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Oil logistics: No framework to protect local operators –Opah

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Oil logistics: No framework to protect local operators –Opah

Foreign players in Nigeria’s oil logistics industry repatriate millions of dollars due to ineptitude in regulation to protect local companies. Managing Director and Chief Executive Officer (CEO) of Fortune Global Shipping and Logistics, Mr. Eric Opah, speaks on how his company and others have been fairing in the sector dominated by their foreign counterparts, in this interview with ADEOLA YUSUF

 

 

What’s your take on the incursion of multinationals and job security for local customs brokers?
I have observed that most Nigerian logistics companies are very laid back and unwilling to go international. Consequently, they hardly ever get to the helm of affairs internationally where decisions affecting freight are made. Nigerian logistics companies are not migrating very fast to dominate other markets, whereas their multinational counterparts are dominating the local market.

It would interest you to note that in 56 years of Nigeria’s existence, we only have maybe one or two brands that operate internationally. So, Fortune Global took the bull by its horns. To give impetus to what we do here, we started a new office in Houston in 2013. The Houston branch of Fortune Global Shipping and Logistics is the wholly owned subsidiary of the Nigerian entity.

That is a milestone for us. We have an FMC license, which authorizes us to work in that market. We did not start working in that market just like an agent. It’s our own full-fledged subsidiary already working for some multinationals and supporting the Nigerian company. We also have an office in Ghana, which is also a subsidiary of the Nigerian entity. This is all part of our vision to look out for strategic places to support oil and energy logistics.

How do you see the Local Content Law affecting local players in logistics?
For me, it’s all about capacity and competence. I will agree to an extent from the local content standpoint that there are not enough jobs in Nigeria. But again, Fortune Global is operating in Houston. So, basically, I am a foreigner operating an international business in America, but I’m not being restricted.

With the Local Content Law, the major drive should be ensuring that the frontliners or those who do the day-to-day port operations are Nigerians. However, anybody should be able to own a company, provided the Nigerian government licenses such a business to operate in the country with majority of employees being Nigerians.

How would you rate the potential of local players in logistics?
Freight forwarding and logistics in places such as China and India is a lucrative business. But locally, the major challenge is that people have not actually developed to the extent of understanding the business fully. Rather, they rely more on customs clearing and customs brokerage. That’s not the business. The challenge starts from regulation.

In Nigeria today, you cannot tell who a customs broker is, international forwarder, NVOCC, etc. Yes, there are licenses, but the specifics to be able to differentiate who is doing what within the sector is a challenge. Everybody gets a custom clearing license and jumps into the field without actually having the requisite knowledge. But by rights, the customs brokerage business should guarantee you to only do the customs brokerage business and not international forwarding. That is not how the system operates in other markets.

Funding is another challenge because most of the global brands are backed up. They have a brand already growing in their international market with lots of funds to support expansion into other markets. Therefore, if our government promotes and gives some form of interest to this sector, it will make a lot of difference since logistics and maritime industry is a major revenue earner for government.

What was the role of Fortune Global in the EGINA FPSO project?
As you know, we have already taken centre stage in the oil and gas/energy logistics. We handled the inward clearance of the FPSO, which is a delicate asset. The performance of the inward clearance is really very important because one needs to ensure that all the documentation is done correctly and the declaration is in perfect order such that when the FPSO sails away to its permanent location there will be no issue arising from all formalities. We handled the boarding and inspection from start to finish. So, what we did has a lot to do with all authorities – Nigerian Ports Authority, NIMASA, Nigerian immigration, Customs, NDLEA, SSS, etc.

How did the Local Content Law impact the EGINA project?
I must tell you that the most outstanding impact I’ve witnessed is what the local content has done with the EGINA project. Bringing the FPSO to do the integration in-country was the most outstanding. A lot of Nigerian contractors got involved – Dorman Long Engineering did a lot of fabrication, paints were manufactured even in Nigeria and shipped to South Korea.

The EGINA FPSO shows that the Local Content Law is very effective. However, one of the challenges is the facilities developed to support these huge projects following the passage of the law. When the project is finished, I urge government to ensure that these facilities are put to use with new contracts to ensure they are not sitting idle.

How much is Nigeria losing to foreign players in shipping and logistics?
I cannot be specific in terms of figures, but it’s huge. For instance, a lot of local projects running into millions of dollars have been awarded to foreign companies in the industry. I’m not saying that such should not be. But again, if you have a local company with the same competence, they should come first.

What I’ve observed is that most companies that claim they are wholly Nigerian owned are only fronting for major foreign entities. Whereas that is not the case in a place like Ghana, which has made it mandatory that you cannot operate in the Oil and Gas Logistics Industry unless a Ghanaian has a majority stake in your company. So, we have lost a lot of revenue because our government has not actually paid the desired attention to regulatory issues around the logistics business in Nigeria.

What volume of freight has Fortune Global developed as a logistics player?
We handled over 500 container import clearance of shipment to support the EGINA project before the arrival of the FPSO. Currently, we are still involved with supporting the project. We have chartered vessels out to deliver project equipment from Nigeria to Geoje in South Korea and for import we have supported with lots of import shipment by Air Freight as well as Sea Freight. In a year generally, we have a volume of about 2,000 containers all year round with different vessels that come into the country. We also do a lot of air freight, about one million tons air freight all year round, spread across different airlines because we have a strategic alliance with international companies that generate a lot of business for us.

How should government support the shipping and logistics industry?
First of all, government needs to enforce the regulations to ensure that players in the logistics industry are qualified to trade since this is an integral part of our economy. If you have people with haphazard knowledge playing in the industry, it’s also a risk to the country. Again, government needs to assist serious minded companies in the sector to have access to loans.

By so doing, government will develop brands of Nigerian origin. This will forestall foreign giants from taking over the market and also help Nigerian brands migrate internationally where they will earn income and repatriate it back to the country.

Also, government should make effort to regulate some areas within logistics – such as the ports, for instance. The truck-transit parking system needs to be developed to solve the problems in congested areas such as Apapa.

What’s your assessment of the Nigerian port?
I think the port is congested. The road infrastructure and facilities around the port are nothing to write home about. The port should be expanded if possible or more effort should be made in accelerating the development of the new ports. As we speak, the port is not yet automated. Customs clearance and examination cannot be done at the snap of a finger as is the case elsewhere – especially in this era of e-Business.

But the question is, what is the reason Calabar port cannot be put to use? Why is cargo going to Calabar and Warri still coming through Lagos? What is happening to Sapele Port? Why can’t it be put into proper use where it can be efficient? That is what is giving Lagos numerous challenges. The roads, once repaired, will go back to their former state in another 2/3 years, because the volume of cargo that goes into Apapa is mind-blowing.

You have Warri, Calabar and Sapele, but they are not utilized. The question is why? We also have the tank farms scattered around the port axis. You have people living in an area earmarked for port use. However, the adjoining area around the port should be for port infrastructure and facilities.

We have seen oil price rise significantly in recent months, how will this impact oil and gas logistics?
I expect a lot of additional businesses to spring up. The Petroleum Industry Governance Bill (PIGB) has still not been signed into law, but with the oil price going up, a lot of projects will start. For us, our strategic direction is to create a strategic logistics base for Fortune Global. Ultimately, we will have a one-stop shop facility to load out and support the oil and gas logistics sub-sector. This will take our business to another level. We are currently evaluating our business plan in that direction. It’s all in a bid to become a Nigerian owned entity with the capability/capacity to deliver end-to-end logistics services.

Do local operators have the capacity to takeover the logistics space if given the opportunity?
It would interest you to note that there is no framework or regulation to protect operators in the industry. We have experts in Nigeria with the requisite capabilities to deliver, but clients have a poor attitude with payments. There is no framework to handle payment-related issues when logistics companies are owed. There is no regulation about data that could be shared and ultimately protect operators in the industry. We have seen it happen a lot in this industry where one client owes your company, doesn’t want to pay and jumps to the next operator. But this should not be the case.

What is the background of Fortune Global?
Fortune Global was incorporated in 2006. We started out as a customs broker and shipping agent. But from day one, the vision has always been to internationalize our operations. I work for PANALPINA World Transport Nigeria Limited, a global company. In the process, I discovered that what they did was inextricably tied to the international hub they had built for the business. That experience gave me some background regarding how to navigate with the vision when Fortune Global was incorporated.

What challenges did you experience starting out?
The first challenge that Fortune Global encountered was how to gain customers starting from scratch as a brokerage business. As a new company coming from this part of the world, you usually don’t have everything articulated and a mentor other than your work experience. But what helped create some kind of advantage was the fact that from the start, we saw the vast opportunity in building up an international network.

As such, Fortune Global keyed into finding an international but independent freight network, which we required to gain a competitive advantage over the multinationals. We joined international networks such as World Freight Network (WFN) and World Cargo Alliance (WCA) with presence in over 120 countries. We leveraged this to generate business from across the world.
So, international forwarding is a core element of what we do, not just customs brokerage or clearing. Fortune Global is not a customs clearing agent. Rather, we are a total supply chain global logistics company.

How did you get into the oil and gas logistics business?
For the last 11 years, we at Fortune Global Shipping And Logistics have been navigating this business – growing from a small brokerage firm to a bigger international forwarding company, which has expanded into oil and gas. From 2010 till date, this expansion into oil and gas and energy logistics has seen us not only handling freight, but also providing tailor-made solutions for the energy industry. Even before achieving this, we had gained recognition in the global forwarding arena where we worked with a lot of Fast Moving Consumer Goods (FMCG) accounts. But 2010 launched us into the global oil and gas industry where we played an active role in the Shell Petroleum Development Company (SPDC) Forcados Yokri Integrated Project (FYIP).

We handled the freight, support logistics of the movement of vessels in and out of offshore. We handled the meet and greet support services, security, procurement, etc. That is what differentiates us from other smaller brokerage businesses. Today we provide consultancy service in marine support services for the Oil and Gas Companies and play as one of the leaders in the Oil and Gas support service niche. Our services allow our clients to focus more on the core areas of oil production, construction and core energy services. Of course with services tailored to individual client requirements

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