Secure Anchorage Area Economics

In recent times, one issue that has dominated the centre stage of the Nigerian maritime industry is that of the Secure Anchorage Area (SAA) in Lagos Port operated by an indigenous firm, Ocean Marine Solution Limited (OMSL).

The seaming controversy surrounding the operation of the scheme, which was initiated to salvage the damaged image of Nigeria as it concerns the safety of vessels travelling along the nation’s coastal region has been inundated with a lot of falsehood to gain cheap publicity and sympathy in some quarters.

This is done more often at the neglect of the true economics of the reality on the ground.

The False Economics and Narratives

Anyone who has followed the debate as to the operation of the Lagos Port SAA project will realise that the Minister of Transport, Rotimi Amaechi, and his subordinates-the Managing Director of the Nigerian Ports Authority (NPA), Hadiza Bala Usman and, to some extent, the Director-General of the Nigerian Maritime Administration and Safety Agency (NIMASA), have always painted a picture of “humongous” monies being made by OMSL in executing the project.

For instance, the minister, while answering questions on national television on the SAA recently, described the project being operated in full collaboration with the Nigerian Navy as one “laced with fraud.”
Answering a question on why he thinks security services being offered by OMSL under the chairmanship of Captain Well Hosa Okunbo, via the SAA is not important, in response, Amaechi asked the reporter rhetorically, “What security was he providing? He charges each vessel on the waters $2,500, then after that $1,500 everyday. He doesn’t pay back that money to the federal government.

“He makes $17million from that activity. Who approved it? Nobody!”
Speaking of the alternative solution he has to offer, he said, “As Minister for Transport, I said no; we can provide that security. $195 million was approved by the federal government to a company that is training Nigerians that will take over the waterways, and take care of the security; then Okunbo is now saying: no, no, I must do it; he can’t. I wonder why our personal interest will override national interest. I wonder what kind of country we belong to.”

While doing all he can, to fault that project, the minister challenged the OMSL chairman to come forward with the approval letter, he got from the federal government to provide maritime security on the nation’s waterways.

“If you said Captain Hosa was doing it, how come we are currently ranked number one in the world in terms of insecurity in the maritime sector? When we came, we were number three, but now we are number one in the world.”

The Real Facts

Meanwhile, even as the focus of this write-up is not to fault the minister’s choice on the acclaimed financial gain, his refusal to go ahead and explain to his viewers what it takes to maintain the ship involved in the project may not have been deliberate, but perhaps an expression of his ignorance of how companies are run.

Again, while the minister’s proffered solution appears to be very economical and cheap on the surface, after all, the country just has to spend $195million in training personnel for his preferred Israeli company, Messrs HLSI Security Systems and Technologies, he failed to tell Nigerians the long-run financial implications of such deals.

While one is not canvassing the idea that the government should have a way of benefiting from OMSL’s financial gains if it, indeed, does exist, we must not forget that huge investment was first put in place before the perceived returns.

Those familiar with the SAA project, which is a partnership between OMSL and the Nigerian Navy say the vessels acquisitions and operational logistics are at no cost to the government and never mandatory for the ship; rather, it involves ship that desires the service (A willing buyer- willing seller arrangement).

Amaechi, a man who was once quoted to have said that he did not like money, seems to have now changed his mind and has refused to understand that the money being charged by OMSL which he believes should be shared is used for operational costs as well as to provide bunker fuel.

Furthermore, it would seem very irrational for the minister and NPA MD not to, at the least, investigate and understand the security architecture under their purviews by inviting all stakeholders (and not) to unilaterally award a contract without knowing or understanding the implications for national security and local investment which was already on the ground.

These may have motivated operators who are also vocal to state vehemently that the economic value of the SAA operation cannot be overemphasised.

Reacting to the recent threat by the Minister of Transportation, Rotimi Amaechi, to scrap the security initiative, which a joint committee of the National Assembly had applauded after investigation of its activities, some key players in the industry charged all the parties involved in the dispute to resolve the matter amicably in the interest of the nation’s maritime economy.

One of those who expressed concerns over the threat to scrap the service of OMSL on the SAA, while opting for a foreign security firm, is Dr. McGeorge Onyung, President of the Ship Owners Association of Nigeria (SOAN).

To this end, it is best stated that SAA, as an economic benefit, should be replicated on other locations and why OMSL should be encouraged to even take over and manage the deep blue project because of the humongous investment by the federal government, which might be another failed project.

Real Economics

Interestingly, the operators of the Lagos SAA, OMSL has always pointed to the fact that its main objective behind the initiative is “National Interest.” To this end, the company has modestly offered it by charging a minimal cost to cover operations and maintenance. Recall, the company’s chairman, Captain Hosa Okunbo, during his presentation at the hearing by the National Assembly joint committee that investigated its activities, said, “The company has always operated on the charges incurred by funds collected from a ship operating under the SAA.”

Meanwhile, an investigation has further revealed that it costs vessels that patronise OMSL-operated SAA an average of $11,500, which works out to be $2,500 for the first day and $1,500 for the remaining days in a seven-day period, which is a maximum period that most vessels berth at SAA for the service provided.

This is against having three mercenaries costing the shipping company a whopping $225,000 on a one-month voyage at a cost of $2,500 per mercenary, which works out to at least $7,500 a day over a total one-month voyage of 30 days from Europe and much higher from farther destinations like Singapore and the United States and the Far East. To this end, it leads to saving of at least $213,500 as against an initial whopping cost of $225,000 before the SAA was introduced by the Navy and OMSL.

It should also be noted that the SAA traffic in a day has not been more than 20 vessels at any particular time. At each vessel paying a stipend of an average of $1,650 per day, it works out to be $33,000 per day as earnings to OMS and with eight vessels operating in the SAA. To this end, operational cost and that of hiring these vessels average $4,150 per vessel if the vessels were to be hired by NPA or the relevant Agency.

These same vessels are hired to the oil companies for at least $8,500 per day.

It will interest stakeholders to understand that NIMASA, under the supervision of Federal Ministry of Transport is hiring similar vessels with a contract running at $10,500 for each vessel per day and they currently have six of such vessels working with NIMASA for enforcement at a total cost of $63,000 which has no security bearings, and coming at almost double the cost of OMSL in rendering this very critical and security arrangement. This brings to fore the fact that, indeed, OMSL is on a national assignment rather than perceived misconception of profit-making as the cost of $4,150 per vessel earned is to enable OMSL offset its running cost.