Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the primary purpose of the ports?
Nigerian ports are categorised into two types - the Western Port and the Eastern Port. The categorisation is used to identify the location of ports in Nigeria.
The Western Port comprises Apapa Port Complex, Lagos and the Tin-can Island Port Complex, Lagos. Both ports have five terminals, with each terminal designed and approved to handle specified cargo contained in the lease agreement ranging from bulk, general cargo, container to ro-ro. The ports in Western Port are designed as gateway ports.
The Eastern Port comprises Rivers Port, Onne Port, Calabar Port and Delta Ports. The Rivers Port has two terminals that handle liquid, dry and bulk cargoes. Onne Port, on the other hand, is one of the largest oil and gas free zone ports in the world and has four terminals that handle container, oil and gas, dry or wet bulk as well as general cargoes and other logistic services. Delta Port has eight terminals, which are approved to handle multipurpose cargoes, while Calabar Port has three terminals and they mainly handle oil and gas cargoes. The ports in the Eastern Port are designed as gateway ports.
There are, however, numerous other private jetties within the vicinity of these ports that are mainly used for receiving oil tankers that discharge refined oil and gas cargoes into tank farms.
There are also dry ports and inland container depots across Nigeria that are either completed or at varying degrees of completion in Kaduna, Kano, Ibadan, Jos, Abia and Katsina. There are plans to link these inland ports to the seaports by rail.Reform and port models
Describe any port reform that has been undertaken over the past few decades and the principal port model or models in your jurisdiction.
The Privatisation and Commercialisation Act of 1999 (PCA) listed the ports as one of the sectors to be commercialised for efficiency. Also, a 2001 study commonly referred to as the Haskoning study found that Nigerian Ports Administration was highly centralised. It was also found that, despite the role of the Nigerian Ports Authority (NPA) as administrator, major decisions required permission from either the Minister of Transport or the President. In 2004, the Nigerian government undertook port reform exercise that culminated in the concessioning of the ports in Nigeria to the private sector in 2006 under the auspices of the NPA as the lessor and the Bureau of Public Enterprises established by the PCA as the confirming party. The concession was based on the landlord model where the NPA is the lessor as well as the regulator under the supervision of the Federal Ministry of Transportation.State development policy
Is there an overall state policy for the development of ports in your jurisdiction?
Following the successful concession of Nigerian ports in 2006 and the rapid improvement it has attracted in the port industry, the Nigerian government has continued to evolve policies through legislation, regulations, guidelines, etc, on port development through private sector participation. A major milestone in this regard is the enactment of the Infrastructure Concession Regulatory Commission (Establishment) Act of 2005 (the ICRC Act), but its implementation did not become effective until 2007.
The ICRC Act encourages ministries, departments and agencies (MDAs) to identify infrastructures within their areas of operation for concession through a competitive bidding process and also empowers the relevant MDA to enter into a contract or grant concession to any duly prequalified project proponent. There is also the Public Procurement Act 2007, which established the National Council on Public Procurement (NCPP) and the Bureau of Public Procurement (BPP) as the regulatory bodies responsible for monitoring and oversight of public procurement in Nigeria. In compliance with these laws and in line with its functions, the NPA is at various stages of procurement for the establishment and development of new ports in Nigeria such as Lekki Deep Sea Port, Lagos, Badagry Deep Sea Port, Lagos, Akwa Ibom Deep Sea Port, Akwa Ibom State and the Calabar Deep Sea Port, Cross River State.
As part of the Nigerian government policy to encourage port development in Nigeria and to reduce inter-agency conflict as well as enhancing the confidence of investors, several bills relating to the port industry are undergoing legislative processes for possible enactment into Acts of the National Assembly to bring them in line with the new port model. They are the Nigerian Ports and Harbours Authority Bill, the National Transport Commission Bill and the Nigerian Customs and Excise Management Bill.Green ports
What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?
There are no specific green port principles required or proposed in Nigeria. However, considerations for environmental sustainability are fused into the laws or catered for by specific legislation targeted at such issues. For example, the NPA Act also provides that the NPA may make by-laws or proffer guidelines for pollution control at the ports, wharves and jetties.
The existing lease agreements governing port operations in Nigeria have environmental provisions that place an obligation on the lessees (terminal operators) to, among other things, observe environmental laws that protect the environment, prevent and control pollution of the air, land, water and sea by oil, chemicals, emissions, hazardous waste and other wastes.
Legislative framework and regulationDevelopment framework
Is there a legislative framework for port development or operations in your jurisdiction?
Yes. The principal legislation for port development in Nigeria is the NPA Act, which gives the minister the power to declare any place in Nigeria a port and specify the limits of such a place. It also grants the NPA the power to enter into an agreement for the provision and operation of port facilities in Nigeria.
There are also other legislative framework and regulations that are not specific to port development but are designed to encourage infrastructural development in Nigeria through privatisation or public-private partnership of which port development is one of them. The 2006 Port Concession exercise was undertaken pursuant to the provisions of the Privatization and Commercialization Act 1999, which established the Bureau of Public Enterprises (the BPE Act). The functions of the BPE are enumerated in sections 13 and 14 of the BPE Act. Besides its functions, the BPE Act also has certain powers - prominent among them being the power to enter into contracts or partnerships with any company, firm or person that in its opinion will facilitate the discharge of its functions. The Public Procurement Act and the Infrastructure Concession Regulatory Commission (Establishment) Act are other applicable laws that govern port development in Nigeria.
The legal and regulatory framework for port development may vary depending on the place of the proposed port. For example, a permit may be required from the Nigerian Maritime Administration and Safety Agency if the act to be done is likely to affect maritime safety or a permit may be required for dredging and development activity in Lagos State under the Lagos State’s Waterfront Infrastructure Development Law 2009.
The Customs and Excise Management Act stipulates that an application be made to the President through Customs for the designation of an area as a Customs port, while the Immigration Act requires an application for recognition of a port as a port of entry be made to the Minister for Interior where necessary. These Acts impact port development in Nigeria in one way or the other.Regulatory authorities
Is there a regulatory authority for each port or for all ports in your jurisdiction?
Yes, the NPA regulates all ports in Nigeria. However, in 2015 there was a Presidential Order - Nigerian Shippers’ Council (Port Economic Regulator) Order 2015 - and also a ministerial Regulation - Nigerian Shippers’ Council (Port Economic Regulations 2015) - which appointed the Nigerian Shippers’ Council as the economic regulator for ports in Nigeria. The appointment was, however, challenged in court by the terminal operators and their umbrella body, the Seaport Terminal Operators Association of Nigeria. The case is still pending in court.
There is also the National Transport Commission Bill before the National Assembly, which seeks to transmute the Nigerian Shippers’ Council as the National Transport Commission to be established by the Bill to assume the responsibility of economic regulation of the ports and other modes of transport in Nigeria.
What are the key competences and powers of the port regulatory authority in your jurisdiction?
- regulate the ports and its uses;
- manage port operations including the allocation and use of port resources;
- control pollution in the ports;
- provide berthing, mooring, dry-docking, towing and salvage facilities or appliances;
- maintain port equipments and facilities;
- ensure safety and security in the ports;
- develop ports, embankments, water courses, harbours, piers, canals, wharves and jetties;
- appoint, license and manage the pilot of vessels;
- enter into a contract for the repair, maintenance, manufacture, construction and supply of any property necessary for the Authority and operate or provide port facilities to be operated in any Nigerian port;
- reclamation, excavation, enclosing and developing lands;
- do anything to advance the efficiency and manner of operation of the facilities and equipment of the authority;
- establish or incorporate subsidiaries or affiliate companies with other organisations to carry out the NPA’s functions; and
- take action necessary for the successful performance of its functions under the NPA Act.
How is a harbourmaster for a port in your jurisdiction appointed?
A harbourmaster is appointed by the NPA. Generally, a harbourmaster is appointed from the existing staff at the NPA when the need arises. However, where there is no such qualified officer, a formal recruitment process would be undertaken inviting applications from qualified personnel.Competition
Are ports in your jurisdiction subject to specific national competition rules?
Yes, ports are subject to the Federal Competition and Consumer Protection Act 2018, which is binding upon a body corporate, a body corporate or agency of the government of the federation or subdivision of the federation that engages in commercial activities. The National Transport Commission Bill pending before the National Assembly also contains provisions that regulate competition in the transport sector.Tariffs
Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your jurisdictions and how are tariffs collected?
The applicable regime is the Tariff Regulations made pursuant to the NPA Act, which harmonises the NPA (Dues and Rates) Regulations 1956, as amended by the various NPA (Dues and Rates) Regulations from 1957 to 2007. It specifies the tariffs levied by the NPA and guidelines for post concession billing system.
The NPA Standard Operating Procedure for Operations at Seaports stipulates how tariffs or fees payable by operators are collected. A debit note or bill (where applicable) is raised and is approved by the relevant department and certified by the audit department prior to dispatch to the operator. The operator is required to make payment on the issued bill or debit note.
The Nigerian Shippers’ Council (Freight Stabilization Fees on Imports and Exports) Regulations 1995 made pursuant to section 9 of the Nigerian Shippers’ Council Act, also empower the Council to charge on every import or export from Nigeria, a freight stabilisation fee of 1 per cent of the freight on the import or export.
Also, the Nigerian Shippers’ Council (Local Shipping Charges on Imports and Exports) Regulations 1997 made pursuant to section 9 of the Nigerian Shippers’ Council empowers the Council to negotiate with the NPA and shipping companies on port tariffs and rates and local shipping charges paid by an importer or exporter at all Nigerian ports and enter into any agreement on the sum payable. The Council has, in line with these regulations, entered into a memorandum of understanding with shipping companies and port users on local shipping charges. The agreed tariffs and charges are mostly collected or paid to the shipping companies at the point of clearing of import cargoes or at the time of export.
The lease agreement between the NPA as the lessor and the BPE as the confirming party and the terminal operators also contain provisions relating to tariffs and charges payable in the terminals as well as mechanisms for adjustments or increase.
Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable by a port operator to the government or port authority? Are any specific currency conditions imposed on port operators more generally?
The Central Bank of Nigeria Act forbids refusal to accept the naira as a means of payment in Nigeria. The Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 2004 empowers the CBN to make directives in respect of the use of foreign currency. For example, in 2015, the CBN issued a circular requiring that institutions price and receive payment for goods in US dollars towards boosting the naira. It must, however, be noted that certain tariffs such as the lease fees and throughput fees are under the lease agreement between NPA and the terminal operators denominated and payable in US dollars. There are no governing exchange rates or foreign exchange controls generally imposed on port operators as access to and dealing in foreign exchange are in line with the Central Bank of Nigeria’s monetary policy, the prevailing exchange rate that is determined by market forces and the provisions of Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.Public service obligations
Does the state have any public service obligations in relation to port access or services? Can it satisfy these obligations through a contract with a private party?
The Nigerian state is, by virtue of the NPA Act, under an obligation through the NPA to construct, execute, carry out, equip, improve, work and develop ports, docks, harbours, piers, wharves, canals, water courses, embankments and jetties and to provide and operate necessary facilities in ports including the maintenance, improvement and regulation of the use of the ports.
The NPA is empowered by its establishment Act to form, establish or incorporate subsidiaries or affiliate companies, whether wholly or jointly, with other persons or organisations to carry out any of its functions. The NPA is also empowered by the NPA Act to perform or exercise any of its functions or powers through its officer or agent or through any other person authorised by it. The Infrastructure Concession Regulatory Commission (Establishment) Act 2005 (the ICRC Act )also empowered the NPA to enter into contract or grant concession to any project proponent in the port. In effect, the NPA can carry out its functions through a private party.Joint ventures
Can a state entity enter into a joint venture with a port operator for the development or operation of a port in your jurisdiction? Is the state’s stake in the venture subject to any percentage threshold?
Yes, the NPA can enter into a joint venture agreement with a port operator. This is provided for by section 8(x) of the NPA Act, which empowers the NPA to wholly or jointly form, establish or incorporate subsidiaries or affiliate companies with other persons or organisations for the purpose of carrying out any of its functions. The ICRC Act also empowers the NPA to grant concession under a PPP arrangement to a private entity. These are not subject to any percentage threshold but depend on the agreement and arrangement of the joint venture partners.Foreign participation
Are there restrictions on foreign participation in port projects?
There are no restrictions on foreign participation in port projects in Nigeria. The Nigerian Investment Promotion Commission (NIPC) Act, 2004 provides that a non-Nigerian may invest and participate in the operation of any enterprise in Nigeria except those on the negative list such as dealing in arms, narcotics, etc. The Companies and Allied Matters Act 2004 (CAMA) also permits foreign participation in business.However, it is required that the company must be incorporated under CAMA and duly registered with the NIPC. If this is duly incorporated under the law of its home country, it may be exempted from incorporation in Nigeria subject to CAMA, which stipulates the grounds for an exemption. They are exempted if the company is:
- invited by or with the federal government’s approval to execute an individual project;
- in Nigeria for executing specific loan projects on behalf of an international organisation or a donor country;
- owned by foreign government engaged in solely export promotion activities; and
- a technical or engineering consultant engaged in specialist project under a contract approved by the federal government.
Public procurement and PPPLegislation
Is the legislation governing procurement and PPP general or specific?
Specific legislation governs public procurement and public private partnerships, namely, the Public Procurement Act (PPA) 2007 and Public Procurement Regulations (PPR) 2007, while PPP is governed by the Infrastructure Concession Regulatory Concession (Establishment) Act 2005, ICRC Regulations 2017 and National Policy on PPP of 2009. The PPA establishes the NCPP and the BPP as regulatory bodies to harmonise government policies on public procurement and ensure competitive procurement and disposal of public assets and services.
The ICRC Act establishes the Infrastructure Concession Regulatory Commission (ICRC) with the objective of accelerating investment in national infrastructure through private sector funding by assisting the federal government of Nigeria and its MDAs to implement and establish effective PPP. According to the ICRC regulations, the PPA and PPR will not apply in transactions where the contracting authority has submitted an outline business case to the ICRC after identifying and prioritising a project and the ICRC has issued a certificate of outline business case to the contracting authority.Proposal consideration
May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?
A fundamental principle of public procurement under the PPA is that all public procurement of works, goods and services carried out by the federal government or any of its entities (including the NPA) shall be conducted by open competitive bidding. The ICRC Act specifies that the federal government or the entity concerned shall invite open competitive bids for infrastructural projects or contracts. However, it allows the relevant government entity to negotiate directly where only one contractor or project proponent submits a proposal or meets the pre-qualification requirements.
The Public Private Partnership Regulations 2017 (the PPP Regulations) made pursuant to the ICRC Act provide for open competitive bidding and other proposals not part of a formal tender such as:
- non-competitive bidding (ie, direct negotiation where one contractor or proponent submits an expression of interest);
- unsolicited proposals: these are proposals made where the contracting authority has not issued any Invitation for Expression of Interest or request for proposal; and
- any procurement procedures prescribed by international financial institutions may be used for PPP projects involving funding sourced from such institutions.
Accordingly, direct negotiation, unsolicited proposals and prescribed procurement procedures by the relevant international financial institutions may be considered.Joint venture and concession criteria
What criteria are considered when awarding port concessions and port joint venture agreements?
By virtue of the ICRC Act, a concession contract shall be awarded to the bidder that not only satisfies the pre-qualification criteria but also that possesses the financial capacity, relevant expertise and experience in undertaking such infrastructure development or maintenance and who submits the most technically and economically responsive bid. The PPP Regulations 2017 specify that the criteria for selecting pre-qualified bidders shall be stated in the Invitation for Expression of Interest. Furthermore, the ICRC is required to periodically issue and update guidelines for award that specify the criteria for choosing the most technically competent, economically viable and comprehensive bid. Generally, the principles for the award of port concessions include transparency, competition, value for money, capacity to deliver and public interest, among others.Model agreement
Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?
There is no model PPP agreement used for port projects. The general format for PPP agreements has been laid down by guidelines or regulations issued by the competent authority as evinced by Schedule VI to the PPP Regulations 2017, which lay down the minimum contents for a PPP agreement. Nevertheless, the lease agreements governing the operation of port terminals in Nigeria have similar terms, with slight modifications to align with individual peculiarities.Approval
What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?
The BPP establishes thresholds for the approval of procurement. The highest threshold for approval is in two tiers, to wit, the BPP’s issuance of a no objection to award and approval of the Federal Executive Council in respect of goods of over 100 million naira and above, works of over 500 million naira and above, non-consultancy services of over 100 million naira and above, and consultancy services of over 100 million naira and above.
The ICRC Act specifies generally that the approval of the Federal Executive Council, on the recommendation of the relevant Ministry or Agency, is required prior to the government agency, ministry or corporation entering into any contract with a private sector, including port PPP projects. It is, therefore, not required that a law be passed for this purpose.Projects
On what basis are port projects in your jurisdiction typically implemented?
The basis for the implementation of port projects in Nigeria is build-operate-transfer or rehabilitate-operate-transfer. Ownership of the port areas and facilities remain in the NPA for the duration of the concession term hence it is described as the landlord model where the concessionaires have leasehold rights with reversionary interests still in the NPA.Term length
Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?
The ICRC Act specifies that the duration of any such agreement shall be as stipulated in the concession agreement. Currently, there are 25 concession agreements, with 15 of them having a term of 25 years, seven of them having a term of 10 years and the remaining four having a term of 15 years.
On what basis can the term be extended?
Under the current lease agreements, there are no provisions detailing the basis for extension of the term upon expiration but requires a terminal operator to make an application for renewal three years before the expiration of the term. However, in practice, the NPA takes the operator’s performance review and compliance level report of its operations into consideration in arriving at a decision for such a request for renewal.Fee structure
What fee structures are used in your jurisdiction? Are they subject to indexation?
The fee structures are specified in the tariffs regulations of the NPA. Concession fees in respect of PPP projects are already stipulated by the ICRC in percentages to be paid at various stages of the contract. Other fees may be specified in the said PPP agreement.
The current lease agreement in use has a fixed annual lease fee covering the entire term of the lease agreement. There is also an initial fixed payment called a commencement fee, which is to be paid within 15 days of the execution date. Another fee stipulated in the lease agreement is the throughput fee that has a stipulated amount on any 20-foot equivalent unit handled in the premises and payable in arrears at the end of each monthly period beginning on the first day of the first month after the effective date of the lease agreement. The lease agreement provides for a mechanism for annual adjustment of the throughput fees.Exclusivity
Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?
The government provides guarantees in relation to port PPPs subject to the applicable laws. Section 3 of the ICRC Act provides that no guarantee, letter of comfort or undertaking shall be issued by the federal government in respect of PPP projects without the approval of the Federal Executive Council. The government may provide capital, debt financing, grants, equity contributions as well as guarantees towards a PPP project. Such guarantees could be permitted tariff rates, exchange rates and others.
Under the current lease agreements, the lessees, being the port operators, are granted exclusive right during the term of the lease to perform the permitted operations within the terminal unless otherwise assigned in accordance with the terms of the lease agreement.Other incentives
Does the government or the port authority provide any other incentives to investors in ports?
The general incentives granted to investors by Nigerian government include the following:
- exemption of profits from a company established within a free trade zone or export processing zone from tax, rural investment allowance and investment tax relief for companies that have provided facilities for a business or trade at the rate of 100 per cent where there is no facility, 50 per cent for electricity, 30 per cent for water and 15 per cent for tarred roads under the Companies Income Tax Act;
- 100 per cent foreign ownership, guarantee against government’s expropriation of private business enterprise, and unconditional transferability of funds through an authorised dealer in freely convertible currency under the NIPC Act;
- repatriation of capital under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act; and
- Road Infrastructure Development and Refurbishment Investment Tax Credit, where eligible companies would receive tax credits for developing or refurbishing eligible roads.
These incentives are applicable to greenfield and brownfield investments.
Port development and constructionApproval
What government approvals are required for a port operator to commence construction at the relevant port? How long does it typically take to obtain approvals?
The NPA Act exempts the application of any enactment in respect of construction, alteration, repair or demolition of buildings as well as urban, regional, town or country planning from any land vested in the NPA. A prospective operator is required to obtain a construction permit from the NPA before commencement of construction. This is an internal process expected to be concluded within six weeks.
To commence construction at a relevant port, the port operator is required to conduct an environmental impact assessment for the approval of the Federal/State Ministry of Environment. In greenfield projects such as the Lekki Deep Sea Port, the environmental and social impact assessment was prepared to meet specific guidelines and safeguards issued by the World Bank, African Development Bank and International Finance Corporation. Although it is standard performance to comply with the environmental safety and health conditions set by these institutions, it is pivotal to comply with the laws, regulations and policies of the Nigerian federal, state and local governments.Port construction
Does the government or relevant port authority typically undertake any part of the port construction?
Under the lease agreement, the NPA has the obligation to maintain the quay wall, dredging of the channel and access road to the existing ports. However, for greenfield projects, these infrastructures may be constructed or maintained by the PPP partners in proportion to their respective shares.
Does the port operator have to adhere to any specific construction standards, and may it engage any contractor it wishes?
The NPA’s approval is required prior to any construction to be undertaken by the port operator. The lessee shall ensure that any alterations to be made to the lease property is compliant with applicable law, prudent industry standards and international conventions, protocols or agreement to which Nigeria is a party.
The contractor to be engaged to execute any construction in the port will need to be approved by both the NPA and port operator and in most of the times after a tender process.
What remedies are available for delays and defects in the construction of the port?
In the event of non-compliance with respective covenants under the current lease agreement, the defaulting party may serve the other party 30 days’ notice to rectify its failure. Where the defaulting party fails to do so, the other party may rectify it at its own costs and be entitled to recover such costs to be computed as specified in the agreement. Parties shall settle disputes arising from the cost of rectifying the delays in accordance with the governing law and dispute resolution clauses of the agreement.
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.Typical services
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.Access to hinterland
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.Suspension
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.Port access and control
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.Failure to operate and maintain
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.Transferrable assets
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.
MiscellaneousSpecial purpose vehicles
Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required) to do so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?
The Nigerian Ports Authority Act gives the NPA the power to do all such things as may be necessary for the successful performance of its functions. As such, the NPA may construct or operate a port under an SPV or permit the port operator to construct and operate a port under an SPV. Yes, such SPV must be incorporated in Nigeria.Transferring ownership interests
Are ownership interests in the port operator freely transferable?
The port operator is not vested with the ownership of the port as same is vested in the NPA by statute and, therefore, cannot transfer same to another entity. The NPA can, however, transfer its rights or interests to a port operator under a lease agreement with a reversionary right over the port and its facilities. The operator may, however, assign the agreement transferring interest in the port on it to a third party with the prior consent of NPA.Granting security
Can the port operator grant security over its rights under the PPP agreement to its project financing banks? Does a port authority in your jurisdiction typically agree to enter into direct agreements with the project financing banks and, if so, what are the key terms?
The operator is responsible for financing its operations and may use the agreement for security in respect of its financing arrangements but is not allowed to use any of the leased property as security.Agreement variation and termination
In what circumstances may agreements to construct or operate a port facility be varied or terminated?
There are no provisions on circumstances for variation of agreements to construct or operate a port facility under the current lease agreements. However, it is required that such agreements are made in writing and duly executed by the parties.
Agreements to construct or operate a port facility may be terminated in the event of:
- expiration of the granted term;
- occurrence of an event of default such as insolvency of the operator, failure to attain a minimum of 50 per cent of performance requirements, failure to operate for a minimum number of consecutive days or non-consecutive days in an operating year, breach of material provisions of the agreement and failure to pay any sum due under the agreement; and
- force majeure.
What remedies are available to a government or port authority for contractual breach by a port operator?
Remedies available to the port authority in the event of a contractual breach include:
- compensation by payment of all costs incurred by the lessor as a consequence of that termination and assignment of all rights in the movable assets to the lessor for nil consideration and free from any encumbrance;
- the lessee’s failure to make any such payments would result in interest to be paid at London Interbank Offered Rate for Dollar Deposits rate plus 5 per cent compounded monthly; and
- resort to any dispute resolution procedure specified in the agreement.
All remedies available to the lessor and lessee are cumulative and the exercise of one does not preclude the other.Governing law
Must all port PPP agreements be governed by the laws of your jurisdiction?
All PPP agreements shall be governed by the law specified therein.Disputes
How are disputes between the government or port authority and the port operator customarily settled?
Disputes between the NPA and the operators are settled through the dispute resolution mechanism process stipulated in the agreement. Typically, it is a three-tier system that entails mutual consultation, expert assistance and arbitration where the previous are unsuccessful. Such agreements usually contain a clause waiving sovereign immunity. In a few instances, operators have approached the courts.
Updates and trendsKey developments of the past year
Are there any other current developments or emerging trends that should be noted?Key developments of the past year44 Are there any other current developments or emerging trends that should be noted?
There are public-private partnerships for the development of the Lekki, Ibom and Badagry deep-sea ports, which are at various levels of implementation.
Legal developments are contemplated in the ports such as:
- the National Transport Commission (NTC) Bill, which seeks to establish the NTC for Economic Regulation of the Transport Industry and implementation of the national transport policy;
- the Nigerian Ports and Harbours Authority Bill, which seeks to improve private participation in providing ports infrastructure and services while providing an appropriate institutional framework for port development; and
- the Customs and Excise Service Management Bill, which seeks to modernise and simplify Customs procedure in line with the Port Reform Agenda.