You need to active Javascript on your
BusinessDay
Nigeria's leading finance and market intelligence news report.

Closing the gaps in Nigeria’s transport industry to grow the economy

Nigeria’s transport, logistics and E-commerce sector has great potential. It can triple its current output, if well managed (The E-commerce market was recently estimated at about USD$12 billion)

With proper management, it can grow exponentially, increase foreign investment opportunities as well as create more job opportunities for the citizens.

Therefore, it is important for the Nigerian Government to prioritize it for more investment as this would add value to the economy.

This investment should focus more in areas such as technology, infrastructure, policy, and operations because it is the gateway to the nation’s economy.

This would also make the sector resilient to climate change and be more sustainable as it is expected to grow at a compound annual growth rate (CAGR) of around 4 % in the coming years.

Some of the reasons for the sector slow growth are poor infrastructure, unfavorable custom procedures, high traffic and congestion, stale policies, bad roads, insecurity, increased corruption, lack of use of digital technology systems etc.

In 2018 the sector was ranked at 112 in its logistics performance index while also ranked 145 out of 190 economies in ease of doing business.

Read Also: Jobberman to develop Nigeria’s e-commerce sector through behavioural profiling

Although the tide recently improved somewhat because of the upgrade in the railway and aviation sector by this administration and recent strategic partnerships with other nations.

However more work still needs to be done as the advent of COVID-19 pandemic opened more business opportunities for the sector as personal and consumer freight that would have otherwise been moved by travellers during trips are now routed solely via logistics and courier agents – and this looks like it has come to stay.

This has made stakeholders to realize the importance of having seamless urban movement of goods and services which has increased the E-Commerce market revenue to US$ 4,885.7 million and it’s expected to grow further at a compound annual growth rate (CAGR) of 20.5% in the period of 2019-2023. It has resulted in a market volume of around US$ 10,290.6 million by 2023)

While other sectors were shrinking because of the pandemic, it grew due to reliance on imported goods and people’s preference for online shopping in areas such as food, toiletries, clothes, electronics and gadgets, furniture etc.

This has also made the sector to maximize available opportunities in public-private partnerships within the sector. However, in 2019, Nigeria’s market’s largest segment was Fashion with a market volume of US$ 1,761.9 million and user penetration was 52.2%.

This growth is expected to reach 75.2% by 2023 due to ease of payments with mobile money and debit cards expected to increase internet penetration and it is seamless, secured, and safer.

Also, with the booming logistics and ecommerce industry in Nigeria, delivery providers such as DHL, FedEx, EMS, UPS, Jumia etc. are all experiencing steady growth in profits and revenues as the population increases.

No wonder Jumia Co-Founder and Co-CEO, Jeremy Hodara on the company’s 2020 agenda for Nigerian market, highlighted the huge opportunities for e-commerce business in Nigeria and stated that he foresees a faster expansion of e-commerce in Nigeria than other parts of the world.

The future of logistics market in Nigeria is very promising, however, for Nigeria’s transport and electronic commerce (e-commerce) sub-sector to grow exponentially there needs to be innovation, enabling environment for businesses as well as the need to implement digital technology systems in driving the needed change e.g adopt cloud-based systems that uses software-as-a-service (SaaS) to open up unlimited opportunities for organizations, scalability, and innovative digital resources usage.

This will increase profitability that will exceed the common returns of on-premises systems’ capabilities.

It is also important for the government to make travel smoother and hassle-free by tweaking public transport policies that will encourage use of transport software (e.g mobility-as-a-service (MaaS).

There also needs to be optimization of transport infrastructure, creation of mobility hubs for multimodal transportation, build platforms for ticketless travel as well as introduce innovative micro mobility and last-mile connections that will enable E-Commerce, retail, and logistic businesses to be more visible.

Also, the sector needs to encourage businesses that deals on tracking and tracing of goods, for example anti-theft GPS helps receive near real-time locations of goods as well as separate items in transit. This extra security strategies helps manage losses.

Interestingly most developed transport systems globally are now using artificial intelligence (AI) and sensors to drive their systems.

There is now an AI-enabled vehicle that correctly evaluates road conditions and how truck drivers behaving during unusual conditions on the road.

Nowadays, vehicle-to-vehicle (V2V) communication has made it possible for trucks to share information and vehicles now operate smarter, for example 5G technologies now facilitates adoption of self-driving fleets.

In the future, these vehicles will potentially become better drivers than human operators and the future seems closer than it is, for example Tesla’s electric semi-truck now have autopilot features that facilitates driving processes and interestingly organizations such as Walmart, Pepsi, etc have started ordering Tesla Semi trucks for their businesses.

While it is important to note that regulatory compliance strategy is urgently needed in Nigeria’s transport sector, it is important for commercial operators to stay up to date on latest policies adopted, changed, or removed by local, state, or even the federal government in areas such as electronic logbooks, overtime, or safety rules, timing, monitoring etc

Another digital technology system needed is Blockchain technology, this can be used in distribution and movement of goods, this will help shape the future of the industry as it enables accuracy of records and performance.

For example, when a truck gets sold for the second time, potential buyers and customers may have questions about how this vehicle was used. Blockchain transactions are immutable and transparent and therefore provide all information about the truck to stakeholders.

Another use of blockchain in transportation is capacity monitoring. The cost of transportation depends on cargo volume, while the use of Internet-of-things (IoT) sensors helps determine the amount of space a particular cargo occupies, and this data are used to calculate cost of shipment.

Therefore, storing this information into a blockchain-based system signed with a smart contract will allow self-executing payments on a base of the amount of space taken by the freight and further highlights the importance of adopting digital technology, communication, and security systems to monitor and regulate the sector.

While the growth of E-commerce businesses has led to rising demand in managing deliveries and provide better services due to the competitive industry. Therefore, organizations such as Dangote, Nigeria Breweries Plc etc should leverage on small fleet of vehicles to win bigger piece of the market to optimize last mile deliveries.

While policy restructuring would open-up the market, attract new investors, birth more small and medium enterprises (SME’s), it will also facilitate ease of doing business in the sector.

Therefore, the sector needs to be given priority in tackling its challenge such as infrastructure deficits, stale policies, insecurity, high corruption rate, lack of freedom of expression, closure of knowledge and skills gap etc

In conclusion, leaders in the sector needs to urgently organize national stakeholder summit to brainstorm on better ways of developing the sector as already mentioned and proffering solutions.

Get real time updates directly on you device, subscribe now.