Nigeria’s Ports: How Foreign Capital Took the Dinner, While Indigenous Businesses Got the Crumbs (2)

Continues from yesterday…

The recent concerns in Nigeria’s port economy over allegations of massive foreign takeover in the midst of an apparent regulatory law, 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.

Within the last two decades of the concession experiment, indigenous capital appeared to have suffered very rude and audacious neglect. Thus, concerned observers are right to ask, where is the Nigerian capital?
This is perhaps the most uncomfortable question of all. Why have Nigerian investors not become dominant participants in strategic terminal operations?
Why are Nigerian financial institutions not building consortiums capable of acquiring meaningful equity positions? Why are pension funds, sovereign investment institutions and long-term domestic capital not being mobilized into maritime infrastructure?
One is appalled that Nigeria being one of Africa’s largest economies has remained primarily a host market for foreign maritime capital. But this is where the conversation must move beyond simply blaming foreigners.
Foreign companies will naturally pursue profitable opportunities. They are not and cannot be held responsible for building Nigerian capitalism.
That responsibility rests with us. Government must therefore create the regulatory and financial architecture that enables Nigerian capital to participate competitively. In doing this, local ownership cannot simply be declared. It must be financed, must be well structured, and must be professionally managed.
This brings us to the issue of terminal lease renewals which is pending, and hence remains the surest signpost to Nigeria’s second chance, under the circumstances.
This makes the next phase of terminal concession renewals so important. It presents the Federal Government with an opportunity to correct whatever weaknesses have emerged in the original model without throwing away the benefits of private participation.
The upcoming renewal should not be treated as an administrative extension of existing arrangements. The exercise must be treated as a strategic renegotiation and as a remedial blueprint.
To this end, the government must audit every concessionaire on its past investment portfolio, what technology has been transferred, and what or how many Nigerian companies have been developed.
Government must ascertain how much Nigerian equity existed within the period under review, what proportion of senior management is Nigerian; and what have been the succession plan in place. The audit must show interest in finding out what percentage of procurement is sourced locally, and what local maritime services have been integrated into the operation.
The bottom line is to determine the measurable economic contribution these foreign giants has achieved in twenty years beyond merely raking in terminal charges.
A concessionaire that has performed should have nothing to fear from such an audit. Indeed, a transparent performance-and-value assessment protects both the concessionaire and the Nigerian state.
A serious government would immediately take steps to pursue a pragmatic test that makes indigenous equity a strategic requirement. Nigeria should examine a local-content framework for terminal concessions that moves beyond symbolic participation.
A future concession structure could require meaningful Nigerian equity participation in terminal Special Purpose Vehicles, subject to competition law, investment treaties and transparent procurement rules.
Of course, the objective should not be to create a politically connected Nigerian shareholders. That would merely replace one form of concentration with another; and should be avoided or will be resisted.
The objective should be to create genuine Nigerian maritime capital through meaningful windows such as pension funds, institutional investors, local shipping companies, banks, private equity, infrastructure funds, and a pool of professional maritime investors.
The point must be made that a diversified Nigerian ownership structure would be considerably more sustainable than a token local partner inserted into a concession agreement.
This government can and should inquire into the vertical integration framework, so far. The Nigerian Competition Act and other applicable laws provide a foundation for examining anti-competitive conduct.
The requires that the questions must be evidence-based. Are dominant players using control in one segment of the maritime value chain to disadvantage competitors in another?
Are shipping interests influencing terminal access? Are terminal operators favouring affiliated logistics providers? Are independent Nigerian haulage companies being commercially squeezed? Are freight forwarders being compelled, directly or indirectly, into particular service arrangements?
What has been the nature of the charges, are charges transparent? Are there preferential arrangements? Are independent operators able to compete on equal terms?
If evidence exists, then our regulators should act. Of course, while the solution is not to drive away legitimate investment, it is to prevent market power from becoming market capture, going forward.
The Cabotage Law must stop being a promise on paper. Needless to remind us that the Cabotage regime was designed to promote indigenous participation in our domestic maritime trade.
Yet the industry has for years debated the effectiveness of waivers and the ability of Nigerian operators to capture the opportunities supposedly reserved for them. One can even say without the fear of the consequences that the Waiver Clause has suffered considerable ministerial abuse. A comprehensive audit and review are thus not only demanding, but urgent; especially in view of the fact the terminal lease renewal, already overdue, is in the offing.
Other areas of concerns in our ports ecosystem under the concession regime include harbour towage, pilotage and tug services, barge operations, offshore support, coastal transportation, and marine services.
The government should determine, service by service, why Nigerians are not dominating activities for which the law envisaged indigenous participation.
Government should not be reminded that where Nigerian capacity exists, enforcement should be firm. Where it does not, government should as a matter of duty identify the missing capital, technology or skills and build them through deliberate action plans.
That is why we have a government. A waiver should be an exception, and should never become a business model.
Another policy shift solution should be on the need to measure technology transfer. Technology transfer is kinetic and we should not be measured merely by training seminars.
Another weakness in many local-content programmes is the tendency to equate capacity building with workshops, certificates and short-term training. Real technology transfer is different. It means Nigerians eventually possessing the competence to design, operate, maintain and manage sophisticated port systems.
It means succession. A concession agreement should therefore contain measurable human-capital milestones. If a foreign expert arrives to establish a specialised operation, there should be a defined pathway for a Nigerian professional to eventually take over. These are the elementary components of foreign investments framework.
Five years may be a reasonable policy benchmark for certain categories of operational and technical positions, subject to the complexity of the function. But the principle should be clear:nForeign expertise should build Nigerian capacity, not permanently substitute for it.

To be continued…