Small Business, Big Logistics Problems

Small Business, Big Logistics Problems

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June 27, 2019 2

Anselem Kadiri

No one expects to start a business on a rosy bed, believe me most Nigerians don’t. But many of the challenges business owners have to tackle on a daily basis in order to survive are just unnecessary.

Nigeria Has a Huge Logistics Problem

Nigeria has a logistics problem, one that ranks amongst other key national issues like corruption, tribalism and power supply. The recently concluded general elections is a case in point. If a well funded public institution like INEC can  still manage to propone an election due to logistics failure, you can imagine the huge challenge poorly equipped small businesses face everyday.

Everyday, millions of dollars worth of goods and services crisscross the length and breadth of this country, at an alarmingly high cost. A situation infatuated by needless inefficiency, inordinate regulation and deficient infrastructure. According to the 2018 Logistics and Supply Chain Industry Report, the economic value lost by this inefficiency is worth well over N250 billion. That’s about three percent of the 2018 budget.

The Nightmare of Logistics

“My business relies heavily on logistics from the US & recently UK. Then logistics interstate in Nigeria. I am constantly on the phone everyday begging these companies to please offer me the service “we agreed” on. Services I am paying for. DELIVER AS AGREED!” Bemi (@Bemi___ a twitter user) recently lamented. Much like her many businesses constantly lament even as they try to navigate Nigeria’s unfriendly logistics terrain.

Logistics affects business owners in Nigeria on two major front; cost and time. According to a World Bank report “transporting goods between two states in Nigeria costs over TWICE as much as it would do between two American states”. This cost is indirectly transferred to customers who would rather not buy than at such extortionate price. How would you justify buying a product worth a thousand Naira only to get it delivered to a pickup point for as much as N2,500 and upwards? And you wonder why Nigerians prefer to get their pizza delivered via the British Airways.

The time it takes to deliver goods within Nigeria is yet another issue. Even though it is highly irregular, it also takes a long period of time to get goods delivered. For instance, ShopRite, a foremost retailing company in Nigeria, says it can take up to 117 days for stocks to reach stores in Nigeria. A study on transport costs and time along the Lagos-Kano-Jibiya corridor found that transporting a 20-ft container by road costs USD 837 from Kano to Lagos and USD 1,548 from Lagos to Kano (N1 = 157 USD, USAID, 2013) compared unfavorably to Tema-Ouagadougou corridor linking Ghana and Burkina Faso, with 25 percent higher costs and 150 percent longer delays.

The option, as explored by most business owners,  is between the fairly reliable but more expensive GIG Logistics and DHL or the below par performing NIPOST of whom a business owner reportedly lost her goods worth more than N250,000 and is yet to get compensated for, and it is over a year now. Motor/Truck parks, a cheaper alternative is unfortunately more risky. Cases of lost goods, unreliable delivery timelines, arbitrarily set prices are sadly, a usual phenomenon.

Unless, you’re Jumia or Konga with enough financial arsenal to build your own logistics arm, this is what you have to struggle with.

Who’s to Blame?

The government, simply because factors like inadequate basic infrastructures- road, rail, power- are core to effective logistics performance. Nigerian roads alone carry more than 90 percent of domestic passengers and freight, yet only three-fourth of federal roads are in fair condition while the larger majority of roads (regional roads) are in poorer conditions.

Infrastructure, ineffective customs, poor international shipment, logistics incompetence, tracking and tracing, and untimeliness are factors that have contributed to Nigeria’s 103rd rank out of 167 countries in World Bank’s Logistics Performance Index (aggregated 2012 – 2018), after South Africa (29th), Egypt (60th) and Kenya (63rd) amongst several other African countries.

Taking the Right Routes

Finding the right answers is not an issue, their implementation is. There is a need to identify and tackle the age long issues of bad roads especially on key corridors. Nigeria lacks a well developed highway system that integrates both federal and regional roads to ensure that accessibility to any part of the country is fast and at the lowest cost possible. Secondly, the unnecessary delays on major roads nationwide caused by law enforcement agencies’ roadblocks and unofficial payments (extortions) have not only succeeded in increasing cost but delays as well. Alternatively, security personnel should be strategically placed on hot spots to intercept criminal elements,  not to stop and search vehicles as it is currently done.

Thankfully, startups like Kobo360 are facing this challenge in new ways by leveraging technology to overcome some of these costly inefficiencies. But they can only do so much. Other factors as identified cannot simply be bypassed by the intelligence of an app. Government needs to see the potential in this sector and do all it can to take advantage of it. We can’t get everything right, but what we can do is to identify key factors in tackling these problems and ensure we begin to boost the performance of logistics in Nigeria. In the meantime, businesses continue to suffer from astonishingly high costs that potentially hinders their trade and growth.

Anselem Kadiri is an entrepreneur by day and a writer by night. Follow him on Twitter @anselem_kadiri.

Tosin Odubela
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2 comments on “Small Business, Big Logistics Problems
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    ปั้มไลค์

    Like!! I blog quite often and I genuinely thank you for your information. The article has truly peaked my interest.

    June 24, 2020 Reply
  2. Problems of Logistics Facing SMEs in Nigeria - SME360

    […] SMEs in Nigeria face several problems such as raising capital and dealing with bigger competitors. It is interesting to note that logistics remains one of the biggest challenges that SMEs face. This problem is not local to Nigeria, rather, it is one that SMEs all over the world battle with. […]

    September 2, 2020 Reply
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