Infrastructure Financing And Management; The Impact Of Concession On The Operations And Performance Of Nigerian Seaports

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Infrastructure Financing And Management; The Impact Of Concession On The Operations And Performance Of Nigerian Seaports


Abstract


This paper study examined the effect of privatization on the performance of Nigerian seaports, using pre- and post-privatization data. A Mann-Whitney Wilcoxon (MWW) test was applied to data (secondary) on two major indices of port operation (average berth occupancy and average turn-around time). The result of the analysis showed that on average, the berth occupancy and turn-around time improved from 51.35% to 72.47% and 8.18 days to 4.83 days respectively. It was also found that at a 0.05 level of significance, the concession of Nigerian ports has significantly improved average berth occupancy and average turnaround time of the vessels calling at Nigerian ports. The study emphasises the need to provide enabling environment through the formulation and implementation of effective policies as a way of ensuring optimal performance of the concession model.


Chapter One


Introduction

1.1 Background to the Study

Maritime activities could be seen as a life wire of any developing economy. Shipping has become the most effective mode of transportation in the international exchange of goods. Transportation of bulk goods over a relatively long distance is most economically done by sea. This is further facilitated through advances in technology which has brought about more efficient, reliable and demand oriented transportation system. It is estimated that over 90% of global commerce is seaborne . This reflects the level of dependency on shipping for the movement of goods generated in international trade transactions.

Port reforms are policy measures by government aimed at enhancing efficiency and productivity of ports by revitalizing and strengthening the operational and functional modalities at the ports. Within the Nigerian context, ports reforms were with a view to making Nigerian ports both user and investor friendly, thus enhancing smooth operations at the ports.

The reform model chosen by the Nigerian government was port concession, whereby the government retains ownership the infrastructure, and contracts out the management and operation of the facilities to the private sector on competitive basis for a specified period of time. Bousquet and Fayard [3] note that a concession arrangement is one in which the government (or her agency) grants the right to fund, build, own, improve, upgrade, maintain or operate a public infrastructure, and charge users for the cost of services, for a limited period of time to a private sector operator. The official view about concession in Nigeria seems to be contained in the Infrastructure Concession Regulatory Commission Act (2005) where concession is described as:

A contractual arrangement whereby the project proponent or contractor undertakes the construction, including financing of any infrastructure, facility and the operation and maintenance thereof and shall include the supply of any equipment and machinery for any infrastructure and the provision of any services.


1.2 Statement of Problem

It is believed that the Nigerian Ports by the 1990s demonstrated very low levels of efficiency which resulted in long turnaround times for ships and increased container dwell time (Leigland and Palsson, 2007). Instead of the forty-eight hours international standard to unload and reload a ship, it took weeks. The workforce was overbloated, there were excessive port-related charges, and massive levels of cargo theft. The most unfortunate was that the port infrastructure required considerable rebuilding and restoration. This entailed massive external financial support which the federal government was unwilling to provide due to the existing corruption and operating inefficiencies. Hence, port operators and users were left dissatisfied (Leigland & Palsson, 2007).

With respect to port operations, concession refers to lease of port terminals and re-organization of stevedoring companies. The contractual arrangement embodies service criteria and specifies the technical qualities and practices expected from the concessionaire. Perhaps, it is because of the stake that the government still has in the venture that motivates government to ensure that her policies are implemented both in technical and social terms as noted by.

The improvement of port efficiency or productivity seems to be the major motivation for port concessions in Nigeria. However, the level of achievement of this objective is yet to be determined. This paper therefore seeks to establish the impact of the reform by analysing the major indices of port operations performance in the port. This impact would be established by:

  1. Examining of the impact of port concession on cargo average berth occupancy in Nigerian ports
  2. Analysing the impact of port concession on turnaround time of vessels calling at the ports, and
  3. Drawing inferences and making recommendations based on the research findings

1.3 Objective of the Study

This study examines only the impact of concession on two major indices of port operation (average berth occupancy and average turnaround time), from 1995-2012 in Nigerian ports. Attention has been drawn to the ways concession has improved the efficiency of services in the Nigerian ports, with recommendations capable of assisting in the actualization of the aims and objectives of the exercise.


1.4 Research Questions

  1. To what extent has port concession affected the average berth occupancy of Nigerian ports?
  2. What is the impact of port concession on average turn-around time of vessels calling at the ports?

1.5 Hypothesis of the Study

Following the objective of the study the following hypotheses were formulated

Hypothesis one
  • H0: Concession of Nigerian ports has no significant impact on the average berth occupancy of Nigerian ports
  • H1: Concession of Nigerian ports has significantly increased the average berth occupancy of Nigerian ports
Hypothesis two
  • H0: The concession of the ports has no significant effect on the average turnaround time of vessels calling at Nigerian ports.
  • H1: The concession of the ports has significantly improved the average turnaround time of vessels calling at Nigerian ports.

1.6 Significance of the Study

Although several studies such as had studied the concept of privatization and how its application in seaports has increased competiveness and efficiency, these have not been specific to Nigeria. This study will complement these existing studies by establishing the impact of privatization (port concession) on average berth occupancy and vessels turn-around time of Nigerian seaports.


Chapter Five


Summary of Findings, Recommendation and Conclusion

5.1. Summary of Findings

The section highlights the following important findings from the analysis carried out:

  1. Concession as a form of privatization has indeed revolutionized Nigerian port system.
  2. The concession of the ports has significantly increased the berth occupancy of Nigerian ports.
  3. The concession of the ports has also significantly improved the vessels’ turnaround time of Nigerian ports.
  4. Concession has introduced the healthy competition being experienced in the Nigerian port system today. So administrative bottleneck and prohibitive costs have been drastically reduced in the ports.

5.2. Conclusion

This research has examined port operations and port concession to ascertain the impact of concession on port operations. It has been shown through existing literature and analysis of available data that concession is a vital means of improving port performance, productivity, and competitiveness of Nigerian ports, and has made the ports more appealing to shipping companies, importers and the freight forwarders, which are the major port stakeholders (operators).

It could be concluded within reasonable limits of accuracy that ports concession impacts positively on ports operations, this serving as a boost to the economy through revenue generation, reduction in cost of importation, as well as in employment generation. However, it is acknowledged that the productivity of Nigerian ports could still be enhanced through a targeted formulation and implementation of effective improvement policies; the recommendations of this study would be a good starting point.


5.3. Recommendation

Based on the research findings, the following recommendations are made:

  1. Government should create enabling environment for private sector participation by providing favourable policies and incentives.
  2. For Nigerian ports to be user friendly, Government should encourage terminal operators to provide modern cargo handling plants and equipment that would enhance smooth operations at the ports.
  3. There is equally a need to ensure that a vibrant training and re-training (skilling or up-skilling as the case may be) policy is put in place. And considering the contribution of Nigerian port to national development, it would be in the interest of Government to ensure the training and retraining of the maritime labour in line with the international practices.

5.4. Limitations

The concession started in 2006 and has only lasted for 7 years. Hence, the post-concession data was limited to only 7 years of operation. However, the non-parametric test deployed was adequate for analysis comprising data for only 7 years. In spite of this limitation, the result of the test is deemed reliable at 0.05 level of significance.

Also, the performance of the ports is not the general productivity that should take account of all the input and output factors. The performance here looks at only the ports operations performance. Hence, the basis for the analysis was the two major indices of efficiency in ports operations (average berth occupancy and vessels turnaround time)


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