Battling Recession

Apapa Port

Business activities at the ports continue to dip in the light of prevailing economic crunch
By Bayo Bernard
Hope that business activities at the nation’s sea-ports will pick up from the rubbles of economic downslide appear to be shrinking by the day. Available indices indicate a gloomy scenario, as prevailing trends do not present a positive outlook.
Signs that business may not experience the expected rebound became more apparent following huge loses declared by some of the world's biggest shipping lines in the past few days. Shipping concerns such as AP Moller, Maersk, COSCO, CMA, Hapag-Lyold and Japan-based NYK have all posted loses running into several millions of dollars.
Denmark-based Maersk, which is the biggest operating ocean liner in Nigeria has projected a net loss of one billion dollars, conservatively, though experts insist that the current figure is too close to call, considering that the new year is still one month ahead. Moreso, when the substantive loss is almost a 50 per cent increase of the $540 million earlier declared in September.
Cosco, which operates the Asian – Nigerian route had posted a $671 million loss, Nyk $694 million while Lloyd recorded a loss of $680 million. Prevailing low business ratings, according to investigations, are caused by falling demand for services and freight rates.
The containerised shipping aspect is worse hit, a situation sharply in contrast to that of last year when a stampede almost occurred due to high volume of transactions. This, as it were, is already having a toll on other ancilliary services around the ports. Earlier this year, there were fears within the maritime community that the ports may witness congestion, but such apprehension has since disappeared.
Business, infact, is currently at an all-time low, according to checks. Investigations carried out also show that there is a 50 per cent drop in business volume as compared to last year.
Some Agents and freight forwarders interviewed by The Source confirmed that it is, indeed, a rainy era at the ports.
Uche James, a licensed customs agent, told The Source last week that business is not as it used to be. He said the present situation contrasts sharply with expectations that there may be a repeat of last year when the ports were congested. James: “The ports are in recession.”
For another importer, Tayo Apata, imports coming into Nigerian ports are low due to the global economic recession. The situation, according to him, has left many freight forwarders without businesses to do. He stated that the Apapa Port where he mainly transacts business has witnessed low volumes of importation. “This is not recession, it is a total meltdown,” Apata told The Source.
Prominent shipping companies have adopted various austerity and cost cutting measures to keep afloat. To underscore the fact that things are not moving smoothly, some shipping concerns have reduced freight rates to shore up cargo volume, but the situation remains static. The stop-gap measures have largely failed to respond positively to the economic crunch, The Source's investigations show.
Tom Gronnegard Knudsen, former managing director of Maerskline Nigeria, paints the situation succintly. “No one in the industry is making money,” he said, adding that "Maerskline Nigeria witnessed a downward trend in cargo volume compared to last year's figure."
Further investigations indicate that the company, which controls 60 per cent imports into Nigeria, has had its market share slashed by 20 per cent.
“With the volume we had in 2008, we almost had a meltdown in the port. Even without growth that with the same kind of volume this year, it will be the same meltdown this year,” Kundsen further said.
Martin Dirk, managing director, APM Terminal seems to be in agreement that there is recession at the ports. The APM boss told The Source in an interview that business has fallen short of expectations. Though he said his company still managed to break even, container transactions, he said, have not improved over last year’s figures. Sources from other Terminals also indicate that business has dipped this year.
The slide in the volume of cargo, freight, industry watchers insist, is a function of so many factors, chief of which are the effects of recession. The recession, experts insist, has also affected the ability of financial institutions in the country to syndicate loans to prospective borrowers. The banking reforms of the new Central Bank of Nigeria (CBN), boss Lamido Sanusi, has also left in its wake so many causalities. Basically, banks have practically stopped syndicating loans to finance imports.
“How can importation improve when financial houses are not lending out money? Except there is a paradigm shift in what obtains currently, many of us will soon be out of business,” Phillip Ezeoke, an importer who operates at Warehouse Road, Apapa, told The Source.
Companies in the sector are already adopting various stop-gap measures, in a bid to cut costs and remain in business.
APM Terminals, for example, was said to have sacked some workers recently – an action that somewhat pitched the company’s management against the labour union. But investigations conducted by The Source indicate that nothing of the sort happened. Inside sources say the grouse of the Union against APM management, is as a result of refusal by the authorities of the concessionaire to approve overseas training programmes for some employees. The APM management was said to have cited recession as reason for its stand.
Indeed, the company’s boss told The Source that except business improves, it may be difficult to maintain the level of its current workforce in the new year.
The Nigerian Customs Service (NCS), investigations reveal, has also recorded a dip in its revenue profile. The total revenue projected for the current year is N650 billion. But current indices indicate that it will be difficult, if not impossible, to achieve this target as various Customs formations at the ports are said to be struggling to meet their revenue targets.
For example, out of the N224 billion target allocated to the Apapa Area Command, it has only succeeded in collecting N129 billion so far. The command’s revenue target represents 37 per cent of the revenue projection of the entire service.
The implication, according to a top customs official, is that the service will contribute less to the federation account this year.
“This will also affect the welfare of our men because their packages, as you already know, depend on how much the service is able to collect in terms of revenue,” the official who craved anonymity told The Source. The customs is funded on the seven per cent allowed it from the total revenue which the service generates.
Experts, however, insist that many factors, especially the readiness of banks to grant loans to the sector, will determine whether business activities will pick-up in the new year, or not.