Poor local participation in shipping business responsible for high freight cost

The cost of freighting consignments from the port of origin to Nigerian ports has been on the rise. This is owing to the poor participation of indigenous ship owners in the shipment of import and export goods.

The Nigerian shipping business is dominated by foreign flagged vessels resulting to huge capital flight to the tune of N2 trillion on the economy. Currently, the cost of transporting imported goods into the country is two-thirds of the total cost of the logistics because Nigerians do not have oceangoing vessels to ship Nigerian-bound cargoes from the port of origin into the country, said Alex Okwuashi, rector, Chartered Institute of Shipping (CIS), at a capacity building programme organised by Maritime Reporters’ Association of Nigeria (MARAN) in Lagos recently.

In a paper titled ‘Challenges of Shipping–Logistics Chain Development’, Okwuashi said Nigeria as an import-dependent country is losing billions of dollars for not harnessing the opportunities in its shipping business.

The CIS boss, who observed that the foreign dominance of Nigerian shipping business has resulted to the high cost of goods and services in the country, added that Nigeria needs to develop its transport infrastructure in order to not only remain competitive but also benefit in the huge potentials of the nation’s shipping business.

“To freight one vehicle into Nigeria costs between $500 to $750 as freight charge, but since Nigeria started importing vehicles the indigenous shipping companies have not benefitted in the freight because Nigeria is not supporting indigenous companies to acquire ships and to build capacity,” he said.

On the importance of intermodal transport, he said there’s need for rail service to effectively come into play in order to transport freight and passengers from Lagos to other parts of the country.

Listing the challenges of shipping and logistics chain development, he pointed at inefficient networks, poor sourcing strategies, waste caused by pushing equipment beyond capacity, non-value-adding costs, and security and safety.

Maritime industry, he said, plays an important role in international freight such that it provides cheap and high carrying capacity conveyance for consumers. However, the disadvantage is that it takes longer time.

“To save costs and enhance competitiveness, current maritime logistics firms tend to use large scaled ships and cooperative operation techniques. Consignees care about service quality more than the delivery price. Thus, it is necessary to build new logistics concepts in order to increase service satisfaction,” he said, adding that without well-developed transportation systems, logistics or supply chain could not bring its advantages to full play.

According to him, a good transport system in logistics activities could provide better logistics efficiency, reduce operation cost, and promote service quality, so as to increase competitive advantage and enjoy economics of scale. “The improvement of transportation systems needs the effort of both public and private sectors,” he added.