28 December 2020
Congestion, bribery and storage costs add to problems for importers in Africa’s largest economy
The congestion at the port in Lagos has become so bad that it can cost more than $4,000 to truck a container 20km to the Nigerian mainland these days, almost as much as it costs to ship one 12,000 nautical miles from China.
A long-running crisis at the Apapa and Tin Can Island ports, the main commercial entry points into Africa’s largest economy, has been exacerbated by the pandemic-induced economic slump and recent unrest in Nigeria’s commercial capital. Dozens of ships idle at sea, while hundreds of trucks sit in traffic for days or weeks waiting to enter and exit the port.
“During the pandemic, there was a lockdown and then curfews, so dock labour couldn’t resume work as scheduled. That lowered productivity and extended the long stays of the vessels,” said Otunba Kunle Folarin, chairman of the Nigerian Ports Consultative Council.
Around the world, the coronavirus pandemic has strained international supply chains and threatened to disrupt trade.
In Lagos, the port area is even more crowded at the busy year-end period, and the Seaport Terminal Operators Association estimates that the congestion costs the country $55m a day in lost economic activity.
Just days before the Africa Continental Free Trade Area agreement comes into effect, Nigerian businesses complain that higher costs make it hard for them to compete. “We all know that the congestion at the ports is bad for the economy,” said Jumoke Oduwole, head of the agency tasked with improving Nigeria’s business environment.
“The government has been talking about ease of doing business,” said Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry. “But if there is one sector where we have not felt the government effort . . . it’s in the ports, where practically nothing has changed.”
The port’s capacity has not increased since 1997, even as Lagos’s population has roughly tripled. Nigeria imports a lot of raw materials and almost all finished goods, and the congestion is causing production delays for multinationals.
“There has been some progress on road improvements and some effort toward [speeding up] clearance of containers, but it has not been consistent or smooth,” said a senior executive at a multinational. “I can’t see it being fixed in the next 12 to 18 months.”
The average spot rate this year to ship a 20ft container from Shanghai to Lagos is about $3,000, according to Shanghai Containerized Freight Index data provided by Dutch shipping consultancy Dynamar, the equivalent of about $3,750 to $4,000 for a 40ft container. The current spot rate is $5,000. Cargo ships often wait more than a month off the coast before they can offload their goods in the port — roughly how long some spend in transit to Lagos from China.
Increased congestion at the end of the year has pushed prices for the transport of goods to the mainland higher. Rather than pay lower rates for a truck that could take several weeks to enter the port, while accruing costly terminal container storage charges, most importers opt to pay spot prices to fleet operators, which charge N1.5m ($3,953) to drive a 40ft container from Tin Can to warehouses within Lagos, according to senior executives at logistics firms. Apapa is cheaper at the moment, with current rates up to N700,000, in part because it is thought to be a better run.
That figure includes road access charges and bribes but does not include terminal or storage charges at the port, general costs — which can run into the tens of thousands of dollars — associated with ships parked at sea or money extorted by criminals and officials while trucks wait days in traffic jams.
The port congestion is caused by ageing infrastructure, meagre rail transport that forces 90 per cent of cargo to go by road and an almost complete lack of automation, which means every container must be physically inspected by customs officials. It has been compounded by increased sea traffic since the closure of the country’s land borders to combat smuggling last year.
Hadiza Bala Usman, head of the Nigerian Ports Authority, said the agency was working to speed things up. The NPA plans to digitise the processing of containers and has pressed terminal operators to invest more, including Dutch company APM Terminals, which announced an $80m upgrade to its Apapa facility this year.
One 35km stretch of road from the port is being refurbished by Nigerian billionaire Aliko Dangote’s construction company in return for a tax holiday. More companies are also using barges to move containers to bonded warehouses, where they can clear customs away from the port.
Other improvements are on the horizon. About 60km east of Lagos, the Singaporean food company Tolaram and China Harbour Engineering Company are building a $1.5bn deep seaport. But it is not expected to be completed until 2022.
In the meantime, the dysfunction in Lagos is allowing other west African ports, servicing far smaller markets, to eclipse Nigeria.
Lome, in Togo, is now the region’s busiest port, and cargo destined for Nigeria is increasingly offloaded or shipped via smaller vessels from ports in Ghana, Ivory Coast, Cameroon and Congo-Brazzaville.
“Nigeria is definitely behind the curve,” said Darron Wadey, senior analyst at Dynamar. “What you’re seeing in Lagos . . . I can’t recall seeing anything like it anywhere else in the world.”
By Neil Munshi. This report first appeared in the Financial Times.