Nigeria, popularly known as the giant of Africa is a country in the west coast of Africa with a very strategic location and endowed with an abundance of natural resources that make it very ripe for commerce.
It had been Africa’s largest economy with an estimated GDP of 650 billion and the economy had been growing consistently at an average of 6.5% prior to the regime change one year ago. It also had been recorded as the fastest growing of the top 5 economies in Africa.
Nigeria is home to 170 million out of a total of 250 million people in all of West Africa (approximately 70%) and constitutes 15% of the whole African population. Of the total population of Nigeria, approximately 50% are under the age of 19. What this invariably means is that there is a massive pool of human capital, a vibrant young resilient working population and a huge
market to be tapped into.
According to a PriceWaterHouse Coopers report on Nigeria, it identifies Nigeria being rapidly advancing with the scale of real growth standing second to government policy. The key supporting factors on growth are the huge young and urbanised population, large oil and gas service and increasingly diversified economy.
The report further states that lots of foreign companies which are expanding into West Africa see Nigeria as the gateway to this region ahead of better organised and stable democracies such as Ghana. By virtue of its population it offers the largest market in in the region.
While there appears to be a great potential for commerce based on the above factors highlighted, Nigeria has unfortunately not been able to fully tap into maximising its full potentia
Nigeria’s recent economic downturn
Nigerian economy is at crossroads of recession, economic meltdown and structural change. The real GDP has declined significantly by more than 14% in one year between 2014 and 2015.
Import/export trading activities slowed down as export dropped by 32 percent from ($82.62billion, 2014) to ($50.7 billion 2015) and import dropped to (50.7 billion 2015)
Customs revenue has also declined while other macroeconomic indicators at the time of economic recession are heading in opposite directions. – these include rising inflation, high cost of borrowing/ monetary policy rate, strict macro prudential measures and capital controls, fuel shortages, power shortages and rising electricity bills. All the above have compounded the domestic prices of goods and rise in transport costs thus placing the logistics and supply chain sector in the receiving end as the cooperate sector face severe losses, production cuts and hence rationalisation of logistics/ supply chain activities.
Nigeria & Logistics
In simple terms, logistics involves the managing of the flow of commodities between the point of origin and the point of consumption in order to meet the demands of customers or co-operations. It involves integration of information flow material handling production, packaging inventory transportation and often warehousing and security. This multistage process can often be riddled with problems particularly in countries where there is poor infrastructure to facilitate its seamless delivery.
Nigeria does not score well on the Logistic performance index. This is a tool developed by the World Bank to compare various countries performance across parameters which include customs, timeliness, tracking and tracing, logistics quality and competence, international shipments and infrastructure. Nigeria has consistently underperformed and remains in the 4th percentile of this index.
In 2016, Nigeria scored 2.63 with a ranking of 90. This was 15 places down from their performance in 2014 when they scored 2.81. South Africa is the highest performing African country on this index.
Infrastructure has constrained growth in the logistics industry. Time delay bottlenecks for international shipments, poor tracking and tracing capabilities, poor logistic quality and competence are indices identified as problems on the logistic performance index related to Nigeria and accounting for their low performance. The major conduits of distribution are sea, land and air transportation.
Sea road and air transport
There have been recent investment and reforms in ports over the past 5-10 years. There has been an operational overhaul. Terminal concessions now attract private investment on a scale that is unprecedented for Africa. Partial privatisation has helped eliminate overstaffing at ports, cargo theft and excessive port related charges in addition to unlocking funds for infrastructural development. While there are gains, challenges such as poor customs performance remain. Lack of deep water port also presents a significant challenge however, there are plans for construction of two deep water ports in Lekki near Lagos and Ibaka in Akwa Ibom. These would form part of a free trade zone and is aimed that this would form the gateway for the West African region.
Road network conditions are patchy varying from good, fair to poor across the country. Nigerian roads carry at least 90% of domestic freight and passengers. While there are good road network links, this needs further improvement to facilitate moving goods around the country.
The railway networks which have been dilapidated and under used started to see some refurbishment under the previous administration. The infrastructure available currently is by no means sufficient.
Other challenges include systemic corruption and this has grossly impeded the growth of the sector. Corruption would certainly account for the dilapidated infrastructure. In addition, government officials can sabotage the processes with a motive to create bureaucratic bottlenecks with the intent to encourage bribery.
Insecurity and militancy is also another factor which has affected the growth of logistic companies. You are faced with a risk of possible kidnap in the north eastern part of the country and the Niger delta.
Financial industry instability – this leaves the players in the industry with a risk exposure. While the returns can be high, there can be significant variations/ fluctuation in foreign exchange that can grossly affect profitability
Nigeria is one country that has been said to defy economic logic. Irrespective of the massive challenges facing the country particularly in the field of logistics and supply chain management, Nigeria has lots of promise and with prospects of getting even much bigger than it is (if the government makes the required infrastructural investment to promote a conducive atmosphere for business).
The logistic sector irrespective of these challenges is estimated to be over N200billiion with an annual growth of 10%. The 2014 Pricewaterhouse coopers report identifies Nigeria as one of the locations offering enormous potential for strategic investors in Africa in the area of logistics. Other countries include Algeria, Angola, Democratic Republic of Congo Egypt.
The time to invest in the logistic industry is now as there are massive growth prospects irrespective of the stated challenges.
WHO logistics report
PwC report on logistics 2014
Review of logistics and supply chain report (part1) by Obi Madu
Nigerian logistics opportunities in challenges by Seyi Adeyemo