Getting the economy on the move

Nigeria has become the number-one destination for foreign direct investment, overtaking South Africa for the first time in a decade. This year alone, high-level delegations from north America have pledged vast sums to bring the country’s energy sector up to speed. Frederick Mordi reports from Lagos. Improved transport infrastructure is another key element in developing […]

Nigeria has become the number-one destination for foreign direct investment, overtaking South Africa for the first time in a decade. This year alone, high-level delegations from north America have pledged vast sums to bring the country’s energy sector up to speed. Frederick Mordi reports from Lagos.

Improved transport infrastructure is another key element in developing a more diverse Nigerian economy. Manufacturing companies need to be able to transport goods around the country quickly and securely in order to supply customers and access raw materials, while farmers must know that their crops will reach consumers while fresh.

However, the country’s road, rail, port and airport infrastructure is struggling to cope with existing demand, never mind creating the additional capacity that would entice investors to set up new ventures.

Most of Nigeria’s ports were in a sorry state at the turn of the millennium after decades of underinvestment. In common with several other African states, the Nigerian government decided that private sector management was required and so – after several false starts and trades union industrial action – introduced the port landlord model, whereby the state-owned Nigerian Ports Authority retained ownership of the country’s ports and long-term management concessions for various port terminals were given to sector specialists.

Turnaround times – the total time a vessel spends in port – were previously measured in weeks rather than days. They have now fallen to about 60 hours at several container terminals, although this is still far short of the best international standards of 24-48 hours. The introduction of more modern management systems, investment in new port handling equipment and competition among rival operators have all resulted in improved performance. However, container turnover increased by 25% at some terminals during last year alone and delays remain a problem. In particular, private sector investors have little control over infrastructure outside their terminals, including access roads, rail capacity and customs’ bureaucracy.

The managing director of Maersk Nigeria, Jan Thorhauge, says: “Given the continued growth in containerised imports into Nigeria, it is important that structural solutions are proffered by all stakeholders to cope with future volumes – not only within the port itself but the road or rail network that leads to and from the port.”

There is a particular problem for two of the country’s biggest ports – Apapa and Tin Can Island. They are located in Lagos and so have limited room for expansion unless more land is cleared. The creation of more inland container terminals would help. These terminals would allow containers to be stored away from ports, ideally at interchanges of major roads and railways.

More capacity should be provided by the development of the port of Lekki, about 60km east of Lagos. Tolaram Group of Singapore has signed a deal to construct and operate the port on a greenfield site with a deepwater harbour. The container terminal will eventually have annual handling capacity of 2.5m TEU a year, making it the biggest in Nigeria. A TEU is a 20-foot equivalent unit – the standard size for containers. Construction work on the project is due to begin this year, with the first vessels scheduled to arrive in 2015, giving a very challenging completion schedule of just two years. It would be no surprise if there was some slippage in the timetable.

Apart from domestic business, the port is designed to handle transhipment trade, whereby large container ships offload cargo at Lekki for transfer to other ports in the region that cannot serve such large vessels.

Other similar projects are planned elsewhere in Nigeria, often in association with free trade zones, but any Nigerian transhipment facilities must also compete with other regional ports, such as Douala in Cameroon and Abidjan in Côte d’Ivoire.

The Nigeria Customs Service (NCS) has set a target of clearing all cargo within 48 hours, while also improving security at the nation’s ports. It is currently installing gantry mobile scanners at the ports of Onne and Port Harcourt in the Niger Delta. The scanners were supplied by Société Générale de Surveillance (SGS), which already supplies other ports in the area.

The managing director of SGS Scanning Nigeria, Nigel Balchin, says: “The two scanners installed at Onne and Port Harcourt ports are able to scan around 34 trucks per hour as compared with 16 trucks for a fixed scanner. The gantry scanner has a double tunnel; therefore two trucks can be scanned simultaneously.”

A spokesperson for the NCS added: “It will aid national security and suppression of smuggling as the scanners are embedded with systems to check the importation of harmful and dangerous goods. When importers declare 900 items when they have 1,000, this machine can help us detect it.”

Cargo transportation would benefit from an efficient rail network but here too underinvestment has resulted in a dilapidated railway system. Several preliminary deals have been signed between the government and Chinese firms in recent years, including an $8bn agreement with China Civil Engineering Construction Corporation (CCECC) to develop north-south and east-west rail lines in 2006. That arrangement was revoked by the government in 2008 and the project was subsequently unbundled into separate pieces. A contract on the first of those sections was signed last July when state-owned CCECC signed a $1.48bn deal to construct a railway between Lagos and Ibadan that will allow trains to travel at 150km an hour on the 157km route, bringing the two south coast cities within commuting distance of each other. CCECC, which is already constructing several important highways in Nigeria, has pledged to complete the project within three years. However, no announcements on financing have been made.

Mixed airline fortunes

The airline industry has proved particularly problematic for Nigeria. Virgin Nigeria Airways was set up with great fanfare in 2004 as a joint venture between the Nigerian government and Richard Branson’s Virgin Group. However, Virgin pulled out and the company was rebranded first as Nigerian Eagle Airlines and then Air Nigeria. The latter ceased operations last September and some privately owned Nigerian airlines have met with a similar fate, despite the fact that many more prosperous Nigerians prefer to travel by plane between the country’s major cities.

Car travel remains a dangerous form of transport in Nigeria because of the frequency of accidents and the risk of robbery. Although there have been a number of high-profile air crashes in Nigeria, it remains a far safer alternative.

However, another successor airline has had more success. Arik Air took over the facilities previously owned by state-owned Nigeria Airways in 2006. It originally launched services between Lagos, Port Harcourt and Abuja, and now flies to 30 airports in Nigeria from its two hubs: Murtala Mohammed International Airport in Lagos and Nnamdi Azikiwe International Airport in Abuja. Its international destinations include London Heathrow, Johannesburg OR Tambo and New York JFK.

With 26 aircraft, it is now the sixth biggest airline in sub-Saharan Africa and was the first airline in Africa to operate the wide bodied Airbus A340-500. It has also become the national airline of Sierra Leone and recently launched cargo services within Nigeria. Whichever way the Nigerian transport grid evolves, it is vital that the government tries to impose a holistic approach. Many strands of the network, such as container terminals and airlines, rely almost entirely on private sector investment but there is much that Abuja can do to ensure that such services are integrated into the national economy. Inland container terminals can be located close to air freight terminals ensuring that cargo can quickly and safely be transferred from one mode of transport to another.

It can also ensure that state-run authorities cooperate on the introduction of single passage virtual documentation, so that cargo does not have to be checked and rechecked where such measures are unnecessary. Above all else, the government can make sure that the road network is developed to complement private sector infrastructure, rather than to compete with it. All too often, people and cargo are held up because of ill-thought-out bottlenecks.