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Supply Chain Trade and Logistics

Challenges of Logistics Operations in Nigeria

Except you’re involved in the scene one way or the other, the logistics industry is one that many people barely notice how it contributes to everyday life – well, until logistics channels get clogged. You notice the scramble as Goods and services have to locate people fast.

The global logistics industry has a market size of over $8 trillion . While global markets were more slow-going in 2020 as the pandemic hit and a series of nationwide lockdowns followed, countries have continued to rebound ever since, with more progress expected. A similar phenomenon is expected in Nigeria, where even though growth in the logistics industry has moved rather slowly over the years, a 4% compound annual growth rate (CAGR) is forecasted for the coming years according to Modor Intelligence. 

The 2018 Logistics and Supply Chain Industry report estimated Nigeria’s logistics sector at 250 billion naira. This is despite the challenges plaguing the sector. The Nigerian logistics and supply chain industry has long been marred by challenges. It is even more unfortunate that recent events such as insecurity have added to the mix. 

Long-term challenges remain, such as inadequate roads and road networks, paucity of skilled manpower, over-taxation, reliance on old technologies, and so on. Solving some of these challenges will have a ripple effect on the economy as it will help drive trade and economic growth across the nation. Some of these challenges are discussed below:

Government Policies

An array of different government policies has affected the sector over the years. In July 2020, the Ministry of Communications and the Digital Economy released a new set of guidelines in the “Courier and Logistics Services Operations regulation (2020)” which among other regulations, introduced new licensing fees for courier and logistics companies. The fees were however reversed after a public outcry but show how unstable the sector can be to government intervention at any time. It may be argued that government regulations have their merits to regularise the sector but abrupt, sweeping policy changes without a proper audit of the sector may prove detrimental to players. 

Inadequate infrastructure

Bad roads, power outages, and other infrastructure remain key issues affecting Nigeria. Moody’s estimated that Nigeria’s infrastructure will need over $3 trillion in thirty years to bridge the gap. Budgetary allocations to infrastructure may have been commendable compared to other areas, but they are grossly inadequate to tackle the current infrastructure deficit. For example, in the 2021 budget, infrastructure amounted to 1.45 trillion, or 8.9% of the total budget. This shows that the government is committed to resolving the infrastructure deficit, but there’s a need for more private sector funding. 

Insecurity

Bandits, kidnappers, rampaging herdsmen, cattle rustlers, intercommunal clashes, or outright terrorist attacks; the title may be different but the result is increasing insecurity in parts of the country. This makes supply chain and logistics operations difficult particularly in affected areas. 

Multiple taxations

It is no secret the sheer number of multiple, often ‘informal’, taxes that businesses have to pay to operate logistics operations. Community levies, company income tax, ‘money-for-chief’, marching ground, and all manner of tax names. This makes it difficult for companies to thrive. 

Inefficient seaports and custom services

Apapa port is in the news every other day with government promises about decongesting it but this is far from the reality. Customs processes in Nigeria are slow and often riddled with one-too-many middlemen. Commendably, there have been government efforts to introduce digital solutions to alleviate this problem, but the process still needs a lot of work. These delays in clearance mean the ports are crowded for longer periods and goods take time to get to users. This likely leads to a loss of time, revenue, and brand image on the part of logistics operators.

The need for more partnerships between operators

More partnerships between operators

This opinion piece points out the need for partnerships, acquisitions, and mergers among logistics operators in the country. Choosing to operate in silos may not be the best approach to tackling collective problems encountered in the industry. Supply chain and logistics is a huge industry, and one way to make fast strides in the sector is through strategic partnerships. Governments, foreign and local companies have to pool financial and physical resources to solve shared challenges in logistics operations in the country and across Africa. Obinna Anyaegbu, the CEO of Chisco Express, a digital logistics company, has opined that for medium to long haul movement of goods, it would do well with a more interconnected rail network with private sector participants providing rolling stock while the government guarantees rail access for a fee or a rail line infrastructure concession to build/maintain, and operate. This would drastically bring down the cost of some critical high volume commodities (FMCG, flour, rice, millet, beans, sorghum, etc.) per kg and would go a long way to ensuring food security.

Skill Gap  

The logistics sector has not been left behind by recent technological disruptions. Emerging tech innovations such as drone deliveries, blockchain, and other forms of automation and digitization continue to change logistics operations. Having a ready workforce equipped with the necessary knowledge is needed now more than ever to bridge the skill gap. In Nigeria, employers often lament the dearth of properly skilled job seekers to meet labour needs. In the logistics sector, properly trained drivers, dispatchers, and warehouse managers continue to remain in high demand. 

Growth potential and recommendations

Regardless of these challenges, the growing popularity of the e-commerce sector has driven more investments into logistics operations. While shopping is done online, physical goods have to be transported to buyers. Small and medium-scale businesses are also leveraging e-commerce tech to sell their products and services and will require logistics providers.

Government budgetary allocations towards infrastructure are necessary and highly commended. But, as earlier pointed out, more private funding is required. Also, proper implementation is expected of all state governments to take responsibility for the growth of infrastructure in their states to provide the best environments for business and living. Federal government projects such as the construction of railways, roads, seaports, airports and the passage of relevant policies to drive growth, should be deployed quickly. Government should also create an enabling environment for a tech disruption in the sector. Events of government interference in some fintech services and products leave much to be desired of other sectors. However, tech products in this space should be given the due support or enabling environment to bring the needed change.

Another interesting recommendation is highlighted in this opinion piece on the need for a “holistic national freight logistics strategy for Nigeria for the next few decades.” Such a strategy would, in essence, bring together all tiers of government and industry to provide a coordinated, national multi-modal approach to freight planning. And it would address Nigeria’s freight while supporting its long-term international competitiveness. ” It’s easy to imagine how this coordinated approach would benefit the logistics industry in the country. In all, the government must provide a suitable environment for logistics to maximize the benefits of trade both within the country as well as across Africa with the African Continental Free Trade Agreement.

In an attempt to provide sustainable solutions to some of these challenges, Obinna Anyaegbu, the CEO of Chisco Express  – a digital integrated logistics company, leveraging technology to deliver excellence to the African supply chain industry, seeks to contribute to reducing the skill gap in the sector by training job seekers with the latest trends and innovations in the sector. Chisco Express also recognizes the importance of partnerships to deliver better logistics services to a wider reach of customers. This is why they have partnered with various experienced logistics operators on every continent to ensure your goods get to you wherever you are. Visit chiscoexpress.com to learn more.

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Supply Chain Trade and Logistics

Intra-African Trade – Border Closures, Trade Agreements, and How They Affect Livelihood

Intra-African trade has been around for thousands of years. There is documented evidence of the trade in animals, gold, and salt, across the length and breadth of Africa. With over 50 countries, Africa is blessed with both human and natural resources, but effectively harnessing these resources is a different reality. Boosting trade relations within African countries has a lot of benefits for the continent, but is not without several bottlenecks. One of such bottleneck that presented itself, particularly during the pandemic is border closures.

As many as 43 out of 54 African countries had a total or partial shutdown of their borders during COVID-19. In a continent that has challenges with proper data collection, the effects of these closures may never be fully known. There is no denying the hardship that ensued during this period. For many citizens who work across borders, especially low-income work, the movement was greatly reduced, which affected their livelihood. Companies were not able to replace workers in the short term, affecting normal company operations. The slow transportation of goods between closed borders meant traders were in danger of running out of stock. The Head of Chisco West Africa Division, Mr. Valentine Ogege opines that the border closure has brought untold hardship because of the loss of jobs to thousands of SMEs that would usually be transporting goods to their customers on a daily basis along the West African corridor.

Border Closure in Nigeria

On August 19th, 2019, the government of Nigeria closed the nation’s borders to the importation of goods from neighbouring countries. This closure lasted for close to 17 months before reopening in December 2020. Several opinion pieces and analyses of the border closure have noted that it did more harm than good to the Nigerian people, while a few others have tried to argue for its merits. Also, the border closure put a strain on informal trade relations between Nigeria and neighbouring countries like Benin and Togo. Informal Cross Border Trade (ICBT) between Nigeria and these countries has a long history, facilitated by reasons ranging from porous borders, corruption to poor joint economic policies. It is, however, important to note that not all trade along these borders is illegal. For Benin, ICBT makes up as much as 20% of its GDP. With an economy, tied to Nigeria’, a border closure or other economic challenges in Nigeria will likely pose negative effects for Benin, as discussed by this analysis by Brookings University.

Trade Agreements in Africa

Trade agreements allow for easy movement of goods, services and sometimes human resources between countries with reduced taxation and other incentives. Trade agreements in Africa have largely been between countries and regions. Examples of trade agreements in Africa include;

  1. Southern African Development Community (SADC): 16 member states including Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania, Zambia and Zimbabwe.
  2. Community of Sahel–Saharan States (CEN–SAD): Benin, Burkina Faso, Central African Republic, Chad, the Comoros, Côte d’Ivoire, Djibouti, Egypt, Eritrea, the Gambia, Ghana, Guinea-Bissau, Libya, Mali, Mauritania, Morocco, Niger, Nigeria, Senegal, Sierra Leone, Somalia, the Sudan, Togo and Tunisia.
  3. Economic Community of West African States (ECOWAS): Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo
  4. Common Market for Eastern and Southern Africa (COMESA): Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia and Zimbabwe
  5. Arab Maghreb Union (AMU): Five-member states including Algeria, Libya, Mauritania, Morocco and Tunisia
  6. East African Community (EAC): Six member states including  Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda
  7. Intergovernmental Authority on Development (IGAD): Eight member states including Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda
  8. Economic Community of Central African States (ECCAS): Eleven member states including Angola, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, Republic of the Congo, São Tomé and Príncipe

However, these trade agreements are between a few countries and not across Africa. In order to boost trade across African countries, the continent-wide African Continental Free Trade Area Agreement (AfCFTA) was proposed.

Some key stats on Intra-African trade provided by the United Nations Conference on Trade and Development (UNCTAD) include;

  • Intra-African exports were 16.6% of total exports in 2017, compared with 68.1% in Europe, 59.4% in Asia, 55.0% in America and 7.0% in Oceania.
  • Intra-African trade, defined as the average of intra-African exports and imports, was around 2% during the period 2015–2017, while comparative figures for America, Asia, Europe and Oceania were, respectively, 47%, 61%, 67% and 7%.
  • In 2016, intra-regional economic community trade was highest in SADC ($34.7 billion), followed by CEN–SAD ($18.7 billion), ECOWAS ($11.4 billion), COMESA ($10.7 billion), AMU ($4.2 billion), EAC ($3.1 billion), IGAD ($2.5 billion) and ECCAS ($0.8 billion).

What is the Africa free trade Agreement?

Signed in March 2018, the African Continental Free Trade Area Agreement (AfCFTA) is a trade agreement signed by 54 out of the 55 countries on the continent. It seeks to promote intra-African trade among African nations and boost economic development. It came into effect on January 1st, 2021. 

What are the benefits of AfCFTA?

Some benefits of AfCFTA  include;

  1. Creating a Single Market: The AfCFTA will turn Africa into a single trade zone reducing trade barriers among nations with policies that facilitate the easier transfer of goods, services, intellectual property and other resources.
  2. Removing tariffs: A stumbling block to inter-country trade are varying tariffs. The AfCFTA will lead to the total or near-total elimination of tariffs such as import duties within participating countries. 
  3. Boosting economic activity and sustainable growth: Small and medium scale African businesses will be able to sell their goods and services to other African countries. This will greatly boost economic activity which is expected to reflect positively on the African continent with time. 
  4. Collaborative Structure and Enforcement. Participating countries have the opportunity to be a part of decisions reached. Various institutions exist within the AfCFTA to provide checks and balances so that countries can contribute to the success of the pact.
  5. Settling Trade Disputes. The AfCFTA makes it easier for states to settle trade disputes as it has a Dispute Settlement Mechanism to resolve trade disputes should they arise between state parties. 

Logistics and the African Trade Agreement

Logistics will play an integral role in the success of the AfCFTA. All hands will need to be on deck to ensure the smooth movement of goods and services across Africa. The governments of African countries should work together to create an enabling environment for stakeholders in the supply chain industry, which will, in turn, impact the economy of the continent at large.

However, logistics companies like Chisco Express, a technologically driven logistics company, are poised to foster growth in the sector. The company is led by Obinna Anyaegbu, a man born into logistics and now at the forefront of tech adoption within the sector. Chisco Express uses a centralized data-driven marketplace for the movement of goods from origin to the last mile in the African market. With over 40 years of experience, Chisco Express is leveraging technology to deliver value to supply chain participants like drivers and fleet owners and excellence in delivery solutions to the African SME by forming global strategic partnerships that have increased its operational efficiency. 

This has given Chisco Express access to over 2,000+ haulage trucks, vans, and motorcycles, as well as warehousing, and distribution networks across many countries.