Nigeria transport industry as a destination hub for investors
FESTUS OKOTIE, CEO of Bernard Hall Nigeria Limited and a transport specialist, in this interview with DAVID IBIDAPO explains the challenges, opportunities and prospects in the Nigerian transport sector.
How will you describe Nigeria’s transport industry? Has there been growth over the years?
Nigeria’s transport sector is the gateway to the economy of the nation and the backbone that facilitates trade, supply chain and economic success. The sector has great potential especially because of the nation’s huge population of over 200million people. The nation’s transport sector was not given the necessary attention by past governments and I see this translated in poor management, decayed infrastructure, unavailability of well-tailored policies etc. which created huge gaps in the system then.
Yes, I believe the sector has experienced growth recently because of the efforts of the current administration and that of the Minister of Transportation – Rt. Hon. Rotimi Amaechi. They have done very well in the areas of building infrastructure such as several railway projects across the country, construction of the new deep sea port located at the Lagos free trade zone Lekki, creation of employment opportunities, building and rehabilitation of various roads to connect different parts of the nation to open up the economy. All these were responsible for the sector’s growth which contributed to the nation’s GDP from $642.927 to $720.241 million in 2019.
How will you compare the transport industry with peers in sub-saharan Africa and the rest of the world?
Nigeria’s transport sector has not taken its rightful position in the region, considering that it is a key regional player in West Africa. Nigeria has the human resources with almost 60 percent of its population between 15 and 65 years, it is the world’s sixth largest oil producer (largest in Africa), with over 300 square kilometres of arable land and significant deposits of largely untapped minerals.
If the sector is rightfully positioned, it could take great advantage of globalisation which many nations in Asia and the world over are already tapping from due to their standardised transport systems.
Also, if the nation had modern multi modal transport infrastructures, the right policies, and other basic elements in place, Its GDP would have been higher than what it is currently.
A lot of foreign investors looking at expanding into Africa and West Africa still prefer Nigeria as a hotspot due to the potentials of the sector and its strategic position as the gateway to the region, however owing to inadequate infrastructures, manpower development, inability to adopt modern policies, sectarian violence, corruption etc. they may be deterred.
Nigeria offers by far the largest transport market in the region and Africa. The sector can achieve far more than its current state, if the government gives it more attention.
About 2 percent contribution to GDP is rather small. What do you think are the challenges in Nigeria’s transport sector?
Yes, approximately 2 percent contribution to the nation’s GDP is quite small. This is because the government has not given the sector the necessary attention considering the fact that it is a very essential sector as well as time sensitive in nature. It therefore requires modern infrastructure and strategies to upgrade it.
There are other factors affecting the growth of the sector, such as lack of technically- qualified persons occupying some sensitive positions due to tribalism, politics, nepotism etc. Institutional gridlocks, poor economic and political policies, poor manpower development, safety, security and environmental issues. Additionally, concentration of transport development on intra, inter-city linkages and the relative neglect of rural transport is also responsible for the slow movement of agricultural products from the rural areas.
Another area to look into is fostering more collaboration with nations that have succeeded in the areas where we are not. For example, it would be interesting to see Nigeria partnering with a country like Denmark in the development of strategic investments opportunities in offshore energy activities like the Ocean Wind Farm which made Danish government to generate 407 megawatts (MW) in its energy sector that covered the yearly electricity consumption of around 425,000 Danish homes. Do we need to emphasise on the role of energy as a driver of the transportation sector and economy at large?
The advantage of improving trade relations and Foreign Direct Investment (FDI) to boost growth in the sector are numerous. For instance, partnering with a nation like Australia that has capitalised on the benefits of building a more sustainable transport sector in boosting the growth of its economy. This was confirmed by the Australian Logistics Council when they reported that logistics accounted for 8.6 percent of its GDP, with 1.2 million jobs for Australians and a $130 billion annual injection to the national economy.
I believe Nigerian government should explore more avenues to collaborate with
Australia and other developed nations in the area of transportation to develop its economy.
In the quest to diversify the Nigerian economy from oil dependence, do you consider our transport industry as a key sector to achieve this objective and restore growth in GDP?
Absolutely, I consider Nigeria’s transportation sector as one of the key drivers we can leverage on in diversifying our economy from oil dependence. This is because the sector is very critical to the growth of the economy, if well managed.
The sector has the ability to create wealth, it will also enable us to maximise our natural resources, distribute and integrate the manufacturing and agriculture sectors. In addition to facilitating the supply of other essential services needed to sustain growth in the economy. Also, a well-structured transportation sector will help create better access in facilitating timely movement of goods and services across the entire value chain of the nation.
Additionally, Transportation and logistics are very key in facilitating and attracting investments opportunities from MultiNational Companies (MNC’S) to the economy, as well as supporting job creation. The sector would also make products cheaper for internal markets, as well as its ability to open the global market for our local products and services, thereby encouraging innovation and increased productivity.
Diversification of Nigeria’s economy in the area of transport would also facilitate the transformation of the economy to achieve higher levels of productivity, as well as improve trade and competition. It would also make the economy to explore untapped opportunities that can facilitate growth, create new businesses and job opportunities.
Also, the government of Nigeria needs to empower experts in transportation investments to look at innovating investments opportunities within the sector (in and outside Nigeria), as an alternative source of revenue generation to the economy just like the strategy by Shanghai International Port Group (SIPG) and the PSA Corporation at the Ports of Shanghai and Singapore respectively. They all have investments and businesses outside the ports domestically and internationally.
Additionally, investment in global ports and terminals operation is big business that will also help in the transfer of knowledge and growth. Therefore, we can think outside the box by looking into equity investments in efficient ports globally. An example is the 2009 deal of China’s COSCO Pacific signing of a 35 year lease contract worth US$4.2 billion to take over the management of the port of Piraeus in Greece, another one is the International Container Terminal Services Incorporation (ICTSI) bid for Portek International – Singapore shares in June 2011. All these are very viable business initiatives Nigeria can explore to reposition its economy, create business and job opportunities.
How can Nigeria make its transport sector a destination hub for investors?
There are several instruments that can be applied to make the sector attractive and I can highlight a few. Improving the nation’s transportation systems such as railway, roads, airports, pipelines, ports and other maritime infrastructures would help open the sector for more investment opportunities and also facilitate the movement of goods and services across the nation. Creating an enabling business environment would help attract more investment opportunities to the nation and make it more competitive – for instance governments provision of incentives and waivers to the exporters of locally produced goods and services would make the sector more attractive . Also, allowing foreign investors to freely repatriate their capital and net profit after tax without any restrictions provided there is evidence of Certificate of Capital Importation (CCI).
Improving trade relations and collaboration with developed nations that have succeeded in using transportation to grow their economy would make the sector more attractive for investors. Also, adopting modern policies to drive the sector, simplifying the process of business registration as well as encouraging the free flow of investments capital and freedom from expropriation of investments.
Lastly but not the least, engaging technocrats in transportation is very crucial as it will facilitate the upgrading of the sector and make it globally competitive, creating platforms that would encourage innovation will also make the sector greatly sought-after.