De-risking Nigeria’s transportation, logistics industry

The recent report ‘Africa gearing up’ by PricewaterhouseCoopers (PwC) which looks at future prospects in Africa for the transportation and logistics industry, with a focus on 10 of Africa’s leading developing nations: Algeria, Angola, the Democratic Republic of Congo (DRC), Egypt, Ghana, Kenya, Mozambique, Nigeria, South Africa and Tanzania aimed at providing a snapshot of the range of business conditions and opportunities for investors.

The report, which assessed the investment potential for Nigeria’s transportation and logistics sector, puts Nigeria’s business environment, trade and logistics and transport and infrastructure as average, with some improvement expected. Nigeria’s poor infrastructure is said to have constrained growth in the logistics industry, even as time delays, bottlenecks for international shipments, poor tracking and tracing capabilities and poor logistics quality and competence are all industry risks that weigh negatively on growth prospects for logistics and transport industries.

Among the 10 countries analysed, South Africa and Egypt top the list on logistics performance, followed by Tanzania and Ghana, with Nigeria in the fifth position.

The report noted that better transport and logistics capacity has a profound impact on economic growth potential and singled out a few sectors that are most relevant for T&L investors such as retail and consumer, agriculture, raw materials and manufacturing.

While South Africa has the most developed retail sector, with most consumers shopping in formal retail settings, Nigeria’s large urban population is an attractive market that can stand alone and also serve as a gateway to Western Africa, while Kenya is also emerging as a strong choice for retail companies looking to set up in eastern Africa.

An analysis of the 10 African countries show that South Africa’s overall transport infrastructure scores almost identically to India’s, and better than Indonesia’s, and is lauded by many as one of the economies to watch. Egypt and Kenya followed after South Africa.

In fact, when it comes to roads, ports and air transport infrastructure, South Africa actually scores better than China.

It was noted that most freight in Africa gets transported through road, but the majority of the continent’s roads are still unpaved and many paved roads are in poor condition.

Nigeria’s roads carry more than 90 percent of domestic passengers and freight, the report said, but capital expenditures are not keeping up with the need for preventive maintenance – just three-quarters of federal roads are in good or fair condition, and regional roads are in worse shape.

According to the report, not a few executives from logistics companies with operations in Africa see Nigeria as one of the African countries with the most potential for their business, adding that only four are already operating there. This suggests that Nigeria still has a lot to do to better position itself for investment.

The report also stated that a lot of companies expanding into West Africa see Nigeria as a gateway to the region, even before Ghana. While Ghana’s main advantage is a stable democracy and thus a safe entry point for total newcomers to the African continent, Nigeria offers by far the largest market in the region, being home to nearly 170 million of the 250 million people living in West Africa.

Needless to say, top on the list of obstacles to the nation’s ambitious target to be among the world’s top 20 economies by 2020 are inadequate physical infrastructure and security concerns, which is impacting negatively on the nation’s a leading destination for international investors

It therefore behooves government to give more priority to addressing these challenges as well as the development of the transportation and logistics industry such that more private investors, both local and foreign, would be emboldened to invest in the industry. No doubt, it takes collaboration between government and the private sector to grow the industry.

We cannot agree more with the PwC report that high-performance transport and logistics systems are a key locational factor for a country and achieving excellence in logistics is a herculean task that requires huge funds, political consent, planning capacity, and subject-matter expertise.