Port operations in Nigeria

Port operations

What government approvals are required in your jurisdiction for a port operator to commence operations following construction? How long does it typically take to obtain approvals?

No further approvals are required to commence operations after construction.

What services does a port operator and what services does the port authority typically provide in your jurisdiction? Do the port authorities typically charge the port operator for any services?

The NPA’s services include:

• arranging for waste disposal and the supply of utilities in the port;
• dredging water channels;
• maintaining of quay walls, common areas, water channels, berths, navigational aids and perimeter fencing on the boundaries of the port; and
• providing pilotage, berthing, unberthing, towage, harbour, wreck removal and general security of the port.

The services provided by the operator include:

• cargo handling, stevedoring, warehousing and delivery services;
• bunkering, ship chandelling and repairs;
• acquisition of equipment for port operations;
• maintenance and development of ports’ fixed and movable assets;
• cleaning, fumigation and procurement of equipment for inland depot transfers, terminal handling, etc; and
• other activities necessary to conduct operations.

The lease agreement specifies that the operator is required to pay the commencement fee, lease fee and throughput fee. The standard operating procedure at the ports specifies that the operator is to pay estate rent, electricity charge and fire service charge.

The ICRC divides the concession fees into the pre-commissioning fees, operations and maintenance fee (implementation phase fee), and the project close-out fee. However, in port-specific agreements, the operator’s fees would be as specified in the contract.

The NPA also collects environmental protection charges, harbour dues, berth rent and ship dues of the cargo dues component, while the operator collects the stevedoring component.

Does the government or relevant port authority typically give any commitments in relation to access to the hinterland? To what extent does it require the operator to finance development of access routes or interconnections?

Typically, maintenance and development of access to the hinterland is the responsibility of the government, while the operator maintains the area granted to him or her under the concession or lease agreement. It is not common for the NPA to require the operator to develop access routes.

How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?

The mode for oversight of terminal operations is specified in the concession agreements and is commonly through documentation and audits. Usually, the operator is required to furnish the NPA with the following documents within the specified timelines:

• every five years: a planning and investment report being capital programme identifying areas for expansion of operations and proposals for human resources and improving operations;
• annually: annual report furnishing technical and financial information such as operations of the applicable year, emergencies, renovation, etc; and
• records and reports: in respect of lease property, accounts, traffic and the quality and quantity of operations.

The lessor may contract an independent auditor to audit the lessee’s operations, performance and annual verification of the lessee’s financial records.

In view of the NPA’s Standard Operating Procedure for Operations at Seaports, the NPA may exercise oversight of terminal operations through reports of the terminal operator at voyage reconciliation meetings where particulars of discharged or loaded vessels are reconciled and the monthly throughput meetings with representatives of all terminal operators in attendance to reconcile vessel throughput. The NPA also controls access of trucks and persons into the port premises through the issuance of a port pass.

The ICRC Act also vests the contracting entity the right to enter and inspect any land or asset that is a component part of a concession agreement made pursuant to the Act.

The existing lease agreements do not have provisions for suspension of operations except in the event of force majeure specified therein.

In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?

The NPA may take over access or take over port operations where the operator is using the terminal contrary to the terms of the concession or lease agreement or for illegal purposes. Typically, one of the key clauses in PPP contracts under the purview of the ICRC is the step-in clause. This clause allows the Authority to step in for the following reasons:

• to prevent or mitigate risks to the environment, public health and safety;
• to guarantee continuity of service;
• to discharge statutory duties; and
• in cases of emergency or default of the private party.

Under the existing lease agreement, NPA has the right to terminate the lease agreement upon the occurrence of lessee’s event of default specified in the agreement, which includes insolvency, failure of the lessee to perform the operations in the terminal for a consecutive period of 14 days, failure to pay any amount due under the agreement and breach of material provisions of the agreement.

What remedies are available to the port authority or government against a port operator that fails to operate and maintain the port as agreed?

The NPA may terminate the concession granted to the terminal operator without prejudice to any rights and liabilities that may have accrued at the date of such termination or that may thereafter accrue to NPA. NPA can resort to any dispute resolution procedures specified in the agreement for settlement of any claims it may have against the terminal operator. Where the act of the terminal operator discloses commission of crime, the government may take steps to prosecute the terminal operator and its directors.

What assets must port operators transfer to the relevant port authority on termination of a concession? Must port authorities pay any compensation for transferred assets?

The port operator is usually required to transfer all fixed assets, including its rights and interests therein, to the lessor on termination. However, the operator notionally maintains ownership of movable assets except where termination occurs as a result of its deafult. The compensation payable under the current lease agreement depends on whether the termination was due to the lessee’s event of default or lessor’s event of default. Where the termination was due to a lessee’s (port operator) event of default, the operator is required to convey, transfer, assign and deliver to the Port Authorities, free and clear of all liens and encumbrances, all its right, title and interest in and to the movable assets for zero consideration.

Where, however, the termination was due to the lessor’s event of default, the Terminal Operator is entitled to be compensated for all construction and development costs incurred in respect of fixed assets. This applies where termination occurred due to the NPA’s event of default within two years from the effective date of the agreement. In this situation, the movable assets remain the property of the port operator and NPA is required to pay for movable assets it desires to purchase from the operator.

Where, however, the lease agreement expires without any renewal thereof, the parties are required to bear their respective costs without any compensation.