The freefall of naira, one of the world’s worst-performing currencies last year, has sparked a bloodbath among multinational companies and logistics companies operating in Nigeria.
In this interview with BusinessDay, Adebayo Adeleke, the chief executive officer of Adebayo Adeleke LLC, an organisation providing advisory and training services in supply chain management, governmental services, and leadership.
In your experience, how significant is foreign exchange exposure for firms operating within the Nigerian logistics industry, and what strategies have you seen effectively mitigate these risks?
Foreign exchange exposure has a significant impact on logistics firms operating within Nigeria. In international transactions, fluctuations in exchange rates can directly affect the cost of imports, exports, and overall profitability.
These strategies provide a buffer which includes Natural hedging, a development that involves matching foreign currency revenues with foreign currency expenses. By doing so, firms can reduce their exposure to exchange rate fluctuations.
For example, if a logistics company earns revenue in US dollars and has expenses in US dollars, they are naturally hedging their foreign exchange exposure.
Another strategy firms deployed includes forward contracts. This allows firms to use forward contracts to lock in exchange rates for future currency transactions. This allows them to protect themselves against adverse exchange rate movements.
By contracting with a financial institution, companies can secure a fixed exchange rate, minimising uncertainty.
Companies can diversify their currency exposure by operating in multiple markets. By spreading their operations across different countries, they can reduce their dependence on a single currency and minimize the impact of foreign exchange fluctuations.
Manufacturing plays a crucial role in supply chain management. How do you assess the current state of manufacturing in Nigeria, particularly its integration into the global supply chain?
Nigeria’s manufacturing industry is not where it used to be, but there’s more work to be done. For a country of supposedly over 200 million, our manufacturing and productivity are below par. For Nigeria’s manufacturing industry to play a vital role in global supply chains, certain infrastructure has to be in place.
Consistent power, functioning critical supply chain infrastructures, stability in the currency exchange, and dependable rule of law.
Though these need to be adequately plugged, into the global supply chains Nigeria can still fair well without some of these but understanding the global standards and ability to bring our manufacturing to meet the global quality standard without shortchanging in quality of products and services, shorting in supply chain processes and more importantly shortchange in delivery.
Export growth is often viewed as a key driver of economic development. From your perspective, what measures can be taken to boost the export capacity of Nigerian businesses, especially within the logistics sector?
Boosting the export capacity of Nigerian businesses, particularly within the logistics sector, requires a combination of measures to enhance competitiveness and overcome various challenges.
Here are some key measures to take: Infrastructure development, access to finance, trade facilitation, export promotion, market diversification, support for SMEs, enhancing logistics capabilities, collaboration and partnerships.
Collaboration across stakeholders is essential for addressing systemic issues in the logistics sector. What collaborative efforts have you observed or been involved in that have yielded positive outcomes for the industry?
Certainly! Collaboration plays a crucial role in addressing systemic issues in the logistics sector. I’ve observed and been involved in several collaborative efforts that have yielded positive outcomes for the industry. One example is the formation of industry-wide partnerships and alliances. Logistics companies, freight forwarders, transportation providers, and even government agencies have come together to form collaborative networks.
These networks focus on sharing best practices, pooling resources, and jointly tackling challenges such as reducing carbon emissions, improving supply chain efficiency, and enhancing overall sustainability.
Another successful collaborative effort I’ve witnessed is the adoption of technology platforms that enable seamless communication and coordination among stakeholders. These platforms provide a space for logistics providers, suppliers, manufacturers, and customers to exchange data, track shipments, and optimize logistics operations. By improving visibility and transparency across the supply chain, these collaborations have resulted in better decision-making, reduced delays, and increased overall efficiency.
Furthermore, industry associations and forums have played a vital role in fostering collaboration. They bring together stakeholders from different sectors of the logistics industry to discuss challenges, share knowledge, and develop innovative solutions. These collective efforts have led to the development of industry standards, guidelines, and best practices that promote cooperation and address systemic issues.
Overall, the logistics sector has seen positive outcomes through collaborations that emphasise sharing knowledge, leveraging technology, and fostering partnerships. By working together, stakeholders can collectively address systemic issues, enhance operational efficiencies, and drive continuous improvement within the industry.
Nigeria has a growing youth population and a burgeoning entrepreneurial ecosystem. How can young entrepreneurs capitalise on opportunities within the logistics sector to contribute to economic growth and job creation?
Nigeria is blessed when it comes to growing human capital and has opportunity areas in logistics and supply chain domains. Young entrepreneurs should capitalise on the opportunities around them by understanding the underlying problems plaguing the logistics sector and be able to provide solutions that not only solve the current problems but also anticipate future occurrences.
This in turn will foster economic growth, create jobs, and posture the country for economic prosperity.
Considering your background in the US military, what role do you see for international partnerships and collaborations in strengthening Nigeria’s logistics infrastructure and improving its position in global trade and exports?
Just like what I have experienced in military partnerships over the years, international partnerships, and collaboration bring about the exchange of ideas, solutions, and different ways of addressing common issues.
Collaboration and partnership are essential in supply chain and logistics because they are the backbone of global trade. Nigeria is an important player in global trade because its products and commodities are part of what sustains the world at large. With the integration we have had over the last 30-40 years in global trade and globalization, the exclusion of any country can be felt globally because almost every country is an important player in the global economy.
Despite Nigeria’s weak logistics and supply chain infrastructure in comparison to other players around the globe, partnership and collaboration strengthen the common cause of excellence in global trade and supply chain and also help foster shared experiences and knowledge which in turn helps the country navigate its infrastructural shortfalls.
How has your experience in the US military influenced your perspective on the importance of human security and defense in economic growth, trade, and supply chains?
Security from military understanding encompasses a broader spectrum, extending to protection against non-military threats like terrorism, cyber-attacks, and internal disturbances.
I understand that security is a priority, and without it, you cannot have trade or economic growth, and supply chains will be in shambles.
Looking at what is happening in Nigeria, insecurity has caused slower economic growth, trade issues, and a significant impact on the supply chain.
Solve human security issues and you will see high growth in trade, productivity, and economic activities subsequently and supply chains will see a lot of reversal.
From your experience, how do you think prioritising human security and defense measures can contribute to boosting export activities in Nigeria, especially within the context of logistics and supply chain management?
70 percent of the cost of commodities in Nigeria is attributable to logistics and supply chain management. Most of these costs are security-centric, as of the time we are having this interview, the cost of transportation (transportation is an integral pillar of logistics) from Jalingo to Lagos for a bag of rice is N10,000 per bag that cost is extremely fluid, the price can double before daybreak.
Despite this, there are not enough logistics providers jumping on the opportunity to go to Jalingo to pick these bags up because of the security of the roads and pickup area.
The impact of security on Nigeria’s supply chain domain is enormous and indisputable. The Nigerian National Security architecture has to be revamped and human security made the central focus. If human security is the focal point of Nigerian national security, a lot more things will be addressed.
Human security has about seven expressions: economic security, political security, food security, community security, health security, physical security, and environmental security.
All these security expressions don’t operate in isolation, they are interlinked with each other and with other forms of security such as maritime security, border security, homeland security, critical infrastructure security, supply chain security, and the like.
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