Deep sea ports
Deep sea ports
Business Model Description
Construct and operate deep sea ports.
Expected Impact
Increase access to safe modes of transportation particularly for international trade businesses.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Nigeria: South West
- Nigeria: South South (Niger Delta)
Sector Classification
Infrastructure
Development need
Nigeria will face several challenges in the next decades, with the infrastructure sector as the basis for the country’s sustainable development due to its cross-cutting characteristics. There are several potential areas for investments. These opportunities focus on, but do not exclusively relate to, serving rapidly growing urban populations, and include electricity generation or waste management.
Policy priority
National Integrated Infrastructure Master Plan 2019 - The value of Nigeria’s core infrastructure stock represents only about 25% of gross domestic product (GDP) according to 2013 estimates, a value significantly lower than the global benchmark of 70%. This low stock has been attributed mainly to low public and private spending on infrastructure.(1)
Gender inequalities and marginalization issues
Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day. Unsafe and low security transport also disadvantages women, by exposing them to violence. This affects their wellbeing and workforce participation.(8)
Investment opportunities introduction
To efficiently revamp infrastructure across various sectors, estimated investment of USD 30 trillion is required over 30 years (2014 – 2043). This estimate includes investments in the following priority areas: Energy, transport, social infrastructure and housing. (1)(2)
Key bottlenecks introduction
The low infrastructure stock has been attributed mainly to low public and private spending on infrastructure.(1)
Infrastructure
Development need
The 2015 Global Competitiveness Index of the World Economic Forum ranked the quality of Nigeria's port infrastructure at 110 of 144 countries. Nigeria's sea ports handle 68% of West Africa's maritime trade.(3) However, significant shortfalls exist in Nigeria's transport infrastructure, impeding productivity across several value chains.
Gender inequalities and marginalization issues
Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day.(13)
Engineering and Construction Services
Pipeline Opportunity
Deep sea ports
Construct and operate deep sea ports.
Business Case
Market Size and Environment
> USD 1 billion
The Infrastructure Master Plan estimates Nigeria's sea ports need total investment of USD 25 million over 30 years (2014 - 2043).(3)
With over 8,000 km of navigable inland and coastal channels – which help handle between 40% and 60% of cargo movements in the North and Central African subregion – Nigeria presents huge investment opportunities in the maritime sector.(4)
Indicative Return
5% - 10%
The estimated return rate for investors is 8.6% - 10.6%. This rate is a benchmark calculated as a cost of equity, reflecting an average return required by investors active in the subsector.(5)
Investment Timeframe
Long Term (10+ years)
Based on benchmark projects, constructing a deep sea port could take up to 3 years to complete and 15 - 20 years to generate cash flow.
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Market - Highly Regulated
Impact Case
Sustainable Development Need
The 2015 Global Competitiveness Index of the World Economic Forum ranked the quality of Nigeria's port infrastructure at 110 of 144 countries. Nigeria's sea ports handle 68% of West Africa's maritime trade. (3) However, significant shortfalls exist in Nigeria's transport infrastructure.
Congestion due to poor port and associated transport infrastructure created losses of NGN 3.5 trillion (USD 9.7 billion) in 2018 at Nigeria’s maritime logistic hubs, according to the African Centre for Supply Chain. (3) These losses are set to increase along with population and economic growth.
Nigeria's maritime ports received a quality index of 2.8. Poor funding models and oversight and weak project execution have hampered improvements in infrastructure quality. The investment required to overcome this backlog is huge and requires active partnerships with private sector.(6)
Gender & Marginalisation
Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day.(13)
Expected Development Outcome
Investments could increase productivity, increase access to markets, reduce the cost of raw materials for industries, increase employment opportunities and increase GDP growth rate.
Gender & Marginalisation
Improving maritime infrastructure particularly generates employment opportunities for low-skilled workers whose living conditions are poor. Investments could increase revenue generation and disposable income in rural households, which will benefit living standards for women.
Primary SDGs addressed
9.1.1 Proportion of the rural population who live within 2 km of an all-season road
9.1.2 Passenger and freight volumes, by mode of transport
9.a.1 Total official international support (official development assistance plus other official flows) to infrastructure
N/A
Passenger volumes by mode of transport: Air (Arrival: 7,529,535; Departure: 7,581,677); Sea/water (Embark: 1,193; Disembark: 1,280). Freight volumes by mode of transport: Air (Loaded: 43,380,089; Unloaded 165,044,000); Sea/water (Inward: 49,303,209; Outward: 29,019,349).(14)
Foreign direct investment (FDI), official development assistance and South-South Cooperation as a proportion of total domestic budget has been growing, from 6.9% in 2016 to 7.6% in 2017 and 8.4% in 2018. FDI is 0.6% of gross domestic product (GDP).(15)
N/A
N/A
Ministry of Finance will seek to engage with multilateral and donor agencies to access additional funding for crisis response, e.g.: International Monetary Fund (IMF) - USD 3.4 billion; World Bank - USD 2.5 billion; African Development Bank (AfDB) - USD 0.5 billion; African Export-Import Bank - USD 0.5 billion; Islamic Development Bank (IsDB) - $113m.(16)
Secondary SDGs addressed
Directly impacted stakeholders
Corporates
Indirectly impacted stakeholders
People
Outcome Risks
Investments could increase CO2 emissions.
Impact Risks
Unexpected impact risk given the negative environmental effects of construction activities.
Efficiency risk given the heavy involvement of public bodies (with higher costs) in the transportation sector.
Execution risk if activities are not delivered as planned and do not result in the desired outcomes.
Impact Classification
What
Likely to have positive impact by improving ease of doing business, improving access to markets and reducing cost of productivity.
Risk
Change in government policies
Impact Thesis
Increase access to safe modes of transportation particularly for international trade businesses.
Enabling Environment
Policy Environment
The Coastal and Inland Shipping (Cabotage) Act) No 5 of 2003 Laws of the Federation of Nigeria: This Act facilitates private participation in coastal and inland waterway transport services, and the construction and management of infrastructure to support the industry.(7)
Terminal concessions have been introduced in some states to attract private investment on a scale.(7)
Financial Environment
Financial incentives: The Central Bank of Nigeria lowered its benchmark lending rate to 13.5% in 2019, from 14% in 2016. This change could incentivise foreign and domestic lenders to issue loans at lower interest rates.(9)
Other incentives: To meet the need for infrastructure improvements, a new public-private committee will be set up to look for alternative funding sources. Much of the financial support is expected to come from capital markets.(9)
Regulatory Environment
Nigeria Inland Waterways Authority (NIWA): This authority regulates waterways activities.
Nigerian Ports Authority Act 1999: This Act established the Nigerian Ports Authority with the functions of providing and operating necessary facilities in ports and maintaining, improving and regulating the use of ports.(8)
Marketplace Participants
Private Sector
United Capital, Lekki Port Investment Holding, China Harbor Engineering Company, Lekki Port LFTZ Enterprise Limited, Loius Berger, CMA CGM, Tolaram Group
Government
Federal Ministry of Transport, Nigerian Port Authority, Infrastructure Concession Regulatory Commission
Target Locations
Nigeria: South West
Nigeria: South South (Niger Delta)
References
- (1) National Planning Commission (2015). National Integrated Infrastructure Master Plan.
- (2) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (3) National Planning Commission (2015). National Integrated Infrastructure Master Plan.
- (4) Ship Technology (2020). Future Of Nigerian Ports: Building A New Shipping Leadership In West Africa. https://www.ship-technology.com/features/future-of-nigerian-ports/
- (5) PwC analysis (2020), based on Prof. A. Damodaran data.
- (6) Pwc (2020). Nigeria. https://www.pwc.com/gx/en/transportation-logistics/publications/africa-infrastructure-investment/assets/nigeria.pdf
- (7) Coastal and Inland Shipping (Cabotage) Act 2003.
- (8) Nigerian Ports Authority Act 1999.
- (9) Lekki Port. Nigeria's deepest port. https://lekkiport.com/
- (10) ShipTechnology (2021). Ibom Deep Seaport, Akawa Ibom. https://www.ship-technology.com/projects/ibom-deep-seaport-akwa-ibom/
- (11) Nairametrics (2019). FG earmarks $1.6 billion for seaport construction. https://nairametrics.com/2019/11/17/fg-earmarks-1-6-billion-for-sea-port-construction/
- (12) Lekki Port (2021). Nigeria's deepest port. https://lekkiport.com/
- (13) OECD (2019). Gender Equality and Sustainable Infrastructure. https://www.oecd.org/governance/gender-equality-and-sustainable-infrastructure-paris-march-2019.htm
- (14) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf
- (15) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf
- (16) Federal Republic of Nigeria (2020). Nigeria Economic Sustainability Plan. https://media.premiumtimesng.com/wp-content/files/2020/06/ESC-Plan-compressed-1.pdf