Can Nigeria’s sluggish ports up their game?

Following years of bottlenecks at its most congested ports, and gridlocks on major arterial roads to the sea, Nigeria’s shipping and logistics industry is in dire need of fresh investment.

At Lagos Port in the Apapa district and at Tin Can Island, cargo ships form a constant line to dock. It takes an average of five hours to manually check each container. The Seaport Terminal Operators Association of Nigeria (STOAN) says delays at the country’s ports are costing the economy $55m per day.

In mid-2020, waiting times for cargo ships at Lagos ports reached 50 days, with thousands of trucks crammed on the roadside and drivers forced to pay to ensure the security of their trucks. New York to Lagos is the world’s most expensive route for shipping 20ft containers, mainly due to congestion caused by the slow pace of inspections and offloading cargo. A 2018 PwC report predicted that a 25% improvement in port performance could increase Nigeria’s GDP by 2%.

Covid-19 has worsened a bad situation. During Nigeria’s lockdown between March and May, President Muhammadu Buhari decreed that only cargo vessels that had been at sea for more than two weeks were allowed to dock at its ports, after crew had been “tested and confirmed disease-free by the port health authorities”. These restrictions did not apply to ships carrying oil and gas products, where there was minimal human contact.

The Nigerian Ports Authority (NPA) set up an isolation centre for vessel crew who were either sick or showing symptoms of the virus, and testing meant some waiting times for ships jumped to as long as 90 days during the worst of the crisis before a reduction following a relaxation of measures. The Cocoa Association of Nigeria said that up to 6,000 tonnes of cocoa beans were stuck at Lagos port during the lockdown.

New investment

Against this backdrop, Hapag-Lloyd, one of the world’s largest container shipping and transportation companies, has opened an office in Lagos to assist clients throughout the region and increase its customer base in Africa’s most populous nation.

The German firm says it witnessed a 25% average growth per year in Africa between 2014 and 2018, resulting from its expansion into coastal and landlocked African countries. The company moves increasing quantities of tea, coffee, cotton and cocoa from inland countries to the ports.

“Hapag-Lloyd has only been in Africa for the last 14 years, so we are still in baby steps in my book,” says Samad Osman, managing director for the Africa area. “The market is going down anything between 5 to 10% this year, and then next year it’s expected to grow again by 5%, but you’re unlikely to reach the 2019 level until 2022.

“However, from a Hapag-Lloyd perspective, in a market like South Africa for example, we have actually grown by 20 to 25% year on year, even during Covid. Because of our extensive network, we are able to grow faster than the market, so even if it’s declining, we are able to show growth.”

Yet poor infrastructure remains a key issue for transport firms, says Darron Wadey, a senior shipping analyst at Dynamar, a Netherlands-based consultancy. Inland infrastructure often consists of poor roads covering vast distances. And until the African Continental Free Trade Area (AfCFTA) is established, customs regulations, language barriers and corruption continue to hamper cross-border market growth.

“For Nigeria, the ultimate solution is to provide a viable port alternative in the east of the country, serving cargo bound for the east and north of Nigeria,” says Wadey. “However, extra capacity at the new port in Lekki could be classed as the first step. Then if you can improve the hinterland infrastructure by improving road capacity, that will address one of the issues.”

Nigeria’s first multi-purpose, $1.5bn deep-sea port is being built in Lekki, in a joint venture between China Harbour Engineering Company (CHEC), and Singapore based Tolaram Group. It is expected to commence operations by 2022 and will form part of an ambitious Lagos Free Trade Zone.

Regional competitors forge ahead

The Lagos state government is trying to woo new investors into developing three major roads linking the seaport to the hinterland. Nigeria’s federal government hopes this will ease the burden placed on existing ports, and help stave off competition from new ports built at Tema in Ghana, and Lomé, Togo. Construction works have also begun by CHEC for the Côte d’Ivoire Terminal (CIT) in Abidjan, which is expected to be operational at the end of 2021. 

“Today we are taking food from South Africa, transhipping into Tema, and within one day the documentation is sorted before shipping into Europe, which I can tell you, a year ago, was impossible to do,” says Hapag-Lloyd’s Osman.

“What Ghana has done is fantastic. They not only addressed the port issue but also the logistics and the roads. Nigeria has these challenges but Lekki and these added initiatives are really good, and it’s going to help, but things have to become decentralised, and at the moment it just takes too long.”

With continued congestion and projects underway to the east and west of Nigeria, Lagos ports need to up their game, says Wadey. Nigeria has lost transhipment business to Lomé, and is losing African transit cargo to Tema, a hub equipped with modern electronic scanners. By contrast, Nigeria’s port technology is often redundant.

“Togo is a slither of a country so they can’t have so much cargo, that’s for sure. But they now have a modern deepwater terminal, modern handling facilities, and they’ve turned Lomé into a transhipment port that’s also proving an exception to the rule by also attracting cargo,” says Wadey.

Increased demand

Wadey says that Hapag-Lloyd’s move into Lagos is a clear sign that there is an increased demand for services and ships.

“Hapag-Lloyd is a global carrier but is outmuscled by the four guys above it including Maersk and Mediterranean Shipping Company. In terms of capacity this is one way of asserting themselves and saying, ‘we’re a big and substantial player here. You can come and ship with us from Lagos.’ It ticks a number of boxes, including marketing.”

Despite the challenges posed by Nigeria’s ports, Hapag-Lloyd will be ideally positioned to ship increasing amounts of agricultural produce and minerals out of the continent if Africa’s leaders implement the AfCFTA, says Osman. The firm also believes the processing of commodities in Africa and measures to stimulate industrialisation will underpin its future business on the continent.

“We are the fifth largest shipping line in the world and we’re aiming for 10% market share as our next target,” he says.