Projects to boost port capacity and address bureaucratic bottlenecks in Nigeria's transport sector

The country is facing a substantial capacity deficit when it comes to meeting the current and predicted demand for cargo volumes. This is set to change with the construction of two new greenfield ports in and around Lagos, in combination with a selection of both ambitious and smaller-scale projects serving the south-east part of the country.

As competition to establish regional leadership for port capacity ramps up, mainly from expansive projects taking place in nearby Ghana, Togo and Côte d’Ivoire, Nigeria is also hoping that once its new megaports come on-stream, it too will be able to secure a position as one of the region’s trans-shipment destinations. For the time being some goods bound for Nigeria are being routed inland through its neighbours, rather than arriving directly on its shores.

Capacity Needed

In addition to investing in hard infrastructure as a means to ensure smooth and efficient operations and reduce dwell times, there is a need to simultaneously bolster soft infrastructure in the form of improved Customs clearance processes and ancillary support services. “Customs is the single biggest impediment to achieving reasonable throughput. The roads into the ports have not been upgraded since the 1970s and are in appalling condition,” Peter Bleasdale, former managing director of French shipping line CMA CGM Delmas Nigeria, told OBG.

The Lagos Port Complex, which comprises six terminals in the area of Apapa, and the nearby Tin Can Island Port are responsible for over 90% of the country’s total container traffic. However, despite the upgrades made and the efficiency gains achieved since the port was put up for private concession in 2006, Apapa still faces severe congestion and long dwell times due to capacity constraints. “Certainly, the port is being operated more efficiently and with less congestion, but its size limits the handling of big ships,” Jan Thorhauge, managing director of Maersk Nigeria, told OBG. “We are also not seeing much improvement in dwell times, as Customs is still slow.”

Lekki

The more advanced of the greater Lagos area’s two greenfield port projects is Lekki Port, which comprises a $1.55bn multi-purpose deep-water port, to be located within the Lagos Free Trade Zone, 65 km east of the city. Initial throughput will be 1.5m containers per annum, expanding to 2.7m in phase two and ultimately 4.5m within five to seven years’ time. Construction is pegged to take 47 months, with the port set to be operational by 2018.

By comparison, Apapa Port was reported to have handled just 618,000 twenty-foot equivalent units (TEUs) in 2012. Lekki Port will have a pier length of 1200 metres and an initial draught of 14 metres, extendable to up to 16.5 metres at a later stage, compared to Apapa’s depth of just 12.5 metres. Furthermore, Lekki will be equipped to handle larger shipping vessels, in the 8000- to 10,000-TEU range.

The project is structured as a public-private partnership (PPP) between the federal government – through the National Ports Authority (NPA) – the Lagos State government and the Singapore-headquartered Toleram Group, with respective stakes of 20%, 18.15% and 61.85%. Manila-based International Container Terminal Services Inc. (ICTSI) was awarded a sub-concession to operate the terminal in 2010, towards which France’s CMA CGM bought a 24% interest in January 2014. “ICTSI will be funding and providing the infrastructure and equipment. Our role is to provide them with volumes,” Bleasdale told OBG.

Ultimately, Lekki is designed with the long-term intention of diverting traffic from Apapa, as well as securing trans-shipment traffic serving the entirety of West Africa. But indications are that the initial cargo flows will mainly involve materials destined for and coming out of the 220-ha free zone, which is being heavily marketed towards oil and gas, agribusiness and petrochemicals ventures. According to the Toleram Group, the macroeconomic impact of the port and surrounding industrialisation during the concession period will be $361bn, with 163,000 jobs created.

Badagry

There should eventually be two greenfield ports serving the greater Lagos area, with another project located 55 km from the city, about halfway to the port of Cotonou in Benin. Badagry Port will be formed as a consortium involving the Maersk Group, Switzerland-based Terminal Investment and Australian investment bank Macquarie as the lead players.

The proposal involves three development phases, starting with a capacity of 1m TEUs, which will go towards handling general, bulk and roll-on/roll-off cargo, in addition to servicing the offshore oil and gas industry. Maersk already has a strong footprint in the country and region as the current operators for both the Apapa and Onne (near to Port Harcourt) ports, as well as involvement in ports in Liberia, Côte d’Ivoire and Ghana. With feasibility studies concluded, as of November 2014 construction works for the port and free zone were due to start in 2015.

Ports Aplenty

There are several other port projects proposed or in development, including planned facilities at Ogidigben in Delta State and Agge in Bayelsa State that will be run as collaborations between the Federal Ministry of Transport, the NPA and the state governments. Ogidigben’s port will form part of a gas industrial park awaiting free-zone status approval from the Federal Executive Council.

Discussions are under way between the Ogun and Ondun State governments and private investors for a deep-sea port at Olokolo. The project is being backed by major Nigerian industrial conglomerate, the Dangote Group, whose future plans call for an $8bn, 400,000-barrel-per day oil refinery that would serve as the anchor tenant for the proposed free zone.

Another ambitious project that also has a free zone and industrial component is a deep-sea port at Ibaka in Akwa Ibom State, which has yet to break ground despite an initially announced May 2015 delivery date. A 5580-sq-metre site has been set aside for the project and plans call for a draught of more than 17 metres, one of the deepest in West Africa, which would allow ships carrying 10,000 TEUs to dock. The project aims to cater to traffic serving the southern portion of the country, as well as the entire Gulf of Guinea. Implementation delays have allegedly been the result of court disputes on intellectual property rights over who originally conceived the venture.

Anticipated Impact

As new ports begin to come on-stream, this should help to bridge the capacity deficit and offset the pace of inflation, as the country relies on imports for much of the goods sold domestically. A couple of the projects will not only facilitate the arrival of more ships, but will be able to accommodate larger ones with better fuel economies.

As most of the new projects are being undertaken in greenfield and vacant plots, other factors that contribute to congestion and long dwell times should hopefully be avoided. Purpose-built access roads and rail connectivity, for example, will ensure a faster flow of traffic out of the gates. “Having Lagos State as one of the partners instils confidence that the ancillary and intermodal infrastructure will be in place. The port and free zone are a key part of the state’s infrastructure ambitions as they aspire to convert Lekki into an urban extension of the city,” Bleasdale told OBG.

Meanwhile, proposals for Badagry call for direct access to the Benin-Lagos expressway, which is being expanded from four to 10 lanes. Passenger vehicle volumes should be reduced, as two of the lanes will be set aside for the exclusive use of a bus rapid transit system, and the Lagos State government plans to run a metro line along the expressway as well. Longer-term plans include barge and rail links to the port.

Customs & Tariffs

Costs and delays are also associated with a burdensome Customs regime, high clearing agent fees, excessive document requirements and long inspection times. The federal government has set a target of clearing cargo within 48 hours. To help meet this goal, ports will be tasked with extending their workdays to 24 hours. Reducing the number of agencies based at the port should also help alleviate bureaucratic bottlenecks, and could come about through reforms in the Ports and Harbour Bill calling for streamlined regulatory authority. “There is a lot of blame game taking place. It is hard to just blame Customs, as there is a lot of waste and inefficiency at all stages in the process,” Thorhauge told OBG.

A simplified tariff structure, whereby goods fall into a single-digit number of taxation bands, could also serve to simplify and expedite the clearance process. Customs revenue is second only to oil and gas as a contributor to government earnings, and high tariffs and duties are also frequently viewed by exporters and importers as contributors to logistics costs.

As an interventionary measure aimed at supporting local industry, caps and duties have been levied on several import categories in recent years, including vehicles, rice and fish. “Import restrictions and quotas are misguided. The intentions are solid, but when there are supply shortages and local output is not filling the void, prices go up and consumers bear the brunt,” CMA CGM Delmas Nigeria’s Bleasdale said.

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The Report: Nigeria 2015

Transport chapter from The Report: Nigeria 2015

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