Ports head for privatisation: the long overdue reform of Nigeria's notoriously ill managed ports is expected to take the form of awarding contracts to private companies in the near future. But union opposition is intense. Who will win? Asks Neil Ford

African Business, June, 2004 by Neil Ford

Although little progress was made on Nigerian port reform during President Olusegun Obasanjo's first term of office, contracts to manage the nation's main ports are likely to be awarded to private companies within two years.

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Attracting private sector involvement into most industries previously under state ownership has proved to be a long and painful process in the West African giant, but the federal government now looks set to face down trade union opposition in an effort to improve poor levels of efficiency in the Nigerian shipping sector.

In February, the state run body charged with the divestiture of state owned assets, the Bureau of Public Enterprises (BPE), announced that 110 companies had "expressed an interest in bidding for contracts" to manage Nigerian Ports Authority (NPA) ports. However, with only eight ports on offer, it is the quality rather than the quantity of any final bids that should most interest the BPE.

Apart from Nigerian bids, the BPE revealed that the 110 firms included a number of European, Asian and North American parties, which presumably include some of the biggest names in the international shipping industry.

Although a timetable for the completion of the tender process has been drawn up, the BPE director general, Julius Bala, has admitted that some slippage is likely. Under the original 'port-landlord' model plan, due diligence on pre-qualified companies was due to have been completed by April 23, and the submission of technical and financial bids was expected by August.

The eight listed ports are Bonny, Calabar, Koko, Port Harcourt and Sapele, in addition to the Lagos ports of Apapa, Tincan and RORO. The latter three plus the main oil and gas industry port of Port Harcourt are likely to attract the most interest.

However, the Minister of Transport, Precious Abiye Sekibo, has admitted that further legislative changes may be required before the contracts are signed. He commented: "The present Nigerian Ports Authority law allows the NPA to give up part of its operation to the private sector to handle, but what we are saying is that the law does not go far enough, so we still need to make some amendments to make it more attractive." Successful bidders will become responsible for maintaining and modernising port infrastructure, while the NPA will assume the dual role of sector regulator and 'port-landlord'.

OPPOSITION TO CHANGES

Whatever the scale of the job cuts, the Maritime Workers Union of Nigeria (MWUN) looks set to oppose the introduction of the 'port-landlord' model on principle, despite the fact that the ports themselves will remain the property of the state in the form of the NPA.

The NPA and other state bodies are to retain control of health and safety, port security and environmental management, staving off some union criticism and maintaining some jobs, but cargo turnaround per member of staff at the NPA is very low, so private operators are bound to cut jobs as part of their drive for greater efficiency.

In the run up to the award of management contracts, the NPA has been hit by a series of problems. Some junior managers have claimed that they have been forbidden from making any purchases since the interim management team was brought in to oversee operations in preparation for the tender process. However, such claims seem to be merely an expression of general opposition to the changes taking place.

An NPA statement on the matter reads: "All purchases must be made through manufacturers or major suppliers and where the need arises to purchase through contractors, it must be made at prices not exceeding 25% mark up over and above the market prices."

At the same time, the House Committee on Marine Transport has ordered an investigation into claims that large sums of money have disappeared from NPA funds. The committee's chairman, Emeka Ihedioha, said: "At a time when government and civil society nearly reached collision course because of the fuel tax introduced to repair our roads, it will be unpardonable on our part for us to see a few individuals swindle the country of these mind boggling sums and turn our eyes away."

NIGERIANS TO GAIN FROM CABOTAGE LAW

Despite the passage of the new cabotage law, which restricts domestic shipping to domestic companies--or at least domestic firms working in partnership with international operators--foreign shipping lines continue to dominate the Nigerian market. It is estimated that 95% Nigerian cargo is transported by foreign companies. However, there are signs that some Nigerian firms could pose a greater challenge in the future, as increasing numbers of companies register with the shipping authorities.

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For example, Nigerian shipping company Japul announced at the end of April that it had sought a listing on the Nigerian stock exchange. Many existing Nigerian operators remain privately owned and can find it difficult to raise the necessary investment to back expansion and modernisation plans. As a result, Japul's decision to raise funds via a listing could prove to be a model that is copied by other companies, most of whom still rely on using chartered vessels.