Controversy trails FG’s $1.5b Lekki port project | Independent Newspapers Limited
Newsletter subscribe

Business, Slider

Controversy trails FG’s $1.5b Lekki port project

Posted: Apr 5, 2015 at 5:02 am   /   by   /   comments (0)

By Andrew Airahuobhor

The Federal Government’s commitment of $118 million to the construction of Lekki Deep Seaport in Lagos is beingmired in controversy over the absence of a plan to construct a rail link that will ease cargo evacuation.

Prototype of the new Lekki port design

Prototype of the new Lekki port design

The deep seaport project is a $1.5 billion public private partnership project among the Federal Government (represented by the Nigerian Ports Authority), the Lagos State Government and the Tolaram Group, a Singaporean investor who are promoters of the project. A Shareholder’s Agreement to this effect was signed in December 2012 amongst all three parties.

Already, the federal government has paid a total of N1 billion to the development of the project, according to the managing director of NPA, Habib Abdullahi. This is aside the expected support from six financial institutions- the African Development Bank, European Investment Bank, Standard Bank, Standard Chartered Bank, Diamond Chartered Bank and African Finance Corporation (AFC).

There are worries that the multi-billion naira project, expected to create thousands of jobs and significantly reduce the present congestion in Nigerian premier port, Apapa Quay, Lagos, will just repeat the crises currently bedeviling ports in Nigeria, in terms of movement of cargo.

“The total amount of the federal government’s stake in this project is $118 million. What we had as at last year was N1 billion and we have already paid that. We have already started making payments on this because there was an allegation that government has not started making payments. That is totally wrong. We have already paid our own dues as at last year. For the year 2015, we have made enough provision to pay up the remaining amount that is due to us. It is still with the government but we have already made an agreement with them and we will pay it up by the end of the year”, Abdullahi said.

He said, “When completed, this project will be an eye-opener that will attract other investors and it will also inspire the construction of other proposed deep seaports, like the Badagry deep seaport, Olokonla port in Ogun state, Ogidigben port in Delta state, and the Ibom deep seaport in Akwa Ibom State. This project will drive the economy and bring economy growth to the country. It will yield employment. It will be of great advantage to Lagosians and Nigerians as a whole. It will be a hub of West Africa to bring export promotions into the state and will transform the whole economy as promised by President Goodluck Jonathan.”



However, troubling issues about evacuation bottlenecks that will discourage high cargo traffic may have dampened interest of investors in the Lekki Deep sea port project. Tolaram Group, is shopping for $800 million from local and international financial institutions to actualise the proposed Lekki Deep Sea Port project, which is estimated to cost $1.35 billion (about N200 billion), according to federal executive council (FEC). But promoters could not convince investors on how it propose to draw cargo traffic to the port facility especially because of evacuation bottlenecks.

This is because the Lekki axis is largely a residential area, vehicular traffic in and out is very heavy without the added burden of trucks plying that route, which will worsen if trucks traffic is added especially as there is none existent rail connection and no plan yet to build one.

The Nigeria Shippers Council, the newly appointed economic regulator for the port is unhappy with the manner government and promoters of the Lekki port project are ignoring the consideration for a rail linkage.

Executive Secretary, Nigeria Shippers’ Council, Hassan Bello has advised all investors in the proposed Lekki Deep seaport project to ensure that proper railway network channels and other mode of transportation are put in place to convey cargoes out of the port. This is so as to reduce pressure of the Lagos roads.

Bello said that if the investors fail to put in place other mode of transportation to complement the roads, then a port like the Lekki port will be worst than what is currently going on at Lagos ports. He urged the federal government to be very careful about the new ports, saying : “It’s not only  to site a port at Lekki then we say we have a new port ; there are so many issues that surround a port for it to thrive”, he said.

When the Senior Special Assistant to the President on Maritime Services, Olugbenga Leke Oyewole visited the Council in Lagos last week, Bello told him that the agency is on a revolutionary mission in addressing challenges faced by operators. He noted that the gridlock faced by operators due to the fact that transportation is only on the roads, has made seaports unfriendly and uncompetitive.

“In the new port order, the new Deepsea ports we have in Lekki and Badagry must be worried about certain things and the Nigerian Shippers’ Council will want the government to be mindful of how to access these ports because a modern port must be accessed by rail, road, inland water and by pipelines because these are the mode of modern transportation,” Bello said.

He added that “Those structures must be in place at the new ports otherwise we will be repeating what is obtainable in Apapa.” Traffic gridlock, according to him, has contributed to the slow pace of port operations noting that the 48 hours clearance of cargoes cannot be achieved if traffic management is not in place.

Meanwhile, Tolaram Group has said that full construction of the port project will begin in July 2015.

Managing Director of Lekki Port Project, Mr. Haresh Aswani, said the port would be built within 40 months, saying the Lekki Free Trade Zone (LFTZ) would be the largest industrial city in Nigeria. He said the investments that will be coming into the region when it is fully operational will exceed $25 billion.

Chief Finance Officer of Lekki Port, Mr. Sandeep Parasramka said in a statement in Lagos, that the project is very much on course and is progressing well, with respect to global standards, large Infrastructure projects like this take time to achieve financial closure. I can confidently tell you that African Development Bank has recently obtained Board Approval for US$150 million funding for the project while European Investment Bank which is very much eager about investing in the project, has also gotten Principal Board Approval which would see them support the project with funds also.“

He said a few more International Banks who are also in the process of securing their Board Approval are also going to join the list of banks, investing in this laudable initiative.

All the Banks are very keen to participate in the Project given its strategic importance, competitive advantage, good financial returns, strong Government Support and unprecedented economic value it is expected to inject into the economy. Parasramka said, adding that, conventionally, projects of this magnitude are undertaken through project financing on a non-recourse basis.

Parasramka said the company is striving to ensure that Lekki port becomes operational by 2018. He added that “Apart from getting the concession from NPA to build Lekki Port, Tolaram has put together leading global consultants such as Standard Chartered Bank, the Louis Berger Group Inc., Delta Marine Consultants, BMT Asia Pacific, TBA Netherlands, Jardine Lloyd Thompson Pte Ltd and GMaps, following which the EPC contractor, China Harbour Engineering Company (one of the foremost builders of ports with a track record of delivering projects on time), has been appointed to build the port and the container terminal has been sub-concessioned to International Container Terminal Services, Inc, Philippines, a leader in the container terminal operations with a footprint across the globe.”

From all indication, the Lekki port project will replicate the perennial traffic gridlock that has crippled some businesses along the Apapa/Oshodi Express Way. Due to the absence of a ports development master plan, Tin Can Island Port was built in 1977 principally to address the congestion crises that hit Lagos Ports Complex, Apapa. Curiously, there was no consideration for rail linkage.

Apparently worried about the economic implications of the traffic gridlock, where multiple man-hours are lost on a daily basis, goods and services are trapped by indiscriminate parking of container trucks and tanker vehicles, government took advise to develop a ports master plan..

In 2012, Federal executive council (FEC) approved a total of N267 million for the contract for consultancy services for the development of a 25-year National Ports Master Plan for the Ministry of transport and Nigerian Ports Authority (NPA).

This move to have a master plan, which is still on the works, came six years after the ports were concessioned in one of the most controversial privatization exercise in 2006.

“Port master plan is meant to forecast, envision. The problem we are facing today in the ports is because they did not forcast, there was no vision,” said Francis Omotosho, who is port planner and lectures at the Certified Institute of Shipping

CPCS, the company handling the consultancy for development of the 25-year ports master plan, had previously advised the Federal Government throughout the privatisation and restructuring of its national ports system.

Following the successes of its concessioning exercise, and in response to the rapid growth in the volume of cargoes handled at Nigerian ports over the past decade, in 2012, the Nigerian Ports Authority (NPA) retained CPCS to lead in the development of a 25 year, national ports master plan aimed at guiding the physical development and operational improvement of Nigeria’s sea port sector.

The overall purpose of the National Ports Master Plan is to promote the development and expansion of the national port system, achieve efficient levels of service, develop an adequate institutional framework and regulation, maximum levels of private sector participation, socio-economic benefits, minimum levels of public expenditure and liability, as well as an adequate mitigation of environmental and social impacts.

As part of the master plan’s scope of work, the CPCS Team is undertaking certain tasks, including, carrying out a technical due diligence analysis (informed by site visits) on each of the six Nigerian port complexes in order to understand the current state of their infrastructure and operations.

It is also developing commodity – specific traffic projections for each port complex over the next 25 years based on detailed demographic and economic analyses of each port’s localised economies. These projections, further informed by over 100 consultations with various sectoral stakeholders (the Nigerian Ports Authority, government agencies, institutional shippers, receivers, shipping lines, third party logistics providers etc.) will subsequently form the basis against which the necessary physical and operational requirements for the Nigerian port sector are to be developed.

CPCS is also preparing operational improvement and port development plans (brownfield and greenfield) based on established requirements; Preparing action plans containing road maps for the reform of each existing port complex; Preparing conceptual plans, including relevant conceptual designs for the existing and proposed port infrastructure, including vital road and rail linkages to the port infrastructure; and Carrying out a competitive analysis and suggesting the way forward to the most competitive Nigerian port;

CPCS is a management consulting firm providing strategic advisory services specific to transportation, energy and urban development sector infrastructure, operations, investment, policy and regulation.