The total value of global trade today exceeds US$ 20 trillion, partly as a result of innovations in logistics and changes in policies in countries around the world thus leading to a reduction in the costs of shipping goods and services across borders. Given the concerns expressed by investors on the ease of doing business in the country, many are adopting the distribution model in penetrating Nigeria’s retail markets. The World Economic Forum notes that the future of Global Value Chain in manufacturing is dependent on effective logistics service. Can Nigeria afford to miss its share in the global trade due to various red tapes encountered by stakeholders in the logistics sector? Femi Adekoya writes.

For many foreign investors, Nigeria has a significant future-success-story. As the largest consumer market, the country has a population of oiver 170 million people. This number is set to double by 2050. 

Indeed, there are eight “anchor” cities in Nigeria with populations above one million each. This development shows the huge potential for future investment and consumption activity. Though there is huge potential, there are risks and weaknesses, which have to be taken into consideration. 

For these investors, Nigeria’s ranking on World Bank’s ease of doing business index raises a red flag as a result of various issues like electricity, contracts, permits and tax, even though the indices are improving.

The most important aspect while thinking about doing business in Nigeria is the level of informal trade. Research has shown that 87 per cent of the trading in Nigeria happens in informal markets, despite Shoprite, Spar and other supermarket chains entering the country. 

With many investors adopting the distribution model to make in-roads into Nigeria, managing logistics for efficiency remains key.

Why logistics remains critical to manufacturing

According to the World Economic Forum (WEF), logistics is a key part of the “plumbing” of the global trading system. The efficiency of logistics-related industries has a major influence on investment decisions of companies large and small, and thus affects the extent and location of job creation around the world.

“If serious efforts were made to facilitate trade – by removing policies that create supply chain barriers, delays and associated uncertainty – real incomes, investment and economic activity would experience a big positive effect. At a time of recession, austerity measures and fiscal constraints, a global trade facilitation initiative that substantially reduces supply chain barriers offers a low-cost source of economic stimulus. 

“Lowering of trade costs by improving border management, bolstering transport infrastructure and removing competition- reducing policies in the areas of transport and communication services could have an impact many times more powerful than that of other possible initiatives for lowering the tax burden on trade”, the WEF added.

LCCI unveils findings

Based on this position, the Lagos Chamber of Commerce and Industry (LCCI) expressed the need for state and federal governments to address the lingering challenges of doing business in the country, especially in implementing strategies to address logistics challenges experienced by the real sector.

According to the chamber, the challenges associated with the delivery of goods and services from one point to the other within Lagos State have emerged as one of the factors stifling businesses.

Specifically, the LCCI noted that beyond the perennial and hectic traffic situation in Lagos State, the inhibitive activities of government agencies including Federal and State governments on the nation’s roads has made distribution of goods and services by the private sector unbearable.

The LCCI emphasized the imperative of addressing these challenges noting that an efficient logistics and distribution of goods and services is crucial to the real sector and the economy, adding that industrial activities will grow by not less than eight per cent yearly given a more service oriented and accommodative logistics and transportation of goods and services on the roads.

Director, Research and Advocacy, LCCI, Vincent Nwani, while unveiling the results of a survey carried out on the burden of government agencies on transportation of goods within Lagos State, stated that the activities of several agencies of the state, including Lagos State Traffic Management Authority (LASTMA), Nigeria Police, Local government agents, Transport Unions have become most burdensome to businesses, logistics and delivery of goods within the state.

Specifically, the Lagos State Traffic Management Authority has been identified as the worst government agency that disrupts the smooth running of transportation and logistics in the metropolis.

In a list of challenges that inhibit logistics in Lagos, LASTMA came top at 26 per cent as the worst government agency; the Vehicle Inspection Office came second at 21 per cent; while the Federal Road Safety Commission was third at 16 per cent.

The Nigeria Police Force came fourth at 15 per cent; street urchins popularly called area boys were fifth at 15 per cent; the Lagos State Signage and Advertisement Agency was sixth at four per cent; and the NURTW came last at three per cent.

The survey also listed the most recurring issues that came up between the drivers, haulage trucks and the government agencies whenever they were stopped. Wrong parking, identified as a favourite theme of LASTMA, topped the list of key issues that often come up in such situations.

Demand for gratification was the second most frequent issue with LASTMA, the VIO and the NPF whenever the personnel had encounters with drivers and the haulage truck operators. The use of seatbelt came third on the list of key issues with the LATSMA, VIO and FRSC.

A list of the most hostile routes in Lagos was also identified in the survey. These routes were said to be those where some of the government agencies had the most presence.

The chamber said: “There are issues of compelling delivery trucks to purchase numerous stickers, emblems and permit from both state and local government. Demand for bribe, multiplicity of levies from state and local government agents, demand of frivolous documents, gross overlap of duties among LASTMA, FRSC and VIO officials, arbitrary one way designation of certain roads and restriction of delivery trucks from plying Lagos route during the day.

“All of these impediments result to deliberate harassment, extortions, intimidation, delays/waste of time, illegal charges and fines by officials of the agencies. The effect of increasing logistics challenges on our roads can be seen in the disruption of truck trips, drastic drop in sales affecting turnover of businesses, and outright loss of business when they are no longer able to meet up with client’s demand”, he explained.

Stakeholders seek increased engagement

Lagos State Commissioner for Transport, Kayode Opeifa explained that there is a need for increased stakeholder engagement especially in the areas of education, enlightenment and enforcement of laws in a bid to address lawlessness on Lagos roads.

Opeifa, who was represented by the Director of Transport Engineering in the state’s ministry, Fredrick Olofin explained that the challenges identified are attributable to the high road density in the state, forcing the state government to implement policies to address these challenges.

Lagos State Sector Commander, Federal Road Safety Corps (FRSC), Hyginus Omeje, who was represented by the Assistant Corps Commander, Gloria Danfulani advocated a good coordination of the production and supply value-chain in a bid to ensure the growth of the nation’s industrial capacity.

A report prepared by the World Economic Forum, Bain & Company and the World Bank, Enabling Trade: Valuing Growth Opportunities, concludes that improving logistics is many times more effective for trade facilitation than the abolition of all remaining import tariffs would be. 

According to the WEF, the latter, in any case, is a highly improbable scenario as the subject of import tariffs has been holding up the Doha Development Round of trade negotiations at the World Trade Organization (WTO) for years. 

It noted that rather than persisting with trade agreements that revolve around deals to lower tariffs, governments should prioritize action that aims at lowering supply chain costs for operators, adding that such move will have much bigger positive effects for consumers and households.