expertise and partnerships.

The problem begins when investment becomes domination. It becomes more problematic when the same economic interest can influence several consecutive links of the supply chain.

The concern being expressed in sections of the Nigerian maritime community is that a pattern of vertical integration has either evolved or have been developed in which major international interests have significant influence over shipping, terminal operations and the inland movement of cargo.

If the same foreign giant’s ecosystem controls the vessel, the terminal interface and substantial parts of the cargo evacuation chain, where does that leave the independent Nigerian logistics company?

Where does the indigenous haulage operator compete? Where does the Nigerian freight forwarder stand? And what happens to competition when access to one segment of the supply chain is commercially connected to another; all of which are run by the assembly of the self-same foreign investors?

For every discerning mind, these are not merely business questions. They are regulatory and competition questions. And, because ports are strategic national infrastructure, they are questions of economic sovereignty.

Perhaps one of the fundamental mistakes in Nigeria’s port conversation is treating a terminal as merely a physical facility where ships berth and containers are discharged. This notion is wrong, the port is more than a quay.

A modern port is an economic ecosystem, producing chains of interconnected value systems. Around the vessel are terminal operations. And around the terminal are shipping agencies, freight forwarding, customs brokerage, trucking, warehousing, inland container depots, logistics, marine services, insurance, finance, information technology, repairs, equipment supply and thousands of ancillary businesses.

The real wealth lies in the chain. Whoever controls the chain has enormous influence over the market. This is why the impending terminal concession renewal exercise cannot be approached simply as a question of whether concessionaires have performed their existing contractual obligations.

Government must ask a second-generation question: What kind of port economy does Nigeria want for the next 20 years? If the answer is a globally competitive Nigerian maritime economy, then, the pending concession renewal must become a vehicle for deliberately expanding Nigerian participation.

Let us return to the 2006 concession model and the missing local-content conversation. The original concession programme emerged from a different era.

Nigeria was battling severe port congestion, inadequate infrastructure, poor equipment, bureaucratic bottlenecks and operational inefficiencies.

Thus, at that time, speed was therefore the overriding imperative. Foreign operators with deep pockets and international experience turned out to be attractive economic brides.

That decision may have been justified by the circumstances of the time. But policies designed to solve yesterday’s problem must not become permanent arrangements that create tomorrow’s problem.

Two decades is a long time in economic policy. If foreign expertise was necessary because Nigeria lacked operational capacity in 2006, perhaps, the question to ask now is why should Nigeria still be structurally dependent on foreign operators in 2026?

If the answer is that Nigerians have not acquired sufficient capacity, then the next question becomes even more uncomfortable. What exactly did the concession agreements require the concessionaires to do about technology transfer, managerial succession, indigenous ownership and local capacity development?

If the requirements existed but were weakly enforced, that is a regulatory failure. If they were inadequate from inception, that is a contractual design failure.

And if the industry has simply evolved beyond the original assumptions of the agreements, we must have the courage to accept the fact that Nigeria has promoted a policy failure.

None of those problems can be solved by pretending they do not exist. That brings us to the question of sovereign wealth. But let us digress a little, there is another dimension that deserves far greater attention.

Nigeria is not merely a country with ports, our ports are gateways through which an enormous proportion of the country’s international trade passes. Every container, every vehicle, every industrial input, every export commodity and virtually every major commercial transaction moving through those gateways generates economic value.

That value is not limited to customs duty.  It includes terminal handling charges, shipping-related fees, agency income, haulage, warehousing, logistics, marine services, insurance, banking, technology, employment and taxes.

If foreign interests capture the most profitable segments while Nigerian firms remain concentrated in fragmented, low-margin activities, it bears repeating that we have been experiencing an illusion of maritime growth; and that can be proven with the most basic empirical evidence.

The port may be busy, ships may be arriving, containers may be moving, and terminal revenues may be increasing. But the national economic multiplier mix remains disproportionately externalized.

This also, leads us to the question of sovereign wealth, mentioned earlier. A nation can own the land beneath a port and still lose economic sovereignty over what happens on it. Could the concession framework have suffered   design default? That perhaps is what has happened with our port concession model in the past twenty years.

To be continued…