Lilypond Container’s imminent wind-up and Nigeria’s off-dock business

When the Federal Government conceived the idea of concessioning its off-dock facility in Ijora, Lagos, and proposed to build new Inland Container Depots (ICD) in the six geo-political zones in country, the aim was to help decongest the main seaports.

An off-dock terminal is a terminal located outside the seaport where goods can be loaded and unloaded and cleared by all government agencies involved in cargo clearance. Here, containers can be transferred between ship and road vehicle or ship and train to the off-dock facility. Off-dock facilities make distribution and clearance of cargo more efficient by setting up the link between inland site and seaport. It allows the importer to take his or her cargo from the facility without having to come to the seaport.

This lofty idea was seen as a solution to the problem of congestion that was the order of the day in Nigerian ports during the pre-concession era when the ports were highly inefficient. Also, off-docking was seen as a means of enhancing timely delivery of cargoes to the importers’ warehouse as well as reducing the cost of doing business at port.

Aside from the aforementioned off-dock terminals, many private sector investors saw huge investment opportunity in off-dock business, especially in the commercial city of Lagos, where the two main seaports suffered serious congestion during the pre-concession era.

BusinessDay checks, however, show that the business of off-docking or bonded terminal operation in Nigeria has in recent times become inactive due to low volume of laden container into the country occasioned by the current global economic downturn.

Also, the massive investment in cargo handling equipment and terminal infrastructure by the seaport concessionaires has led to efficient port operations, which has in turn resulted to reduced container dwell time at the ports.

This, however, has taken away the need for transfer of containers from the seaport to off-dock facilities because containers are cleared and evacuated from the port as soon they are brought into the country, thereby creating enough staking space for other laden containers.

A typical example of an off-dock operator that is closing shop is Lilypond Container Depot Nigeria Limited. Due to the recent drop in volume of cargo handled by off-dock facilities, Lilypond, a subsidiary of AP Moller Maersk Nigeria and the off-dock arm of APM Terminals, recently commenced arrangement to wind up its operations at Ijora terminal.

The company in 2006 entered into a 10-year concession agreement with the Nigerian Ports Authority (NPA) on Build, Operate and Transfer (BOT) basis to handle cargo operations at the inland container depot, but is now set to conclude the handover of the depot to another operator in the next six months.

Tristram Denyer, Lilypond manager, said last weekend in Lagos that the management has notified NPA of the development, adding that the company’s shareholders are currently experiencing negative cash flow as the company has lost over N778.8 million ($5 million) in the past one year to drop in cargo volume, which started since second quarter of last year.

Lilypond has in the last seven years invested over N2.4 billion ($15 million) on terminal development, infrastructure, cargo handling equipment, safety and skill acquisition. In 2011, there was upbeat of operation as it recorded cargo throughput of 47,000 TEUs, which started witnessing drop from mid-2012.

Lilypond Container Terminal operates an off-dock business model, which is now becoming obsolete because many terminal operators are increasing their yard facilities, which has brought about efficiency and low cargo dwell time such that there is no longer need for off-docking.

“The decision was a very difficult one. Lilypond management and staff have made efforts to develop a viable and sustainable long-term business model over the last eight months but the effort has been frustrated by lack of overflow container volume available for depots generally, high cost of operating the depot and increased capacity in Nigerian marine container terminals,” the Lilypond boss said.

The company, with 47 full staff and several contract staff, has promised to accommodate majority of its staff in its sister companies of Maersk Shipping Line Safmarine, Damco and APMT.

Dallas Hampton, managing director of APMT, confirmed recently that the drop in cargo volume at Lilypond as well as other off-dock facilities cannot be blamed only on efficient port operation and drop in cargo volume, but can also be attributed to apathy of importers to have their cargoes transferred to off-dock terminals. According to him, importers no longer subscribe to paying the additional cost or charges involved in clearing cargo from off-dock facilities.

This additional cost to the logistics chain and to the importers’ business, industry analysts say, will in no distant time push the off-dock business model in Nigeria into extinction, given the global economic situation.

However, operators of privately-owned bonded terminals that are located in different areas have been advised to consider other business models that could drive the business. They should look at the option of becoming dry ports and serve as ports of origin as well as destination ports.

By : Uzoamaka Anagor