AN APPRAISAL OF NIGERIAN PORTS POST CONCESSION PERFORMANCE

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Abstract

Concession has been acknowledged as a valuable tool for port authorities to retain control of ports and shape the supply side of the terminal market, in the absence of full privatization. This study empirically examines the influence of transfer of port operational services from the public to the private sector, through concession contracts on operational performance in the context of the Nigerian port industry. It extends the work of Liu (2015) and others on the comparative performance of public and private ports in the UK and other countries, by extending the study to the Nigerian portsconcessions.

The Nigerian port reform was borne out of the belief that the transfer of port operations from the public to the private sector will improve the efficiency of the ports, by instigating competition among the various terminal operators. The Nigerian port concession involved the delineation of six Nigerian ports into 25 terminals and awarded to terminal operators. The objectives of the study include, among others; the benchmarking of pre- and post-concession efficiency, to determine sources of efficiency change and to determine factors responsible for the improvement of Nigerian port performance.

A positivist approach is adopted, using quantitative data that involves outputs and inputs related to the port‘s production function. The variables of the research were analysed using non-parametric DEA and the Malmquist Productivity Index to determine the efficiency and the sources of productivity change respectively. This study introduced a novel idea, by adopting a concentration index in measuring the level of competitiveness of ports. The conceptualised theoretical model of operational performance was solved using a two-stage multivariate regression, to determine the factors responsible for the improvement of the Nigerian ports‘efficiency.

The results of the analysis suggested that the productive performance of the ports under consideration improved after the transfer of terminal operations to the private sector, though not in all the ports. Indicating that the wholesale concession of the ports is not the best after all, some ports would have been better left under public ownership. The driver of the improved efficiency after concession, is scale efficiency (increased throughput levels), rather than technical efficiency. Therefore, the post-concession Nigerian ports performance is influenced by the scale of production and change of ownership. The delineation of the ports into terminals has not ushered in the expected competition among and within the ports.

Chapter One

 Introduction

1.1 Background to the study

The last decade has witnessed significant changes in the ports in Sub-Saharan Africa. The 31 countries with ports in the sub-region have either improved legislation or policy oversight, restructured, or embraced private participation in an attempt to reform the ports. The ports in the sub-region are gradually moving away from being publicly operated to engaging the private sector in terminal operations through concession contracts. Most container ports have been a concession, while the specialised ports and terminals are either privately owned or leased. International and local companies participate in the operation of a vast number of ports, even in relatively small ports and in competing terminals at more major ports.

Countries in Sub-Saharan Africa have embraced reforms, as ports play a role in the global trade logistics chain, which impacts heavily on the cost of many exported and imported goods. The belief is that the reforms that improve efficiency will lead to a reduction in total logistics costs. It also impacts positively on the overall competitiveness of economies of reforming countries (Estache, González, & Trujillo, 2001). The most commonly used tool to engage the private sector in the port industry is a concession contract. It is a public–private partnership (PPP) of a contractual nature and has been a favourite means worldwide of instigating port development. It provides new opportunities for injecting private capital, by adopting a market orientation approach. A common feature of reforms is monitoring and evaluation. The focus of ports in post-reform monitoring is partial productivity indicators. The partial indicators, though useful, can be quite misleading, as they do not generate the same ranking for all the ports. As a result, the port authorities have limited information to implement some of the regulatory mechanisms that require consistent estimation of efficiency gains (Trujillo &Nombela, 2000). Hence, the need for a study that reflects the joint effects of all inputs and outputs in the measuring of absoluteperformance.

Nigeria ports play a significant role in international trade in the sub-region; over 90% of traded goods are carried by sea. The Nigeria economy accounts for over 70% of seaborne trade in the West and Central African sub-region due to its vast population (FivestarLogistics,2008).Therefore,assessingtheproductiveefficiencyofNigerianportsafterconcession is crucial to the implementation of port reforms of other countries in the sub- region. Port development in Nigeria has a chequered history. However, the history of modern ports administration can be traced to the Port Act 1954. The Act gave impetus to the establishment of the Nigerian Ports Authority (NPA) in April 1955, as a public corporation. It was owned wholly by the Federal Government of Nigeria (FGN) and charged with the responsibility to operate and regulate seaports in Nigeria (Mohammed, 2008). The importance of ports as a catalyst for economic development was recognised in the first national development plan (1962-1968). The plan earmarked Nigerian ports for development; it provided for the expenditure of £45 million for the improvement of facilities at Lagos and Port Harcourt ports (Akinwale&Aremo, 2010). The Nigerian Civil War (1967-1970) constituted a major setback for port development in Nigeria due to the closure of Port Harcourt port to foreign traffic. Lagos port was left to supply port services in Nigeria. As a result, the then military government enacted a decree empowering the NPA to acquire the private ports in the Eastern part: Warri port operated by John Holt transport, Burutu port owned by United African Company (UAC) and Calabar port by five different.