The logistics industry has a lot of contributions to our everyday lives but it is usually neglected by people. Unless you are involved with the industry in one way or the other, you aren’t going to notice the contributions of the logistics industry until one of the products or things that you are looking for is not available because the logistics channel got clogged.
Globally, the logistics industry has a significant value, with a market size of over $8 trillion. The industry saw a slow growth during 2020 because of the pandemic and lockdown but in the post-COVID era, this industry is soon regaining its value. In 2018, the Nigerian logistic sector was believed to have a market value of over 250 billion Naira and this value was despite the challenges and problems faced by the industry.
The challenges in the Nigerian logistics industry are hampering its growth and global events in recent times have further added to the damage. Solving these challenges will have a ripple effect on the economy of the country because of the contribution of the logistics industry to every other industry out there. So, what are those challenges? Let’s discuss them below:
Government Policies
First off, we have different government policies that have created major problems for the industry over the years. In 2020, the Ministry Of Communications and the Digital Economy released some guidelines and one of these guidelines was the new licensing fees for courier and logistics companies in the country.
Although it was completely rejected by the public and caused certain public distrust in the government after which the government had to reverse this order, it showed that this sector was prone to government intervention at any time. These guidelines and regulations can be argued whether these are valid or not but currently, these can create huge problems for an industry that holds a lot of potential.
Poor Infrastructure
The infrastructure in the country is also poor which is further creating hurdles for the logistics sector. We have bad roads, power outages, and poor transportation systems in the country that are creating problems for the sector. For any country to promote its logistics sector, it needs to make sure that it has proper infrastructure in place that can support the modern-day logistics needs and requirements.
In Nigeria, the government has made significant budgetary allocations to infrastructure as compared to other sectors but it is not enough to tackle the infrastructure crisis that the country is in. People give examples of logistics companies like YRC that are working in a country like the USA where infrastructure is the best but these cannot be compared to their counterparts in Nigeria. The government of Nigeria seems committed to resolving the infrastructure crisis but it seems like it will need funding from the private sector too.
Insecurity
The increasing insecurity in different parts of the country is also a problem for logistics operations in the country. We are seeing an increase in kidnappers, bandits, robbers, terrorist attacks, and inter-communal clashes. Although these are different people and different things, these all create insecurity in different parts of the country.
Any vehicle that will be transporting goods can easily fall victim to these things which will result in a major loss for the company. This insecurity makes supply chain and logistics operations difficult in affected parts of the country.
Unstable Economy & Multiple Taxations
The economy of Nigeria isn’t that stable and along with this, logistics companies have to pay multiple taxes, most of which are informal. Logistics companies have to pay community levies, company income tax, and several information taxes to operate their logistics operations in the country. This makes it difficult for companies to work in such a country where the economy isn’t stable and along with that, they have to pay so many taxes.
These informal taxes are preventing international companies like SF Express, TCS, DHL, etc from coming into the country and the survival of local companies is becoming difficult.
Inefficient Ports & Slow Custom Clearances
The seaports in the country are highly inefficient if we compare these with seaports from around the world. And that is not it, the customs processes in Nigeria are highly slow and there are too many hurdles along the way, usually in the form of middlemen which makes cross-border transportation and logistics very slow and difficult.
We are seeing the government making efforts to introduce solutions, especially digital solutions to solve this problem of slow custom processes but this is going to take some time. Because of slow custom clearances, the ports are crowded for longer periods and goods take a lot of time to reach their destination.