News analysis: How infrastructure gap limits N250bn supply chain industry
The logistics and supply chain industry in Nigeria valued at about N250 billion annually is faced with a huge infrastructural gap that is limiting its growth.
According to experts, inadequate infrastructure including poor roads, ineffective rail networks, and poor power supply creates gaps between warehousing and transportation, resulting in an increase in overhead costs for businesses.
They said a nation’s supply chain industry can only boom and become competitive if there is constant upgrading of logistics infrastructures such as roads, rail, ports, and airports.
Research has shown that Nigeria is rated poorly when assessed using the six pillars of the Logistics Performance Index (LPI), including ease of movement, access to the port, quality of logistics service, quality of the people that provide services, and ease of moving cargo in and out of the ports.
Obiora Madu, a logistics and supply chain expert, said it would be unfair to score Nigeria high in the six pillars of LPI owing to the current state of logistics infrastructure in Nigeria.
Madu told BusinessDay in an interview that bad roads and an ineffective rail system are limiting the movement of goods and services from the warehouses to the marketplace.
He said policy inconsistency is another factor that is limiting the growth of the supply chain industry as both past and present governments have failed to revamp the nation’s transport infrastructure.
He said the number of active rail lines and cargo coaches owned by the Nigerian Railway Corporation for freighting of import and export goods from the seaports to the hinterlands is not insufficient for a country of over 200 million people.
“Cold-chain is also a very critical aspect of the supply chain industry, particularly in managing post-harvest losses in export business. Cold-chain is about keeping to temperature requirements in order not to compromise the quality of the product. I think Nigeria’s performance rating in cold chain business is about 1 percent compared to the global standard,” Madu said.
He said there is also the soft infrastructure, which deals with the education and training of logistics and supply chain experts.
He said the recent plan by the Nigerian University Commission to introduce BSc in Logistics and Supply Chain Management will help expand the ecosystem by training experts who would help to solve the aspect of the infrastructural challenge.
Read also: Challenges affecting the development of Africa’s supply chains
Abel Olawale, a logistics expert, said Nigerians who are in the export processing business need the power to process goods, road, and rail lines to move both the raw materials and finished goods.
According to him, a high-interest rate is also creating a funding gap for businesses as a lot of manufacturers who want to go into food processing for export are discouraged by lack of funding.
“Nigeria has not been paying serious attention to non-oil export due to crude oil. The environment is not friendly but the exporters are still struggling to survive. Policy inconsistency is another major problem hindering export growth in Nigeria,” he said.
Citing an example, Olawale said that in Nigeria, a government came with a policy that exporters will have unlimited access to foreign exchange but another came with the policy that exporters must sell FX at a certain rate.
“The government does not make funding available, and no incentive, yet it wants people to sell their FX at a certain rate, which has its own implication on the economy. This is why a lot of exporters have a domiciliary account abroad and they find a way to let the goods go out illegally without opening Nigeria Export Proceeds form that mandate he or she to repatriate the proceeds,” he said.
Olawale said the gaps in the supply chain industry encourage corruption in the ports as exporters in some cases move their goods to Ghana, where they can ship to other destinations.
“Our national integrity is zero, which is why buyers are afraid of Nigerian goods. This is also affecting export; Nigerians are not attracting the kind of market that we should attract. Our goods are going out at discounted prices. They rather call Nigerian yam Ghanaian yam because of credibility,” he added.
Bayero Salih Farah, the director-general of the Nigerian Institute of Transport Technology, told our correspondent in an interview that the challenges facing the logistics industry in Nigeria are twofold.
Farah said the lack of adequate infrastructure required to support the nation’s supply chain has been limiting the growth of the industry.
According to him, inadequate trained manpower is another factor that limits growth.
“We need people who are well trained, skilled, and experienced to manage the transportation industry from the management to the lower level of logistics staff. It was said that Nigeria’s position in the world logistics index is too low. We have to do more to grow our logistics industry by training more Nigerians,” Farah said.
Citing an example of the importance of logistics to economic growth, he said countries like Singapore and the United Arab Emirates depend on logistics as it has proven to be a major contributor to their Gross National Product (GNP).
He however said that the opposite is the case for Nigeria, as logistics contribution to the GNP is not up to 2 percent when Nigeria is naturally positioned in the African continent to be the hub for transport logistics in terms of the airport, seaport, road, and rail.
“We should be the meeting point of logistics in Africa. It is only if we are able to achieve that, that Nigeria can be able to generate huge income from logistics to the nation’s economy,” Farah added.