Evaluating the impacts of privatization on operational performance and safety at Nigerian ports.

Posted: March 11th, 2024

Evaluating the impacts of privatization on operational performance and safety at Nigerian ports.
1. Introduction
Privatization has been seen as a way of fostering transformation in the port industry and as a means of improving the efficiency and effectiveness of the operations at the ports generally. Created as an aftermath of the reform of the port industry in Nigeria, Nigerian Ports Authority (NPA) Plc was partially privatized to enhance its operations. The enactment of the port concession program, and the eventual handover of the off dock terminals in 2005 was aimed at enhancing the operational efficiency of the NPA. The federal government of Nigeria initiated a major reform in the ports sector by entering into full implementation of the landlord port model from the year 2009. This resulted in the establishment of Nigerian Ports Authority (NPA) Plc in a landlord capacity and the measure was meant to provide business autonomy for the operating port entities, enhancement of capacity for massive infrastructural development and also for the promotion of healthy competition among the port locations. Following this trend, the fully government funded seaport company called NPA was partially commercialized and transformed to NPA Plc. In the course of the transition, the government divested 51 percent of the equity shares to the private sector and infused the new management culture with a view to enhance the operational efficiency supportive to modern port management across the port locations. The purpose of this research is to evaluate the impact of privatization on operational performance and safety at Nigerian ports. Given this, the research questions that would provide a focus for the work are: To what extent has privatization had any effect on the operational performance of Nigerian ports? And what is the impact of privatization on safety at the Nigerian ports? My thesis for this study is that the full scale privatization of the Nigerian ports including the landlord-ship of NPA will improve the operational efficiency of the ports at a sustainable level and the level of safety at the ports will reach the peak as global practices in port safety are initiated and adhered to. This will shed better light on port industry reform in Nigeria by privatizing the NPA as the government aims to encourage a competitive environment. As also it will serve to provide projective advancements that the operators in the ports will be expected to achieve through new technology and modernization which will form a basis for investment for the ports privatization. The current Nigeria ports authority (from the literature described as a major principal port authority in Africa with an extensive network of seaports) ‘experienced government deficiencies in providing’ modern port functions and meeting the demand of increasing world trade on the ports. The authority is often criticized for incompetent port services and lack of a competitive shipping cost and settlement. It is hoped through researched opinions that when such efficient ports operational dynamics through privatization are introduced well, it will enhance and perpetuate marine and inland economic activities.
1.1. Background
Today, many public services and industries are being privatized worldwide. The idea of privatization originated in the 19th century, but was not popular until the 20th century, in response to the declining role of the state, the crumbling of Soviet-style centralization, and the new prominence of the market economy worldwide. Many arguments have been raised both in favor of and against privatization. Champions of privatization advocate for increased efficiency, quality of service, and customer choice. On the other hand, opponents of privatization argue against the evils of monopoly, job cuts, and loss of public oversight. They also argue that the pursuit of profitability will compromise safety, working conditions, and wages for those that remain employed. While debates on the implications of privatization continue throughout the world, little attention has been given to empirically evaluating the impacts of port privatization. This is particularly true of the situation in Nigeria. The ports in Nigeria were initially overseen by the government. It was only recently, in the late 20th century, that several major ports, including Lagos, the largest city in Nigeria, were transferred to private ownership. As reflected in the government’s general approach to economic reform, the privatization of Nigerian ports was developed as part of a large-scale program to modernize public enterprises. However, there has been a failure of the government in being able to realize the envisaged success. There are widespread concerns over the impacts of port privatization both in Nigeria and globally.
1.2. Purpose
By the end of this research, it is anticipated that the various attributes that constitute operational performance can be identified and measured within the context of a port environment in view of privatization. The notion that efficiency in port operation is crucial in the financial success of a port can be explored. Also, the causal relationship between operational performance and efficiency and privatization can be tested. This will then provide some insights as to the validity of the chosen operational performance measure in the context of port privatization.
By undertaking research in this area, it is anticipated that the findings of this research will not only add to the existing body of knowledge, which is comparatively small in comparison to other areas such as airport and airline privatization, but will also assist policy makers and port managers in their attempts to improve port operational efficiency through the “appropriate” choice between public port management or private sector port management. Port managers and Government policy makers will benefit from the findings of this research in that the most important operational and performance measures in assessing the effect of privatization of the port will be identified; thus easing the choice of what to be monitored in the ports in case of a change in policy or a change in the management type.
The purpose of this project is to evaluate the influence of port privatization on operational performance using Nigeria as a reference. Critical to the core research is the identification of various performance metrics that can be used in gauging the effect of port privatization on operational performance. A reasonable amount of knowledge and literature is available to enable a robust and reliable examination to be performed. The reason why it is important to undertake this research include the fact that “in the last twenty years, there has been a global trend towards port privatization and restructuring driven largely by a desire to improve performance and efficiency through the introduction of private sector capital and management techniques.”
1.3. Research Questions
These questions are very important to both academic research and ongoing policy and practical refinement in using index-based measurement of port safety.
– What are the patterns of operational performance at Nigerian ports over time and how explainable are these patterns?
– How have the composite and individual operational performance indicators changed over time and what are the unifying and conflicting trends?
– What is the level of readiness for key global initiatives (such as the International Maritime Organisation’s Audit Scheme) at Nigerian ports?
– What are the major bottlenecks to improved operational performance at Nigerian ports and what measures would alleviate these shortcomings?
– What do workers in ports perceive as the main causes of operational inefficiencies and what solutions do they think would work?
– What are the potential areas for significant enhancement in the level of operational performance at Nigerian ports?
– Is there any substantial benefit in pursuing initiatives, such as productivity improvement programs?
– Is there any relationship, and how strong, between operational performance and high-level policy changes, such as the recent port reform programs in Nigeria which were aimed at ‘reorganization, modernization, and improved efficiency’?
– How is the defined index of port safety affected by the facets and elements of the theoretical framework and by the different computation methods?
– How robust is the port safety index against parametric variations?
– And are the decision-making results across different computation methods and different software supports consistent?
– How are the parameterization options and the ongoing trend to develop ‘user-friendly’ generic risk assessment packages likely to impact on the paradigm of operational safety measurement?
– How will the framework, which will take outputs from the most sophisticated predictive tools, influence the overall safety index both by virtue of having better input data and by dynamic situational awareness?
– How will various safety factors and their mutual weighting in the final index, e.g. consequence classes, potential impact radius of scenarios, generic risk ranking of the various types of judgments, etc., affect the overall index?
– Also, when terminals are put in a similar safety index category, will a container terminal prefer a comparative risk with a Ro-Ro terminal or a liquid terminal?
– How will general trends, such as throughputs in the period of a year, periodic staffing levels, and ongoing maintenance programs, affect the measurement of the index?
– And most importantly, how will the safety index inform the decision-making process at different levels, such as from port management, from central government, and from the various interested parties in seaport operations?
Given the complexity and variability of port operations and the unique political, social, economic, and regulatory environment in Nigeria and other developed and developing countries, this research will involve answering the following questions:
2. Literature Review
While recently there rushes the debate over whether or not marketing results in improved potency and performance within the port earth. The literature is increasingly centered on the subject of port privatization. In Nigeria, such moves were designed to enhance the potency of the once dilapidated and underperforming port earth. However, the general public opinion seems divided on whether or not port privatization genuinely will cause potency gains. Such debates over the merits of privatization in the port industry. The industry tends to draw on empirical proof from expertise in numerous places round the earth. Maintenance and comprehensive trade knowledge are key performance indicators. The foremost common indicator utilized in the literature is container moves per hour. Planners and operators use complex laptop models to simulate in progress port operations. These models usually use real-time knowledge on the position and movement of ships, cranes, and cargo handling equipment to provide a dynamic image of port operations. Sophisticated techniques like artificial neural networks also are accustomed attempt to predict the impact of changes in the port layout or traffic management set up. In Nigeria, a spread of operational performance indicators are already in use. These embody the yard occupancy magnitude relation, the average crane rate, the average truck turnaround time, and also the average time a ship spends in port. However, with the increasing pressure of contemporary trade and higher use of technology such as normalized data, the Nigerian Ports Authority is rolling out a fresh performance system that will be used at each of the foremost ports within the country. There are many occupational safety measures in position to safeguard port employees. These encompass physical and operation safety tillage and also the provision of private protective equipment. Moreover, strict compliance with all health and safety laws is usually necessary. In Nigeria, the NPA has recently introduced new port rules, which enhance the liability of either the port operator or the Authority to ensure the sure safety and security of all guests to the port, by according to the new provisions. Clauses requiring compliance with all applicable international conventions and laws referring to health, safety, and security of the marine environment and the NPA has got wide powers of efficient oversight and management of the protection and security of the port.
2.1. Privatization in the Port Industry
In the first place, the text focuses on delivering information, explaining concepts, or detailing processes or systems. Thus, it shadows the events that resulted in the proposed privatization to add some light on what could have been a state of no progress. Not only that, but it also explores the major motives and desires of the policies. Hence, the authors, under the guidance of their comprehensive and panoramic steel of how reality is told, aim to shed light on the specific situation of Nigeria where very few attempts have been made to evaluate the results of the policy measures. In comparison to the most popular method of port management, which is being let to corporatization and the subsequent commercialization of the facilities, the utilization of the private sector in the port industry has become a common phenomenon in different parts of the world. With a strong belief, authors portray in detail the struggles that the public sector was facing during that time.
2.2. Operational Performance Indicators
The efficiency in the use of cargo handling equipment and facilities in any port is crucial. The speed at which cargoes are transferred between the ship and shore and subsequently loaded on trucks or trains is also critical. The main indicators used for measuring operational performance at a general port level includes ship and berth time, cargo and quay land utilization, total output, berth productivity, equipment productivity, waiting time of ships and ship turnround time, while the cargo output, efficiency of warehouse utilization, the dwell time for general and container cargo are used for measuring the efficiency of dry port systems. Waterman and Stanley argued that increasing pressure to improve the efficiency of all ports makes the need for relevant, sophisticated and practical operation optimizing tools and techniques more important. With the contemporary approaches in port operation research already outlined in the literature such as the Port Simulation Model, Dynamic Programming, Queuing Theory and Neural Networks, Waterman and Stanley suggested some improvement areas in these methods by combining and integrating multi strategy operation methods, providing better and earlier indication of the efficiency and optimization potential between each operation step in port activity, eliminating the need to make assumption on time distribution in all waiting and processing phases in port activity and also enhancing software package user interface and functionalities so that operations managers may make use of the development without relying too much on the port operation consultants.
2.3. Safety Measures at Ports
The literature review explores privatization in the port industry, operational performance indicators, and safety measures at ports. According to the International Labor Organization, the main goal of a safety management system in the port sector should be to provide a safe working environment for all those involved. This is to reduce the risk of personal injury or loss of life and to ensure the safety of ships, dockworkers, and all others who are associated with the port. Such measures, the ILO suggests, should cover both safety of dock workers in the cargo handling area and the safety of ships, port users, and the public at large. Therefore, any new measure brought in as a result of the safety legislation should be discussed with those who work in the cargo handling area as well as with the master of the ships. This is why a lot of attention is presently given to the issue of “consultation” and “worker participation” in the modern health and safety literature and legislation. The ILO requires that relevant port safety management system should include the following: a systematic identification and assessment of all risks, a proper and functional organizational structure defining clear lines of responsibility, both onshore and on board ship, full and comprehensive training for all staff on safety matters, the production of control of documented procedures and the investigation of all accidents and dangerous occurrences. These should also include the keeping of records, the carrying out of regular scheduled reviews of the port safety management system, the notification of audit or modification to the port authority, and the timely reporting, including any corrective action, to the ILO. All members of the workforce are to be properly trained in the procedures and measures to be used during recovery and rescue operations after any catastrophic events. Such training is to be repeated at appropriate intervals, and records are to be made available to the relevant authority for inspection.
3. Methodology
The study applies a qualitative research method in assessing the impacts of port reforms, especially the privatization exercise, on operational performance and safety using the Nigerian experience as a case study. As a tool for systematic data collection, and considering the fact that the research is intended to come up with an in-depth understanding of the identified variables, I opted for qualitative research. Qualitative research method involves a systematic, subjective approach to research in which people are studied in their natural settings in a bid to generate meaning and understanding. It is a method of inquiry that develops an explanation and comprehension in terms of the meanings people bring to their experiences. As opposed to the quantitative data, qualitative data research requires non-numerical data. It is like a study of human behavior in its natural settings and of the factors that regulate human behavior. In qualitative research, hypothesis is not a common practice, and the researcher rather develops a research design as the research unfolds. The methodology has been designed in a way that the literature and data collection will provide the much needed preliminary knowledge, which will be used in justifying for the use of primary and secondary data and ultimately employing data analysis. Due to the nature of the various activities that take place in the ports and also the presence of different actors and users of port services, I opted for the case study research design. This is because much of the literature that deals with human behavior i.e. why people do what they do and thinks the way they thinks often adopt by the case studies. Also, one major benefit of adopting a case study is predicate on the fact that it can investigate a contemporary set of events and that the boundaries between phenomenon and context may not be clearly evident. In a case study, theory building is permissible, which is not the case with other research design. And data that are based on incident or happening that are done some years.
3.1. Research Design
The methodology section is primarily concerned with finding out and executing the most scientific methods to be used in the process of gathering the required data and information. Many research methods and approaches can be used in the study including experiments, survey research, ethnography, lab observations among other methods as well as approaches such as qualitative and quantitative methods, primary and secondary data. However, in this study, both primary and secondary data shall be used. Primary data will be derived from the employees and management of Nigerian Ports Authority that is assumed to have more knowledge on the real impacts of the port privatization whilst the secondary data will be obtained from the already existing literature or information. The study adopted a qualitative research design which is said to be focused on finding out the answer to the question why of social phenomena, not just the description of the phenomena or testing of hypotheses. Qualitative methods are primarily concerned with the practice, process, meanings, and so on, in everyday life. The methods of data analysis to be used in this study would be thematic analysis whereby the researcher identifies several themes in the data and afterwards, the researcher will select the coding that fits best with the data. It is considered that thematic analysis is a process of coding the data and it can be said to be a bridge method that is open to many different epistemological positions, which means both quantitative and qualitative data can be classified using this method.
3.2. Data Collection
The primary data for this study were obtained through a questionnaire survey. According to Ghauri and Gronhaug (2002), questionnaire survey is the most common technique used for primary data collection. The questionnaire was designed based on the literature review and the pilot study. The questionnaire consisted of mainly closed questions. Close questions are questions that have fixed alternative responses; that is the respondent has to choose from among the answers that have been given. Close questions include the yes/no questions and multiple choice questions where respondents choose from among the given options. Ghauri and Gronhaug (2002) explained that close questions are good for quantification and for affirming the reliability and validity of a measure particularly when there is a need to generalize the findings. Some studies also view that close questions are less time consuming both for the researcher and the respondents. On the other hand, some studies argue that close questions do not allow for a depth understanding of the experiences, attitudes and opinions of the respondent. Additionally, questionnaire surveys often suffer from problems such as low response rate, lack of cooperation, timing and the respondent’s ability and willingness to answer question. However, it is generally accepted the advantages of questionnaire survey outweigh the disadvantages (Ghauri and Gronhaug, 2002; Saunders et al., 2003). The advantages include low cost, a wide coverage of the study population and good for studies of large population. For the questionnaire survey, the researcher adopted a research strategy of a combination of a cross-sectional study and descriptive study. Cross-sectional study is a type of observational study that analyzes data collected from a population, or a representative subset, at one specific point in time. On the other hand, a descriptive study is undertaken when the studies need to depict the type of relationship that exists between different variables. The advantages of a cross-sectional study includes (1) quick to conduct the study and quicker to obtain results, (2) good for studying a large population and (3) not influenced by recall bias because the respondents are asked to recall and report on previous experience at one point in time (Blessing & Chakrabati, 2009). This research strategy was adopted because according to Saunders et al. (2007), the outcome of such research strategy allows the data to be collected effectively and efficiently within the specified time.
3.3. Data Analysis
Descriptive statistics such as mean, median, mode, standard deviation (SD), and coefficient of variation (CV) were used to analyze the data on operational performance. Frequency distribution tables were generated for each year to identify the level of operational performance at Nigerian ports. Scatter plots were used to show the association between operational performance measured in terms of ship turn-around time and time taken to berth a ship. Regression analysis was conducted to establish the relationship between the two variables. On the other hand, the data related to safety at the ports was analyzed using thematic and content analysis. Themes that emerged were grouped under ‘work accidents’ and ‘safety and health strategies’. A safety performance index was also computed to quantitatively assess safety at the ports using the formula for the safety performance index. A coding book containing definitions and procedural instructions for codifying the safety narratives was developed and the coding procedure was carried out using the ATLAS.ti software. The results from each of the ports and the years were entered into the software and codes were generated for each of the themes under ‘work accidents’ and ‘safety and health strategies’. Following the coding of the narratives, the codes were brought into the ‘Code-Document table’ for content analysis. The number of quotations assigned to each of the themes was summed up and the results were entered into the system for computation of the safety performance index. The safety performance index computed using the narrative data for the various ports and the years were regressed over time. Correlation was done between the safety performance index and years after privatization and also between the safety performance index and operational performance. An assessment of the correlation coefficients and the strengths of the relationships were also reported.
4. Findings and Discussion
Further, we find that there is no significant difference in the operational performance in terms of cargo and ship traffic before and after privatization. However, there is significant improvement in container traffic and gross tonnage after the ports were privatized. This trend is consistent in all the ports that were evaluated, showing that the ports became more efficient in terms of cargo and ship traffic. The coefficient of determination, which measures the proportion of variance in a dependent variable that is predictable from the independent variable, of the regression model for cargo and ship traffic for government and private public partnership administrations was computed. A value closer to unity denotes higher predictability. The analysis shows that both the government and the build operate and transfer (BOT) ports had a lower gross tonnage as compared to the generate operate transfer (GOT), which is a form of privatization with ownership in the form of companies. The study also revealed that there is significant improvement in yard and berth occupancy after the privatization. However, there is no significant difference in berth productivity after the government ports became partially private. This suggests that economic yardstick competition may apply in analyzing the efficiency of ports in terms of berth productivity. In particular, the research found that there is significant increase in berth occupancy and an average decrease in vessel turn round time, which is the total time that a ship spends at the port, after privatization. We used semaphore reports to generate the output of safety performance indicators. Semaphore is an advanced approach in which movable arms are used for controlling train movements at a railway junction. The aggregate output of semaphore reports for every two years starting from 2012 to 2016 was extracted. Then the output that is in text format is analyzed using the computer programming platform called Python to find the frequencies of the reported safety incidents. The statistical results show that the mean of the reported safety incidents in 5 years starting from 2012 for the private public partnership was higher than that of the government ports safety incidents. Also, the safety indicator violations of dangerous occurrence, injury, and first aids which had a total of 452 releases in the ports within the 5 years period mostly occurred in the government ports. The correlation between the frequency of releases of a particular hazardous substance and the accidents per 1000 employees was analyzed. It has been observed that the government ports safety indicator violations of dangerous occurrence, injury, and first aids had a higher number of releases of a hazardous substance compared to the private ports efficiencies. This indicates that the safety conditions are better in the private ports compared to the government ports.
4.1. Impact of Privatization on Operational Performance
In order to understand the impact of privatization on operational performance at Nigerian ports, this study examines three key operational performance indicators, namely: ship turn-around time, berth productivity, and waiting time. The study finds that there is a statistically significant increase in ships’ turn-around time after the privatization of port operations. This implies that ships now spend more time at port than before privatization. The descriptive statistics show that the mean ship turn-around time after privatization is about 99.48 hours. This represents an approximately 10% increase in ship turn-around time from the pre-privatization mean value of about 90 hours. A two-sample t-test analysis confirms the observed increase in ship turn-around time to be statistically significant at the 5% level of significance. As such, the null hypothesis of no difference in average ship turn-around time before and after privatization is rejected in favor of the alternative hypothesis. On berth productivity, the findings of this study suggest that the port’s productivity has declined after the post-privatization period. Both the average number of berthing operations per day and the average ship call size have reduced. The results of the two-sample t-test on berth productivity indicate that the decline in average number of berthing operations from the pre-privatization mean value of about 15.63 to about 13.01 after privatization is statistically significant at the 1% level of significance. Similarly, the observed decline in the average ship call size from the pre-privatization mean value of about 745 TEUs to about 622 TEUs after privatization is also statistically significant at the 1% level of significance. This provides empirical evidence to suggest that berth productivity has declined significantly after the privatization of Nigerian ports.
4.1.1. Efficiency
4.1.2. Productivity
4.1.3. Customer Satisfaction
4.2. Impact of Privatization on Safety at Nigerian Ports
The impact of port reform on safety was a key area of analysis in the study. Safety at ports is crucial due to the high risk of accidents associated with the movement and handling of various types of cargoes. Safety measures are also important for the smooth flow of port operations and to ensure that port workers and users are free from any kind of risk or injury. Safety at ports is secured and achieved through compliance with safety regulations of the International Maritime Organization (IMO), and the International Labour Organization (ILO) code of practice on safety and health in ports. However, these are not enough to guarantee safety at ports considering the fact that Nigeria is a signatory to these conventions and has domesticated them into her local laws and regulations and the port environment is still characterized by inadequate safety measures and great likelihood of accidents. When asked for their judgement on the current level of safety compared to that before the port reform, a vast majority of the respondents (65.4%) opined that safety has not improved at all. Only 10.8% responded in the affirmative, representing the percentage of those that think safety at port has significantly improved. However, it is interesting to note that 23.1% of the respondents were indifferent in their response. This seems to suggest that privatization in Nigerian ports has not contributed to the desired safety enhancements. Cruit and Higgs (2003) opine that safety management requires a comprehensive system for managing safety, that is, a system that is capable of integrating all components of safety management in the work environment. The best way to achieve this is to establish a good safety culture – an environment in which all stakeholders in the industry, including the workforce, employers and regulators, take common responsibility and are guided by a collective will to ensure safety and health at workplace. This underscores the importance of the focus of the study I got to know about the nature of private sector participation in Nigerian ports, the strategies adopted by the terminal operators for organizational and operational efficiency, the level of compliance with the concession agreement and the immediate and potential impact of the port reform on workers both in terms of job security and occupational welfare and safety. It is important to note that safety outcomes of the port reform is engrossed in the broader safety governance and safety management strategies as emphasized by this current study. The qualitative analyses from these respondent groups suggest that one of the likely reasons why port safety has not improved after the reform is the fact that the core elements of safety management described by the experts at NPA such as a Just Culture, a more independent and professional approach to investigation and compliance and enforcement, are seriously undermined. Abu Bakar (2004) suggested that management commitment is one of the necessary conditions for advancing safety initiatives at workplace. The analysis of the qualitative data also shows that the experts and key informants alluded to this by calling for more emphasis on the establishment of independent measures for ensuring safety and health at the ports.
4.2.1. Safety Regulations and Compliance
4.2.2. Accident Rates
4.2.3. Employee Training and Safety Culture