Ports facelift gathers steam: the recent announcement that China has signed an $8.3bn contract to develop a rail link between the north and south of the country comes as very welcome news to the country's business community. But greater volumes of trade will be generated only if Nigeria's ports are also modernised. Neil Ford reports on Nigeria's determination to upgrade its ports infrastructure.

The grand plans devised for the regeneration of the Nigerian rail sector could have a massive impact on trade both within the nation and between the West African giant and the rest of the world.

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Yet the country's railways are only one part of a much wider transport network. Goods are carried to and from West Africa by international shipping lines, so the ports that act as an interface between Nigeria and the wider world have a vital role to play. Substantial progress has been made on implementing the port reform process but much more needs to be done before the port and rail network can act as a boon rather than a hindrance to investors.

Nigeria's poor transport infrastructure has long deterred investment, particularly from local companies. Trade between different parts of the country is limited by the cost in time and money of moving goods and people from one region to the next. This not only has economic ramifications but also a social and political impact, in that it pulls at the fabric of national cohesion. Trade between regions and between nations is the best antidote to conflict yet devised and the north and south of Nigeria do not trade nearly enough with each other.

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In October, months of promises of Chinese investment in the Nigerian rail sector finally seemed to come to fruition. China Civil Engineering Construction Corporation (CCECC) signed an $8.3bn contract to develop a rail line between Lagos and Kano. The 1,315km railway will form the centrepiece of the new rail network and will enable freight to be moved far more easily between north and south than on the country's overused and under-maintained road system.

Whether from private or public sources, new investment is expected to be made in many of the nation's ports over the next five years, partly to enable them to make the most of the new rail links.

Vastly improved rail freight services will have any number of benefits for Nigerian ports. They will encourage and enable trade, and so are expected to promote the use of any ports served by a modern rail station. Improved rail links will also enable goods to be moved in and out of each port, preventing overcrowding and minimising the amount of new storage capacity required, whether for dry bulk, container or any other form of freight.

The Nigerian port sector has long been controlled by the state-owned Nigerian Ports Authority (NPA). Despite the need for efficient ports to promote trade, the organisation was starved of funding by successive governments and efficiency at NPA ports was low. A combination of limited funding, low morale and outdated technology resulted in turnaround times--the time taken to unload and reload a ship--of many days, or even weeks. The most efficient ports in the world, in the Far East, Europe or North America, generally consider 48 hours to be standard.

While the Nigerian government has backed down on or delayed several key economic reforms, it has managed to proceed with implementing its port reform programme in the face of strong opposition, particularly from the trade union movement, because of fears over job losses.

Some ports have already been transferred to private sector control as a result of contract tenders. For example, APM Terminals, which took over P & O Nedlloyd earlier this year and which is owned by Danish shipping giant A.P. Moller, was awarded a 25-year contract to manage Apapa container terminal.

As with the country's other port operators, APM Terminals will be required to improve port facilities by investing in new cargo handling equipment and boosting overall port capacity. Given the poor track record of NPA, the private operators are unlikely to provide a worse service and are widely expected to reduce turnaround times through a combination of new investment and sound port management.

In addition, Abuja is likely to do well out of each concession. It will no longer need to subsidise ports, while successful bidders pay the government a fee for their contracts.

How quickly rail lines between the ports and the main cities are improved will have a huge impact on the performance of each port. The government hopes to engender more competition between the nation's ports in order to minimise costs and improve efficiency. Given that the Lagos to Kano railway is first in line for development, the Lagos ports will almost certainly gain a huge advantage over their competitors.

The NPA will also lose its position as industry regulator, as a range of state-owned bodies will assume responsibility for overseeing the sector. The new National Transport Commission (NTC) will become the port sector's commercial regulator, although the NPA will continue to act as the sector's technical regulator.

The government has also announced that the NPA will be retained to continue managing those ports that do not attract private sector interest.

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The new National Ports Commission (NPC) is to take overall responsibility for sector competition across the entire country, although five landlord authorities are being formed to cover the five designated shipping regions of Calabar, Lagos, the Niger Delta, Port Harcourt, plus the inland ports.

Concession downside

The private sector investors may bring in new methods and investment but there will be a price to be paid. Port charges have already been raised and further increases are likely.

Although to be expected, price rises have certainly not been popular. APM Terminals greatly increased container charges, including port rental, delivery costs and handling charges. It has been reported in Nigeria that the Manufacturers' Association of Nigeria (MAN); the Nigerian Chambers of Commerce, Industries, Mines and Agriculture and other bodies with an interest in the sector have complained about such rises.

Many importers have complained that the Bureau of Public Enterprises (BPE) has reneged on claims that port costs would fall. Indeed, the director-general of the BPE, Irene Chigbue, had said: "In concrete terms, a successful implementation of the port reform and concessioning programme is expected to reduce port operating cost by 20% to 25% per annum, reduce port charges by around $70-$100 per annum and reduce the costs of the Nigerian importer by as much as 5% to 13% per annum."

Government plans to remove informal settlements from port areas have also attracted some criticism but the presence of shanty towns within port bounds is completely incompatible with international shipping standards.

Under pressure from the US, international port security regulations have been tightened in order to reduce the risk of terrorist attacks on shipping and ports--and also the use of vessels as weapons. Failure to abide by the new standards could prevent ships that use US ports from visiting Nigeria.

The government is particularly keen to demolish the informal settlements at the Lagos ports of Apapa, Lagos and Tin Can Island. President Olusegun Obasanjo commented: "There is no reason whatsoever why those people who should not be in the ports, no matter what they claim, should be at the ports. And we will make sure it does not happen. We will not relent on security--security onshore and security offshore. This is very important because if we do not ensure security onshore, it will endanger lives and goods offshore. On the miscreants and shanties in the ports, I have already given a directive to the managing director of the Nigerian Ports Authority and it will be carried out."

Despite the various concerns, the federal government certainly expects private sector operators to improve operations at the nation's ports. At a port sector meeting in August, Obasanjo said: "We expect efficiency. We expect cost-effectiveness. We expect Nigerian ports to compete favourably with any other port in Africa. Otherwise, we cannot achieve our set goals." The government appears to be making progress on transport sector reform. The minister of Transport, Abiye Sekibo, and the minister of Works, Femi Anibaba, are now drawing up plans for the creation of an integrated transport strategy that will tie port reform and expansion to rail modernisation.