On the 18th of May 2016, the acting President Prof Yemi Osinbajo signed the executive order on the Ease of Doing Business in Nigeria. It contains far-reaching initiatives to be implemented by MDAs to ensure easier access to information, processes and documentation, as well as promote efficiency in public service delivery. The Executive order had five major planks namely:
- One Government
- Default Approvals
- Entry experience of Travelers and Visitors
- Ports Operations
With specific regard to Port Operations, there were 6 reform initiatives chief among which were:
- All agencies physically present in the Ports are to harmonies their operations into one single interface station in one location in the port and implement by a single joint task force at all times.
- The Apapa Port to have 24-hour operations
- Export Terminal in each port dedicated to export of agricultural products
- No bribing and No Touting policy
Why was there special focus on the Ports? First because one of the index of measurement of the East of Doing Business report is "Trade across Borders", an indices that we rank 183 out of 190 countries and secondly because there is a strong correlation between trade and GDP. In a world were 80% of trade are sea borne, ports when well managed are enablers of national development. For instance, studies show that US ports contribute 20% to the US GDP (https://www.ttnews.com/articles/ports-shipping-industry-responsible-26-us-gdp-study-says).
Unfortunately, in Nigeria, we are unable to determine the contributions of the maritime industry to the GDP as it is not captured as a line item.
It is within this light that we examine the report of the survey by the Convention of Business Integrity (CBI) on operations at Nigerian Sea Ports and Terminals. The report allowed us to analyze from the port users perspective the feedback regarding the operational and governance effectiveness of the ports, professionalism of port officials, ethical conduct especially those bothering on corruption and in general the effectiveness of the ease of doing business reforms that have been put in place.
The report set out to establish the following:
- Presence or lack of clear procedures and processes backed up by relevant laws (including obsolete laws and procedures) in many areas of port operation including such processes as Temporary Imports, Permanent imports, Midstream discharge, Emergency importations (Hand carry policy) etc
- Exercise of discretionary powers by Customs officers and other port agencies including Terminal Operators and Stevedoring Companies including the discretionary powers to impose customs duties and tariffs, classification of goods, port charges and the potential disruption of operations of companies that depend on the ports for the importation of critical parts and goods for their operations.
- Existence or absence of a system of bottlenecks made possible due to wide discretionary powers of port officials and the likelihood for such powers to be used to create opportunities for graft and extortion of port users.
- Payments for services not rendered by port agencies including the dredging of waterways by port users, payment to Stevedoring companies without any services being rendered; collection of pilotage fees in areas outside pilotage districts including international waters etc;
- Awareness or lack of awareness of port users on the existence of the port agencies SOP - Standard Operating Procedure
- Availability or absence of complaints/feedback desks/redress mechanisms and the effectiveness of such where available.
The report established the following:
- There is presence of clear procedures and processes backed by laws. The procedures as backed up by law are instituted to guide operational processes for efficiency at the ports and terminals as managed by Nigerian Ports Authority. And that port users are aware and familiar with these procedures and that they are transparent, consistent and predictable.
- There is exercise of discretionary powers by port/terminal officials relative to processes, fees, charges and fines. This encourages corruption and ultimately, inefficiency in the operations of the ports and terminals.
- Ports and terminal officials enjoy exercise of wide discretionary powers even when these are in conflict with the legal procedures and processes. These discretionary powers are sometimes indiscriminate, bridge port processes, lead to bottlenecks and create fertile ground for corruption and graft and the procedures become convoluted. Often, such exercise of discretion creates opportunities for outright graft and extortion of port users.
- There are payments for services not rendered by ports and terminal agencies and these payments are often at the discretion of officials. Even when customers know these services are not rendered and levies are discretionary, they still comply to facilitate their businesses and avoid delay.
- Grievance mechanisms are available at the ports but some customers are not aware of these mechanisms. For those who are aware of the availability, most of them have never used the mechanisms. Even in the case of grievances, customers often choose not to complain because they perceive the process as subjective. There is perceived weak enforcement and poor investigative structures and ineffectiveness in the case of complaints/feedbacks. Port users do not have total trust in the complaints/feedback mechanisms as they consider the mechanisms part of the problematic processes. There is also the belief that the mechanisms will always lead to backlashes.
- Fees are also verifiable but even when they are verifiable, officials at ports/terminals still exercise discretionary powers in the processes.
- There are, generally, poor infrastructures at the ports/terminals and this cause delay in accessing services at the ports/terminals and make businesses cumbersome and unnecessarily expensive to the extent that they are frustrating.
According to the Lagos Chamber of Commerce and Industry (LCCI) and its private sector partners, these negative operational elements lead to huge revenue loss of as much as about N2.5 trillion in annual corporate revenue in the ports industry. While Capacity utilization stands at 38-40%, approximately 40% of businesses located around the ports communities have either relocated to other areas, scaled down operations or completely closed down.
There are so many things in this report to unpack. But in my analysis of the data, what I can deduce is the following:
- There is clearly an abundance of will politically and by the administrators to put in place a system that will ensure the delivery of an efficient and effective port system. For instance, there has been a number of initiatives from The Federal Government and Nigerian Ports Authority to ease procedures at the ports. Especially through the Presidential Enabling Business Environment Council. These efforts include reduction of documentation of imports from 14 to 8 stages, reduction of export documentation from 10 to 7 and removal of Cargo Release Order, Manufacturers' Certificate of Production, Payment, receipt of Customs Fee and so on from documentation.
- The fact that a large percentage of the users acknowledge the existence and usage of a Standard Operating Procedure and allude to its transparency and consistency, speaks volumes about the efforts of the NPA and the Shippers council to ensure best practices.
- Even though the report in its executive summary seems to suggest otherwise, a majority (85%) of the port users acknowledge knowledge of the grievance mechanism and over 80% of them have actually used it. This means that there is a growing appetite from port users to test the system even at the risk of being victimized in the process. The import of this should not be lost. Users want a more transparent, fair and corruption-free system.
- It is obvious to me that the issue at play here is not that of a lack of enabling laws or enabling procedures, but rather a lack of compliance by State actors (e.g. Customs, port officials) to comply with existing rules without relying on their discretionary powers. Add to that the gross infrastructural deficit to adequately cater for the volume of activities (which creates gridlock outside the port), you would have nailed down the two biggest enablers. These operational challenges create the perfect storm for graft and corruption to thrive. If there is no effort to eliminate or significantly reduce the use of these discretionary powers, the ease of doing business indices is not likely to improve.
It is necessary to acknowledge that under the current leadership of the Customs and the NPA, a lot of efforts have been put into making the processes seamless, payments cashless and ease of operational bottlenecks, but some of these efforts (like the increase of the rent-free period for cargoes stowed at the terminals from 3 to 21 free days and increase in the demurrage free period on return of empty containers from 5 days to 15 days) are temporary or palliatives at best. There is a need to have a full, integrated, comprehensive and structural approach to the problem.
For instance, if there is no solution to the infrastructural deficits in the port, there will no solution to the gridlock which in turn increases the cost of import (by up to 600%) and is the major enabler of the corruption that is seemingly acceptable in the ports. It doesn't matter how good and transparent your procedures are, if the operational facilities are inadequate, you will enable graft and also re-direct transactions to other more efficient ports in the region.
This is probably the reason why regardless of efforts to improve the ease of doing business, Nigeria is hardly increasing in the index. A lot needs to be done and all stakeholders must be on the table to carve out a lasting result. An efficient, effective and well functional port, will not only increase our ease of doing business, but it will also lead to higher government revenue and growth. It is within this light that I look forward to the round-table discussions on "Service Delivery at the Nigerian Ports" taking place on Tuesday 8th of October 2019 in Lagos. Hopefully, this heralds the beginning of a long conversation on the way forward.
Download PDF Copy of Port Reform Report