Nigeria - Country Commercial Guide
Logistics Sector

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2021-10-13

Overview

                                                                                     Unit: USD Millions

 

 

2018

2019

2020

Total Market Size

132,988

141,000

300,000

Total Local Production

6,000

6,000

3,000

Total Exports

12

12

0

Total Imports

133,000

135,000

195,586

Imports from the U.S.

9,512

9,800

198,586

Exchange Rate:  1 USD

362

360

379.5

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources: 

Total Local Production: Industry contacts, Nigerian Postal Service, Nigerian Investment Promotion Commission (NIPC)

Total Exports: Industry sources

Total Imports: Leading importers, distributors, and industry associations.

The logistics and supply chain sector is one of the fastest growing industries in Nigeria, though still in its nascent stage. As of 2018, the value of Nigeria’s logistics sector was estimated to be 250 billion naira ($696 million), a rise of 50 billion naira ($140 million) from 2017 figures. This was according to the 2018 Logistics and Supply Chain Industry report as reported by Vanguard.

In 2018, Nigeria was ranked 145 out of 190 countries in its Ease of Doing Business, and 112 in the Logistics Performance Index.

The current growth in Nigeria’s logistics is due to infrastructure development in railways and airways, improvement in ties with other countries, development in manufacturing and export sectors, and the rise of e-commerce.

A huge infrastructure deficit, government policies that undermine ease of doing business, poor road network, unstable electricity, entrenched corruption, and multiple taxation has led to the sector not being able to achieve its full potential.  With local stakeholders unable to meet financial obligations, costs transfer to end-users, making them uncompetitive. Foreign-owned operators with the financial capabilities to absorb higher levels of business risk can better survive these conditions.

Another problem is the inefficiency of seaports and customs services at all ports of entry.  Customs clearance is slow, manual, and fraught with discretion of the agents. This protracted process significantly increases the time goods remain at ports or at sea to undergo inspection, increasing operating costs.

Infrastructure is critical to any logistics and supply chain development objective. The health of available infrastructure and level of integration directly impacts logistics access, cycle-time, reliability, and cost. Maintaining a competitive logistics and supply chain ecosystem requires a constant and strategic upgrade of regional infrastructure. It also demands high performing government institutions, financing, and industry skills. Logistics can therefore be attributed to be the main indicator of economic advancement expressed boldly in trade facilitation and business competitiveness. Unfortunately, there are substantial regional and national deficits in Nigeria’s logistics infrastructure which hinders its trade competitiveness negatively.

A representative of a major stakeholder in the Nigerian logistics and supply chain sector, Red Star Express, stated there is almost a total lack of infrastructure at the level needed to fast track the development of the economy.  Nigeria is an import-heavy economy with potential for growth requiring a renewed focus on infrastructural development. Given the vast nature of the logistics sector, local and foreign operators require coordinated resources to engage the government to improve the overall infrastructure network in Nigeria.

To ensure innovation within the infrastructure development cycle of logistics and supply chain, Nigeria requires a national logistics strategy focused on the following areas: transportation and distribution industry, transport and distribution workforce, road infrastructure, road congestion, road conditions, interstate highway access, vehicle taxes and fees, railroad access, water port access, and air cargo access.

A survey conducted by the Lagos Chamber of Commerce and Industry indicates that the Nigerian economy lost an estimated annual revenue of 3.46 trillion naira ($8.4 billion) due to poor infrastructure, poor implementation, and corruption at the ports, of which 2.5 trillion naira ($6 billion) are corporate earnings losses across the various sectors of the economy. According to the report, profit margins of corporate entities using some of the country’s key infrastructure, namely the Apapa port, have gradually dwindled as logistics cost has increased significantly.

In Nigeria, there are several local and foreign private sector companies operating in the logistics industry, including Red Star Express (partner to FedEx), United Parcel Service (UPS), and DHL. The government of Nigeria (GON) regulator, the Nigerian Postal Service (NPS), regulates the activities of stakeholders and also operates the Nigerian Post Office (NIPOST), a courier delivery service which competes with the private sector courier operators.  A bill pending as of August 2021 would overhaul the postal sector and separate the postal operator from the postal regulator.  However, several other aspects of this bill are concerning to the postal sector, including double taxation provisions and a near-monopoly given to NIPOST for courier conveyances under one kilogram.

Nigeria’s bilateral and multilateral agreements with various countries, along with its involvement in initiatives such as ECOWAS and AGOA are expected to improve trade and grow the sector. With the African Continental Free Trade Agreement, Nigeria now has free access to the entire African market thereby improving the trade between the neighboring countries and impacting the logistics sector in the future.

Due to the recession in 2016-17, the GON banned access to foreign exchange for import of 43 products with the aim of boosting local manufacturing and industrial units, as well as to support the agricultural sector, which requires a functioning logistics network to boost the nation’s economy. The project MINE is an initiative by the President Buhari administration to develop special economic zones and promote the goods that are made in Nigeria. The first round of funding will concentrate on developing Funtua Cotton Cluster, Enyimba Economic City and Lekki-Epe Model Industrial Park in Katsina, Abia, and Lagos State respectively. This will increase the domestic demand as well as exports in the market giving a boost to the warehousing sector.

Given the huge presence of industrial parks and the proximity to seaports and airports, majority of the warehouses are situated in Lagos. With the developing manufacturing industry and increasing demands for logistics, some companies have entered the sector recently like Dangote, Vicampro Farm, BlackPace and Kiremko.

 

Nigeria - Distribution of Sampled US Franchises in Nigeria in 2018
Logistic Industry Costs in Nigeria

 

97.09% of total exports from Nigeria were transported through the waterways. This was followed by air transportation (2.61%), road transport (0.13%), and other forms of transport (0.17%). Similar statistics were recorded for commodity imports into Nigeria: water transport at 88.4%, air transport at 11.17%, and road transport at 0.4%.

In Q1 2021, the bulk of export transactions were conducted through Apapa port, with goods valued at 2.58 trillion naira ($6 billion), or 88.91% of total exports. This was followed by Port Harcourt, which recorded 167.29 billion naira ($406 million), or 5.75%.  Muhammed Murtala International Airport recorded 75.4 billion naira ($183 million), or 2.5%. In terms of imports, Apapa Port also recorded the highest transactions valued at 2.92 trillion naira ($7.1 billion), or 42.73% of total imports. This was followed by Tin Can Island 1.2 trillion naira ($2.9 billion), or 17.95%, Port Harcourt 691.7 billion naira ($1.6 billion), or 10.10%, and Muhammed Murtala International Airport with 625.7 billion naira ($1.52 billion), or 9.13%.

Opportunities

Technologies such as GPS tracking and control towers are still not very popular in Nigeria, which poses a major opportunity for entry by U.S companies with the competence and technical skillsets to close the gap in the market. Other upcoming technologies include real-time fuel management systems, warehousing management systems, cargo management systems, and communication and information systems such as electronic data interchange (EDI) which can be used to reduce paperwork and minimize the time taken for compliance procedures. 

Nigeria is also expected to build the Lekki Lagos Airport on a 3,000-hectare plot. The Lekki Deep Sea Port project at a budget of $1.5 billion is currently underway with an anticipated Phase 1 completion of 2022.  The hope is that once completed the new development will decongest the traffic around the Apapa seaport and open up additional logistics routes within the Lagos metro area.

The Nigeria Special Economic Zones Investment Company is currently raising capital of $250 million from various lenders to develop free trade zones in Katsina, Abia, and Lagos States which will fill the supply-demand gap in the economy.

The e-commerce sector is also expected to experience exponential growth given the investments generated by direct and third-party logistics operators within the sector to boost the courier and parcel market in Nigeria.

In the last 10 years, online shopping has become deeplyrooted in Nigeria and changed the landscape in how Nigerians shop. Online shopping and platform providers have provided easy and seamless access to all kinds of local and international items, including books, food, toiletries, clothes, electronics, and furniture. The online shopping sub-sector generated revenue of about $4.88 billion in 2019, with expected growth at a CAGR of 20.5% in the period of 2019-2023, resulting in a market volume of around $10.2 billion by 2023.

Online shopping trends in 2019 showed that the fashion industry led with a transaction volume of $1.76 billion and user penetration of 52.2%. This is expected to reach 75.2% by 2023. With the ease of payments through mobile money, debit cards, electronic wallets, and other payment modes increasing, internet penetration is expected to help this sector grow further and give a boost to the logistics and freight market.

Nigeria eCommerce Revenue by Segment, 2019-2023
Nigeria eCommerce Revenue by Segment, 2019-2023

 

 

For more information, e-mail: Adesina Anthony A., U.S. Commercial Service, U.S. Consulate General, Lagos, Nigeria at Anthony.Adesina@trade.gov