Infrastructure Financing and Management: The Impact of Concession on the Operations and Performance of Nigerian Seaports
Chapter One
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.
CHAPTER FOUR
LITERATURE REVIEW
literature review
The magnitude, scope and persistence of failure of Nigeria’s public enterprises (PEs) including the Ports became alarming as these enterprises required continuous massive subsidies but delivered only intermittent and substandard services. The returns on these large investments were generally poor, and in some cases negative, with an especially low rate of return relative to the large amount of resources invested in them (FGN, 1986 in Jerome, 2008). Net outflows from the government to the public enterprise sector were estimated at US$2 billion annually (Callaghy & Wilson, 1988, Jerome, 2008). All these pointed to the inefficiencies of the public enterprises of which the ports are part of he reasons for the poor performance of Nigerian Ports and other public enterprises from history tend to have a uniform pattern globally and range from the presence of conflicting and interwoven roles determined by politicians, prevalence of uncompleted contracts and subsidies from government. These more or less aid internal inefficiencies, issues of excessive bureaucratic controls, to government interference and intervention, and other public service culture of undermining and compromising efficiency and optimum productivity (Ogunsiji & Ogunsiji, 2010; Jerome, 2008).
Concessions were born out of the needs for one reform or another. Concession may be considered analogous to public private partnerships (PPPs) and Private Finance Initiatives (PFIs) and or seen as an arm of privatization (if defined broadly). Privatization of state-owned enterprises (SOEs) has become a key component of the structural reform process and globalization strategy in many economies (Jerome, 2008). It gained popularity in recent times but is an old innovation as it was practiced by the French government as can be seen in the water project of 1776 (Idornigie, 2006).
Section 168 of the draft Ports and Harbour Authorities Bill defines a ‘concession’ as an arrangement between an Authority and a third party pursuant to which such third party shall be authorized to provide a port service or operate a port facility in accordance with the bill (Idornigie, 2006). It is argued that privatization of terminals through concession contracts would be a valuable option if port competition is effective, but not necessarily in cases where competition needs to be created by regulation (Niekerk & Henriette, 2005). It is not the plan of this paper to discuss the suitability or not of concession as a method.
The FGN embarked on the concession of Nigerian Ports essentially to solve the protracted problems of inefficiency, corruption, mismanagement, and huge debts that characterize the Nigerian ports. The rationale behind the Nigerian Port concession includes the $34 million indebtedness of the NPA, the redundancy of 24 out of 83 managers as well as its poor management structure. Emphatically concession of Nigerian ports refers to lease of port terminals and re-organization of stevedoring companies. About 110 applications were received in December 2003 and out of 94 pre-qualified concessionaires, only 20 were granted to operate Nigerian seaport terminals for 10-25 years (Leigland & Palsson, 2007; Kieran 2005; Cameron, 2004; Akinwale & Aremo (2010).
The concept of efficiency is very vague and proves difficult to apply in a typical port organization extending across production, trading and service industries. Ports are complex and multi-parts organizations in which institutions and functions often intersect at various levels (Bichou & Gray, 2004). There are many ways of measuring port efficiency although reduced to three broad categories – physical indicators, factor productivity indicators and economic and financial indicators (Trugillo & Nombella, 1999). Physical indicators refer generally to time measures concerned with the ship e.g. ship turnaround time, ship waiting time, berth occupancy rate, waiting time at berth). It can sometimes measure coordination with land modes e.g. cargo dwell time or how long it takes for unloaded cargo to leave the port. Factor productivity indicators focuses on maritime side of the port as it measures both labour and capital required to load or unload goods from a ship. In the same vein, economic and financial indicators are usually related to the sea access, for example, operating surplus or total income and expenditure related to gross registered tonnes (GRT) or net registered tones (NRT) or charge per twenty foot equivalent (TEUs). Port impacts on the economy are sometimes measured to assess the economic and social impacts of a seaport on its respective hinterland or foreland. The importance of logistics to port operations and achievement of efficiency cannot be underestimated (Itami, 1980; Taticchia et al, 2008). \
CHAPTER THREE
MATERIALS AND METHOD
This study utilized secondary data collected from sources such as the annual reports of the Nigerian Ports Authority (NPA), abstract of ports statistics, seminar papers, journals, as well as maritime bulletins. Statistical tables were prepared from secondary data source which served as meaningful, valid and reliable data for the study.
The data used in this data may not satisfy the assumptions, such as that data must be drawn from a normally distributed population, needed in parametric analysis; therefore a non-parametric alternatives to t-test analysis, which does not make any assumptions about the data was used. The Mann-Whitney and Wilcoxon tests assess whether there is a statistically significant difference between the mean ranks of the two conditions. According to , Mann-Whitney test is the non-parametric alternative to the t-test for independent samples, while the Wilcoxon test is designed for use with repeated measures. Mann-Whitney test is generally applied where there exists different participants in each condition, while the Wilcoxon test is used when there is the same or matched participants in both conditions.
The null hypothesis is that the two samples are drawn from a single population, and therefore their distributions are equal. It requires the two samples to be independent and the observation to be ordinal or continuous measurements. In a less general formulation, the Wilcoxon-Mann-Whitney two-sample test may be thought of as testing the null hypothesis that the probability of an observation from one population exceeding an observation from the second population is 0.5. This formulation, f1(x)=f2(x + δ) requires the additional assumption that the distributions of the two populations are identical, except if there is possibly a shift.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Data Presentation
The data used for analysis is contained on Table 2 below. The data relate to number of vessels per year, the percentage average berth occupancy, the average daily turnaround time, grouped into pre- and post-concession periods.
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
Summary of Findings
The section highlights the following important findings from the analysis carried out:
- Concession as a form of privatization has indeed revolutionized Nigerian port system.
- The concession of the ports has significantly increased the berth occupancy of Nigerian ports.
- The concession of the ports has also significantly improved the vessels’ turnaround time of Nigerian ports.
- 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.
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.
Recommendation
Based on the research findings, the following recommendations are made:
- Government should create enabling environment for private sector participation by providing favourable policies and incentives.
- 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.
- 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.
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)
REFERENCES
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- Ndikom, O., The essentials of the Port Reforms: The Nigerian Experience. 2004, Lagos: Bumico Publishers.
- Bousquet, F. and A. Fayard. Road Infrastructure concession practice in Europe: a report based on document on analysis of highway concessions in Europe. 2001 [cited 2015 15 January]; Available from: www.rru.worldbank.org/documents/toolkits/highways/pdf/25.pdf.
- Federal Government of Nigeria, Infrastructure Concession Regulatory Commssion Act, 2005. 2005: Nigeria. [5] Oghojafor, B.E., O. Kuye, and G. Alaneme, Concession as a Strategic Tool for Ports Efficiency: An Assessment of the Nigerian Ports. American Journal of Business and Management, 2012. 1(4): p. 214-222.
- Awam, I., Analysis of the Impact of Concession on Port Operations: a Focus on Nigerian Seaports, in Transport Management Technology. 2014, Federal University of Technology, Owerri. : Owerri.
- Tongzon, J. and W. Heng, Port privatization, efficiency and competitiveness: Some empirical evidence from container ports (terminals). Transportation Research Part A: Policy and Practice, 2005. 39(5): p. 405-424.
